http://www.ft.com/cms/s/0/0d7c533e-0664-11dd-802c-0000779fd2ac.htmlBanks take blame for credit crisisBy Krishna Guha in Washington and Chris Giles in FrankfurtPublished: April 9 2008 20:01 | Last updated: April 10 2008 01:24The world’s leading banks on Wednesday publicly accepted much of the blame for the credit crisis, as the International Monetary Fund slashed its estimates for global growth and warned that the US downturn will last longer than most people expect.The IMF said the US would suffer a recession this year, recovery would not begin until next year, and growth would remain well below trend even in 2009.The Institute of International Finance, meanwhile, representing more than 375 of the world’s largest financial companies, acknowledged “major points of weaknesses in business practices”, including bankers’ pay and the management of risk.But it said it would be “completely wrong” for the authorities to impose much greater regulation on the industry.In its interim report on the causes and consequences of the credit crisis, the IIF promised a code of conduct for better self-regulation of the industry.“We think it would be completely wrong to jump to some premature regulatory measures,” Josef Ackermann, chief executive of Deutsche Bank and chairman of the IIF board, said. “We want to demonstrate we can do a better job within the industry.”The IIF report detailed a series of failings on the part of the banks, including managing risks; conflicts of interest over bankers’ pay; the over-reliance on models and inadequate protection against shortages of liquidity.It said that while pay should be left to individual banks, there should be greater deferral of bonuses and setting pay “on a risk-adjusted basis”, implying paying less to bankers who have simply aken big risks and struck lucky.The IMF’s new forecasts, meanwhile, offered a bleak outlook for growth in both the US and Europe, challenging the relatively bullish views of national authorities and central banks.It contradicted the Federal Reserve’s forecast that the US economy will start to recover in the second half of this year and grow above trend next year – predicting growth at just 0.5 per cent this year and 0.6 per cent in 2009. The US quickly challenged the IMF forecast. David McCormick, Treasury undersecretary, said “our view…is a stronger view”, adding that most other governments were more bullish than the IMF as well.The IMF slashed its forecast for UK growth to 1.6 per cent this year and next – much less than the UK government and the Bank of England have projected for 2009. And it cut back its forecast for the eurozone to 1.4 per cent this year and 1.2 per cent next, disputing the European Central Bank’s view that eurozone growth will not be greatly affected by the credit crisis.The IMF said the Fed “may well need to continue easing interest rates for some time” and put pressure on the ECB to start cutting rates too.

So who exactly is the PPT?http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=707530543&fromSearch=n

Interesting 48 hours…Client 1 had 3 tradeshows cancelled by the organizersClient 2 started and then canceled a sales force training programClient 3’s spouse indicated that their backlog is solid for 3 months, but their pipeline is E-M-P-T-Y for month 4Client 4 has been moving in-house production of certain products to an outside vendor to “save money,” but are finding that it will cost more than double their current operating budget.Client 5 made an off-the-cuff comment about “not letting anyone go” until he was certain the it “would not be turning around in a few months” We’ve never talked specifics like that – so it’s on the top of his mind and I didn’t start the topic of conversation.Potential Vendor 1 called to see if we had any work – they just bought new equipment and they are S-L-O-W – haven’t heard from them since we quoted a project about 8 months ago and we’ve never done business with them.Similar calls from Potential Vendor 2 and Current Vendor 3 & 4.Unsolicited discounts and incentives are being offered from a number of other vendors/suppliers

@Written by JP on 2008-04-09 21:52:18Can I ask what line of work you are referencing? All business is cyclic… but what happens when all business cycles collide? Hmm…

@ vikas on 2008-04-09 21:20:55I agree. I think the ugly is just getting started. It\’s trickle down economics – Wall Street to Main Street. I think there was a lot of corporate momentum that carried Main Street through 07Q4, but new budgets are being drawn, forecasts being recast, and a shift from \”ride it out, 2H08 will rebound\” to \”2H08 may not bring salvation\” Logic indicates real cost cutting will start in earnest – and will include headcount reductions, lower inventories, longer leadtimes, and less capx spending. Is this a self fulfilling prophecy?The good news is that the Kentucky Derby is only a few weeks away, my 5 year old just learned to swim without a bubble, and NR says 12-18 more months.

My tinfoil hat is still under construction, but today I purchased a large chest freezer (on a deep discount) so we can buy things on sale in bulk. It\’s very enlightening to walk around my local retail stores these days – lots of things marked down and on special. Business must really suck.

Using elliott wave theory the SPX is doing a classic ABC zig zag pattern. We\’re currently starting the \”C\” wave down. This is a similar pattern to what happened in February 2001. That \”C\”wave was a 250 point drop.

CC over? try Again! It turns out that to get rid of the 12 billion citi had to lend the buyers 9 billion!http://online.wsj.com/article/SB120777784513002951.html?mod=hpp_us_whats_newsThe Bank-Loan HaircutDebt Market Improves, So Banks Trim Risk, But Often at a PriceBy CARRICK MOLLENKAMP, SERENA NG AND DAVID ENRICHApril 10, 2008Banks, taking advantage of slightly improving debt markets, are shedding some of the risky loans and securities that have caused them so much trouble in recent months — even if that means taking a big \”haircut\” on the price.But it could be harder to move hundreds of billions of dollars more.Citigroup Inc.\’s move this week to sell $12 billion of leveraged loans and bonds to private-equity firms is a step toward relieving a problem facing banks and the broader economy: With the \”securitization\” markets that have allowed them to package and sell loans all but shut, banks have a large amount of corporate, mortgage and other loans that they never intended to hold.That eats into the capital cushions they maintain against unexpected losses, and leaves them with little capacity to make new loans — a problem that is starving even well-qualified borrowers of the money they need to buy cars, homes and even companies. Citigroup is in talks to sell the debt at just below 90 cents on the dollar.Another factor that could breathe some life into the long-dormant market for risky corporate loans is the Federal Reserve. As part of its wide-ranging efforts to make cash more readily available in the financial system, the Federal Reserve Bank of New York recently created new lending facilities for Wall Street firms. The Fed has been accepting some \”investment-grade\” securities backed by hard-to-sell debt as collateral for loans.As a result, some banks are moving to bundle risky corporate loans into instruments known as collateralized loan obligations for use with the Fed. Last month, $13.4 billion in CLOs were created, Morgan Stanley said in a report Wednesday. It isn\’t clear how much the Fed has taken on. A Fed spokesman declined to comment on its collateral arrangements.As banks seek ways to get rid of the unwanted loans, they are raising hopes that the credit crunch won\’t continue with the same ferocity much longer.\”These small psychological steps bring confidence back into the market and bring value back,\” says Chip MacDonald, a partner with law firm Jones Day who specializes in banking.Ratings company Standard & Poor\’s said Wednesday that a completed sale of the Citigroup loans would signal that stress in the credit markets is decreasing, and possibly free up Citigroup\’s balance sheet to make more new loans. In Switzerland, UBS AG has formed a so-called workout group to move troubled mortgage investments off its books. On Wednesday, investment bank Goldman Sachs Group Inc. sold $500 million of Chrysler Automotive debt left over from that company\’s sale to a private-equity firm last summer, according to a person familiar with the matter.A Citigroup spokesman declined to comment. The buyers of the bank\’s $12 billion portfolio of loans and bonds include Apollo Management LP, TPG and Blackstone Group, according to people familiar with the situation. The bank is trying to complete the deal by the time it reports earnings on April 18.But to make the deals work, banks will have to help fund them, and that will mean balance sheets will remain full. Citigroup is loaning the buyers about $9 billion for the purchase of a portfolio that largely includes less-risky pieces of corporate debt, according to a person familiar with the situation. Among the solutions that banks are pursuing: the sale of big portfolios of loans, attempts to sell smaller blocks, and the formation of so-called workout structures that could be sold to outside investors. Central banks and regulators ultimately could be forced to coordinate a broader bailout structure that would own loans and securities until maturities are reached.Even if more deals happen, the relief might be short-lived.As banks pile into the market to sell loans or securities, they could drive down prices — a situation that would cause further losses and could bring a quick halt to the sales. Goldman Sachs, for example, sold the Chrysler debt for about 63 cents on the dollar to an investor group that included some hedge funds, according to the person familiar with the matter. That is well below the average value of loans used in corporate buyouts, which stood at a six-week high of 90.14 cents on the dollar this week, according to a Standard & Poor\’s index. A Goldman spokesman declined to comment.Meanwhile, billions of dollars in consumer loans and securities are building up on banks\’ balance sheets. Over the past five years, assets on the balance sheets of the 10 largest U.S. and European banks doubled to €15 trillion ($24 trillion) the International Monetary Fund said this week. Commercial and industrial loans on the books of U.S. commercial banks are up 20% in the past year to $1.4 trillion, while real-estate loans are up about 6% to $3.7 trillion, according to the Federal Reserve. Some of the commercial-loan growth is the result of banks lending to middle-market companies that continue to be seen as good credit risks.Securitization markets — where loans and other assets are packaged and sold to investors — aren\’t likely to provide an outlet for those assets soon. Last month, global asset-backed securitizations totaled $24.8 billion, up from the previous month but down 81% from a year earlier. Mortgage deals have performed worse.Securitizations of home loans totaled $19 billion in March, compared with $218.6 billion in March 2007, when the U.S. housing market began its sharp decline, according to data research firm Dealogic.Even the most highly rated securities aren\’t finding many buyers. \”To unclog the system, you need to find a place to sell triple-A securities,\” says Karsten Moller, senior managing director at the Securities Industry and Financial Markets Association, a trade group. \”Right now, every time somebody sells a decent block of those securities, the price drops.\”The repercussions of the clogged financial markets are visible around the world, including in the United Kingdom housing market. In a report issued Wednesday, Credit Suisse Group estimated that a third of the U.K.\’s mortgage availability disappeared in just the past two weeks.Efforts are under way to restart the securitization market. One goal is to make debt sales more transparent.Still, Mr. Moller, based in London, figures the market may not reopen until the second half, at the earliest.

KJ,It is also possible to think of all the recessions that you listed as being within what has empirically been a long curve, rising until moreless 1970-73 and declining since then. The pre-1970 recessions were in general more mild than those of the later period, i.e. similar or roughly similar duration fails to take qualitative differences into account. Differently, there was a multi-decade post-WWII \’Golden Age of Capitalism\’ which by the later 1960 had begun to wilt even as mainstream economists claimed, and truly believed, the contrary…to the point that many believed the business cycle was a thing of the past.What had really happened was the great depression and WWII, a combination that devalorized a sufficient mass of production capital to allow the accumulation process to restart leading to high rates of GDP and then, once again, to conditions of overaccumulation, falling avg. rate of profit, stagnation and decline. Monetary and policy response, which had been less stressed, transformed into a type of permanent crisis management. As we can see today, there are limits. As we can see today, it is not possible to substitute financial for real without that substituting undermining both real and financial.In short, we have been in a Long Slowing or \’managed depression\’ for decades. Same has been evident on a global scale as well.

Gloomy, this is for you:Recessions and the Duration of Bad News How do the economy and the market behave in an \”average\” recession? William Hester, CFA March 2008 All rights reserved and actively enforced. http://www.hussman.net/rsi/recessduration.htm

This has to do with MArtin\’s latest post:Marathon\’s Chief Executive Bruce Richards seems to have a keen sense of how badly the banks want to unload such distressed assets, giving him a strong negotiating position to push for the lowest possible price.“They’re sitting behind closed doors and figuring out right now with regulators and with their own internal risk committees and treasury departments how they fund themselves in today’s market environment and how they get risk down,” he says.Going forward — and given the generous funding terms the Federal Reserve is now offering them – banks actually have a great opportunity to make money on new loans, he says.But to do that, it’s crucial that they free up space on their balance sheets. That’s why Citigroup’s agreement to sell $12 billion in loans is likely to be just one of many such deals by a variety of banks.“Right now, they have to get through the problem assets that are on their balance sheet to get that more manageable and get their leverage down,” Richards says. http://int1.fp.sandpiper.net/reuters/editorial/images/20080409/richardsbanks.mp3 (this audio is the key link)http://blogs.reuters.com/summits/2008/04/09/marathon-ceo-sees-opportunity-in-banks-woes/

@vikas on 2008-04-09 21:16:48 wrote: what will be the catalyst for recovery?Vikas,The catalyst for recovery is quite simple – integrity. All of Warren Buffet\’s holdings e.g. AXP value integrity in people. The Investment Banks are on the ventilator now with all the printing going on. Once they\’re off the ventilator, the questioning can begin.In terms of asking questions:1. To restore integrity, we need to ask where is the purgatory? That would be and RTC like structure. The MBS is still pretty much constipated like Bill Gross would like to say. 2. Since CDOs backed by houses can be toxic for you (forget lead paint), I think we need an FDA for financial innovation. How about a name like Finance and Derivatives Administration? See FDA http://www.fda.gov/cder/guidance/3580fnl.htm#C%20OverviewWe need Methods and Findings, Adequacy to Patient Exposure and Safety Assessments (Is it bad for the liver?) and Summary of Selected Drug-Related Adverse Events, Important Limitations of the Data, and Conclusions Since our money (taxpayer\’s) is on the line, we definitely would like to find out if a few people died during the clinical trials. If the innovation didn\’t kill anyone, we would like to find out if the product is better than the placebo (say a good old FDIC insured Bank CD). Enjoy the ride over some Bhel at Vithal\’s!Print First Ask Questions Later.

@ ORTotally agree with Mish on the details. The question now is whether the loan to the PEs to buy these LBO assets is with or without recourse. This kind of financing shenanigan will just further reduce the trust in the system, leading to a greater lock-up in the wholesale lending market.http://www.ft.com/cms/s/0/58571d70-0660-11dd-802c-0000779fd2ac.htmlThe situation must be very dire for Citi to resort to this and expect it to be good news. And as usual, no one in the traditional media picks it up… By my calculations, if the loans are sold with the first loss of 20% on Citi\’s books, with recourse, the selling price is closer to 80cents to the dollar. And if there is no recourse, Citi\’s exposure would be to the first loss piece and the senior piece (after taking away what the PEs put in as equity). I suspect the latter is more likely. The ironic thing would be that the regulations would allow them capital relief for taking this off balance sheet, when economically, THERE IS NO BIG DIFFERENCE. Someone should point this out to the mass media…

Money markets signal fears over banksMoney markets in the US and Europe are signalling renewed fears about the financial strength of banks, with key confidence barometers almost returning to the levels that preceded the collapse of Bear Stearns.The concerns are being highlighted by the difference between overnight lending rates set by central banks and three-month Libor, the rate at which banks lend to each other. This spread, known as the overnight index swap rate, has been rising in the US and remains elevated in Europe, indicating that banks are reluctant to lend to each other.The difference between the overnight central bank rates and three-month Libor was typically about 12 basis points before global credit turmoil grew worse last summer. In the US on Wednesday, that spread rose 2bp to 77.5bp. The difference had climbed above 80bp on concerns about Bear, then fell back to 60bp in mid-March after the investment bank was sold to JPMorgan Chase.In the UK, the swap rate gained 2.45bp to 95.45bp on Wednesday. In Europe, the swap rate was up 1.29bp at 74.68bp. It had been 67bp after the Bear sale.Investors also sought the safety of government debt on Wednesday, pushing the yield on the two-year Treasury down 12bp to 1.75 per cent. Tensions are rising in the money markets in spite of the injection of huge amounts of liquidity into the banking system by central banks. Traders say market conditions suggest the Bear rescue has not completely alleviated worries about counterparty risks. Until confidence is restored, the availability of credit to investors and companies will be restricted, potentially hurting the broader economyhttp://www.ft.com/cms/s/0/58571d70-0660-11dd-802c-0000779fd2ac.html

Iceland Raises Benchmark Interest Rate to 15.5%…Inflation soared to a six-year high of 8.7 percent last month after the krona lost as much as 25 percent against the euro this year. The currency slumped after “unscrupulous dealers\’\’ started a speculative “attack,\’\’ central bank Governor David Oddsson said in a March 28 speech.The krona slipped 0.4 percent after the decision and was trading at 114.2250 as of 9:12 a.m. in Reykjavik…http://www.bloomberg.com/apps/news?pid=20601087&sid=a6xmcToWBouk&refer=homeHow will or can they get out of this spiral? Can\’t they get any advice from Bernanke?

@Written by Octavio Richetta on 2008-04-09 21:59:53couldn\’t have said it better. which is why I think the duration and depth will be more than any post-war recession. Unlike you I didn\’t close my puts or cover my shorts at the Bear bailout — no time to follow the market as closely as needed with this treacherous volatility! But I believe there is another leg (or two) downwards yet to come.OT, I\’m off to Buenos Aires for a medical conference; my first visit to Argentina, and looking forward to it.To you, gloomy, PrintFirst, wolf in the wilds, LB. I mostly lurk but love all your contributions. Just wish we had shorter threads!

Written by Gloomy on 2008-04-10 02:50:42I agree. In all likelihood, this will be a \”big kahuna\” of a recession. So the historical stuff gives you a lower bound (i.e., it may be worse than history would anticipate). As you saw in the Hussman site article, Looses during bear markets associated with recessions run deeper. It is difficult to time the bottom (e.g., will it be a 30%?). But IMO skimming 20% from these levels will be no sweat. Settle for 15% if you are a chicken:-)

Written by vikas on 2008-04-10 05:55:00When are you visiting? I am taking off on May 6.

FED is bery bery bery busy. Muni\’s goin under too! Are they gonna give them non-recourse money too?:-)Jefferson County Advisers Meet U.S. Officials as Crisis Looms By William Selway and Martin Z. BraunApril 10 (Bloomberg) — Financial advisers for Jefferson County, Alabama, met yesterday with Bush administration and Federal Reserve officials as the county contends with rising borrowing costs that have pushed it close to bankruptcy. http://www.bloomberg.com/apps/news?pid=20601009&sid=a_.hdWe1xXmM&refer=bond

BOE continues on the slippery slope:Bank of England Lowers Rate to 5% on Recession Risk (Update1)http://www.bloomberg.com/apps/news?pid=20601009&sid=aZu13.7rYu1c&refer=bond Bye Bye BP!

Let\’s see how the day goes. I said above I would be surprised if the day holds as well as yesterday. Now I say, I will be surprised if we close the week with April still in the black. Perhaps, another big FED announcement and we rally again?:-) They are running short on ammo. FED you got a 1 billion BS? not enough to plug the black-hole!

Get the cnnmoney angle:http://money.cnn.com/data/premarket/Stock slide set to continueReports of new talks in Yahoo deal aren\’t enough to lift futures ahead of retail sales which are expected to show further weakness.http://money.cnn.com/2008/04/10/markets/stockswatch/index.htm

Written by Octavio Richetta on 2008-04-10 07:10:38the way california, nevada and arizona are going they will become the American pampas after we tear down all the vacant malls and foreclosed homes. This cr*p just doesnt end.

@MedicYou are going to have to figure out how to set up a turbine above your new pellet stove, to generate the electricity to power your new deep freezer.:)

Fed subprime lending orgy party means we will lend as long as you have collateral. and quality of your collateral or yourself ain\’t matter to us. God forbid, do you want us just hang over the money we printed to you????yes please do.

http://seekingalpha.com/article/71792-size-of-fed-s-balance-sheet-limits-public-s-losses?source=d_email

In the \”OH MY!!\” category:9:36 Paulson says U.S. economy has \’turned down sharply\’

\”So now the binge is over and it is contraction time. The people of the US do not have the income power to support the economic apparatus they developed. Someone in the previous thread mentioned GB in the not too distant past? So it is plain and simple we can no longer support neither our lifestyle nor our bankers\’.\”In the short term we\’re headed for further major contractions in credit – both to consumers and to corporate. A significant spike in bankruptices, delinquencies and unemployment will mark the point where the pain hits Main St in the USA.If the Fed continues to bail out all the major players in the banking system, then we\’re headed for a two-tier society. The credit crisis will be transferrednto the public debt, and it will become a credit crisis for the US dollar. The twin processes of BOTH inflation and deflation will transfer those losses to the US consumer with powerful effects. People on the street will be living in a totally different world to the Wall St banks.PeteCA

Wow, SKF up but the Dow is steady…. quite a split personalityOT—- @ ORI\’m visiting May 17- 22.Do you live in Buenos Aires? I hear it is quite in the groove these days. Send me the name of your favourite restaurant!Vikas

Someone post the link please!Written by Octavio Richetta on 2008-04-10 06:42:46http://video.google.com/videoplay?docid=-5339352868242979498&q=Mr+Mortgage+Lehman+Brothers&total=1&start=0&num=10&so=0&type=search&plindex=0Also, you may find Peter Schiff and John Browns commentary at http://www.europac.net/ interesting as they seem able to make earlier calls on future events than many of the articles you post here. PeteCa/Medic perhaps you will be encouraged (if not already) by their calls for Gold. If Mr. Schiff was not right so often I would abandon my gold based on the Professor and LB thoughts.hlowe

@PeteCa 2008-04-10 08:50:37\"The yield curve is not righting itself in the way that normally occurs as things go into a recession. Yields at the long end (long-dated bonds) are continuing to drop. That\’s not a particularly good sign.\" ???Hi Pete, as economies move into recession, government bond yields usually decline across the yield curve, with the move most pronounced at the short end. The fact that longer yields (10 years +) are not declining more sharply is disturbing. It confirms that we have both inflation and deflation existing at the same time. As a bond investor myself, I very nervous about anything longer than two years. If the dear Professor is wrong about the possible length of the downturn, any degree of economic recovery will spell doom for longer dated govt securities\’ prices.

Remember Hugh Hendry, C to go to $10.Click the Erin Burnett link.LISTEN TO THIS GUY! $$$$$$

Re Dr Roubini the new Market Bull – Most remarkable in the last few days is that Dr Roubini himself has indeed become rather a kind of \’bull\’ on the markets, with his forecast of a U-shaped 18-month recession followed by a rebound.Huge systemic financial meltdown unlike anything in world history … has suddenly become a manageable 18 month event … Is that what happens when a leading bear economist has a few dinners with the Gulfstream private jet crowd at Davos?What will be next? … Maybe Dr Roubini on bubblevision with Cramer, \"How to Go Long on Stocks, and Profit from the Eventual Recovery!\"This 18-month terminus to calamity as forecast by Dr Roubini this week, has provided comfort to thoughtful people who have come to feel that we are diving off the edge of the known world for good.One has to admit, if the PPT (… or now \’BPT\’, \"Bubble Protection Team\", the new moniker …) wanted to hire a trusted pitchman to advise that it will all be over in a short while, not to worry too much … Who better than Dr Roubini?Remember the Godfather movies, the sage advice of the \’Don\’ … I paraphrase from memory here:« Someone will come to you with an offer of a deal, someone you completely trust … »A bit tongue in cheek here, of course. Seriously, we\’re all happy you have shared so much with us, Dr Roubini, and we don\’t mind if you spend a few days with the Bilderberg, er, Davos crowd again …

UnTradeables There is an elephant in the room that I haven\’t yet seen discussed: The UnTradeables. In our discussion last week on SFAS 157, there was a subtext not articulated: The broad category of items that are actually too illiquid to trade. These include \"one offs\" such as Dry Cleaning stores, non-chain restaurants, Mom & Pop shops. They are untradeable because the amount of research into each item, relative to their market cap/size, makes it too inefficient. No one will spend $100k for the due diligence on a $200k store. For a while, Pez candy dispensers were an UnTradeable — until eBay created a market where these can be effectively bought and sold. However, the total value of all the Pez dispensers in the world wasn\’t measured in the trillions, or even 100s of billions. Even tho they are relatively illiquid, their small capitalization makes it viable. And don\’t forget, there is no leverage involved in any of the eBay items. Hence, no margin calls. Now consider the size of the derivative marketplace based upon mortgages: Everything from RMBS to CDOs to CDC. It runs into the trillions. If they cannot be effectively priced, are these products essentially untradeable? Consider these factors: • The price relative to the requisite cost of research/due diligence; • The size of the market relative to the overall regular and ongoing demand for that investment product; • The buyers and sellers with an expertise and knowledge of this paper. This may be the crux of the issue with subprime/derivative problem: The paper is, or at least should be, Untradeable . . . http://bigpicture.typepad.com/

It is to be expected that most here are very bearish; after all Roubini has been one of the foremost Dr. Dooms in recent years, and we are here because of him. But it seems to me some people have taken the ball and run with it all the way into the next county! I really don’t believe this is the end of civilization as we know it. Did Japan become a Mad Max world after 1989? When the English empire faded and the USA emerged as the world’s number one economic and military power did they need to hoard food and fuel to survive?Paper wealth is created and it is destroyed, but life goes on in the non-paper world.When TROW slows down too, commodity prices will fall and the food shortages will disappear. We may not see a U shaped recovery; I am beginning to think in terms of a reverse J pattern where the bottom is prolonged (12 to 18 months sounds reasonable to me) and growth resumes slowly, but does not return to previous levels for many years.What made this country great economically is its system: the ying and yang of free-market capitalism and social market economy, coupled with a strong rule of law. Who else has such a system? China? Russia? No. The USA will not degenerate into chaos; our system will endure. We will not see a depression. The dollar will not collapse into hyperinflation.I think, if Dr. Roubini has become less negative in recent weeks, it is because the recent unprecedented actions taken so quickly have demonstrated to him the flexibility of the Fed and the ability of TPTB to stave off financial meltdown and economic collapse; i.e., to prevent the worst case scenario.All IMO.

@London BankerWhat have you proposed to save the financial system? Is it top secret or can you let us in on it?

I have been buying Chimichanga plate from my local Mexican restaurant for $5.50 for the past two years and yesterday I noticed that price is now $6.75. Many people will be squezed hard by incoming inflation.

test

@ Octavio RichettaApologies for taking some time to respond to your comment on my recent activity. i have been very busy moving stuff. Thank you for the elaborate insight you provided. you provided some personal financial data and i am ok to do so as well in return; just hope not offend anybody with this as some of the amounts are really obscene, but that is how london functions these days…I built two extremely elaborate models for buying an apt in London and in New York – so elaborate and detailed that my friends called me anything you dont ever want to be called. I modeled in everything you could think of: real est tax (council tax in England), maint cost, repairs, tax rebates, opportunity cost, sensitivity scenario incl extreme downside etc. I also lived in this very small neighourhood in London for four years prior to moving (back) to NY, have seen probably 100 apts both to rent and to buy during that period, so know the neighbourhood, the agents, dynamics for 2 bed/2 baths, the residents, the bars and restaurants etc extremely well.See http://www.visitlondon.com/areas/villages/marylebone-villageand http://www.marylebonevillage.com/Location: corner of blandford st and aybrook st see http://www.theaybrook.comAnecdotal: i just discovered that a Dubai Arab bought 6 apts in this building and is about to start renting them outalsoWith regards to financing, i paid close to 1m gbp (usd 2m), which is gbp 1250 per suare foot, or 1180 gbp per square foot after stripping out the garage (a garage in this \’hood costs 50k gbp = 100k usd / one neighbour just rented his garage out for gbp 5k per year = usd 10k per year, or gbp 96 per week = usd 192 per week)literally 500 metres from my apt, there is another block of new apts being built righ now. location: just north of oxford st (= just north of mayfair). asking price is gbp 2000 per sq foot = usd 4000 per sqft. the property is marketed specifically to russians (according to 2 real estate agents). 200 metres further down, you are in mayfair, and will easily pay gbp 2000 per sqft.got a 52% mortgage, interest only tracker (bofe rate + 54 bps; NOT libor) three weeks ago (just before banks increased margins on mortgages), so am riding the BofE rate cuts down (mortgage today got 105 gbp cheaper) for the next few months and will continue to do so until we are an additional 50 or 75 bps down (or incl todays 25 bps cut, 75 to 100 bps) and might then convert into fixed rate (without fee if at the same mortgage lender). i pay just over gbp 500 per week on my mortgage; i could rent the flat out at gbp 900 per week (usd 1800 per week). macro picture: soros says that the credit crisis will worsen (in line w roubini-houdini); this implies rate cuts, inflation (note: rents are indexed to inflation), and falling gbp and usd vs euro (specifically: uk econmy depends more on financials than the euro economy) – so my gbp mortgage will decrease in value compared to your euro cash account. i can always take out my gbp mortgate with my euro cash, at a profit.re arbitraging by converting euro to gbp, keeping that in a gbp account and renting instead of buying: considered that for a while and definitely a good idea if you wanted to buy a normal apt. but the trade-off would be that no apts would available anymore in this specific newbuild (high spec, best location you can imagine, immense rental value) if i waited a couple of additional weeks, and there are simply not new build alternatives in this neighbourhood. the place is really exceptional. and after all, a man needs a place to live – especially if your gorgeuous and immensely smart chinese model-entrepeneur girlfriend wants that… it becomes a lifestyle choice, although i still believe that this purchase will not be a negative return project… buying an apt definitely feels better if you know that your neighbours buy cash and drive bentley sports cars with german number plates, even if you have the smallest apt in the building and drive a bicycle instead of a car…

way earlier stuff…\"corporates hyped the spend today mentality so that blame is shared more generously.\"Commercial aired now in the US. \"(loud chorus) I want it all, I want it all, I want it all and I want it now. Check your Chase balance via the internet to see what you can buy at all times.\"@LondonBanker, in the longer term perhaps a few years, do you see hyperinflation on the other side of the deflationary rainbow ?All, it deeply saddened me today to realize that a simple man with a huge family not sure how many grandchildren 30 something I think, spoke of ending the Federal Reserve and was passed over to keep much closer to the status quo. If not for his huge family\’s sake alone, would he not have done at least something close to what is good for the American people ? My heart is heavy because I honestly believe he may have been the only chance the US had to combat the monstrocity coming down the pipe on the American people. I stood on a corner for one seriously uncomfortable day as it is not my thing quite frankly to canvas for votes for his delegates. It is a shame that more was not done.oh how i wish Ron Paul would ask Bernanke how is it that King and Trichet warned their people about lower standards of living related to inflation while he cozily has sat in his chair and cut rates. (while day trading the equity market )Trichet is the man ! Perhaps this is why a at a Euro conference a while back the Arab finance minister said that the Euro would be the reserve currency by 2015. …and to think somehow in my mind back in September, i actually thought Bernanke would assert himself as a some semblance of a defender of the dollar – such a fool i was then…so investors / day traders / outright gamblers, is this rally following Paulson\’s bleak comment a one day final shot to the heart of shorts before going down or the start of even more moves up over the coming weeks ? the casino is open and the treasury secretary\’s own comments are part of the game today. dice out, hands high, all bets are placed

Hi JMa, Here is my analysis…2nd post on John Williams\’ HYPERINFLATION SPECIAL REPORT, Issue Number 41, April 8, 2008 Hyperinflationary Depression Likely by 2010 (I have paraphrased what I believe to be his key concepts. Any mistakes are my fault. And, of course, you can subscribe to his newsletters to get the full flavor and view the graphs.)First, definition of terms: Deflation is an overall drop in the cost of property, commodities, or services. Other factors being equal, a reduction in the money supply, such as bad, unpaid, debt, leads to deflation. The Great Depression was an example of a deflationary depression driven by a contraction in the money supply making things more expensive. Since money could by fewer things, pre-deflation debt became more expensive and a positive feedback cycle, or deflationary spiral, of bad debt begetting more deflation continued for years.The housing market is presently in a deflationary spiral. As homes are abandoned and foreclosed, neighborhood home prices are affected and values are reduced with each foreclosure. As the home prices drop, the mortgage on the full price becomes a burden, and another homeowner leaves and so on. Nouriel Roubini predicts home prices will continue to decline from the current 10-12% loss to an average 30% loss in the foreseeable future which represents a $6 trillion loss in home equity and would put 21 million households, or 40% of all mortgage-holders, in a negative equity position. But others see the deflationary spiral continuing beyond 30% maybe even down 50% from high home values.Inflation is the opposite of deflation, but with a similar outcome. Inflation is an overall increase in the cost of property, commodities, or services. Other factors being equal, an increase in the money supply leads to inflation. This can only occur with a centralized banking system and with a currency based upon the value of debt rather than a fixed asset such as gold. Debt-based currencies are considered \"paper money\" and allow governments to adjust the money supply up, to encourage growth, or down to slow growth in the economy. Fixed-asset currencies are considered \"hard currencies,\" since the government is limited by the amount of asset reserves in adjusting the supply of money. All things being equal, too much money supply allows more dollars to be used to purchase a stable supply of items and, as a result, costs rise. Over time, increased costs ripple through the economy raising the cost of all goods & services.Deflation of a single item or class of items, like cell phones, is considered an increase in productivity, while inflation of a single item or class of items, like home prices, is considered an asset bubble.Hyperinflationis inflation on steroids. Rather than have prices jump 10-50% annually, hyperinflation changes are 50-100% per month or week (52,000% annually). In other words, the value of money is increasing so fast that it become meaningless in determining the value of goods and services. Hyperinflation is the result of a government\’s massive and rapid increase in the amount of available money, which competes for a fixed amount of goods and services.International Accounting Standard 29 lists four criteria that indicate hyperinflation: 1. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power. 2. The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that foreign currency. 3. Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short. 4. Interest rates, wages and prices are linked to a price index and the cumulative inflation rate over three years approaches, or exceeds, 100%.Finally, hyperinflation has been historically associated with war (or its aftermath), economic depression, and political, or social upheaval.Since there are no uniform definitions for Recession, Depression, and Great Depression, Williams\’ offers his definition of these terms. Recession being two or more consecutive quarters of contracting real GDP. The NBER is the official arbiter for labeling when the United States economy is in a recession, but it uses a more elaborate method than Williams\’ method.A depression is a strong recession where there is a minimum loss of 10% or more of GDP in non-inflation dollars.A Great Depression is a strong depression where there is a minimum loss of 25% or more of GDP in non-inflation dollars.Using these definitions, and an approximate loss of 5% GDP, we are already half way from a recession to a depression while the government does not claim officially that a recession has begun.Our immediate economic concerns the mortgage crisis and subsequent bad debt write-offs, according to Nouriel Roubini and 2008 Global Financial Stability Report, were approximately $1 trillion as of March 2008. This monetary contraction, combined with declining home values, suggests a classic economy-wide deflationary spiral. Williams answers this concern by describing our last 95 year history of chronic inflation. Williams presents a series of graphs to show how throughout the history of our country, since 1665, there have inflation and deflation cycles with an approximate 30 year harmonic. However, it was not until 248 years later, in 1913 when the Federal Reserve is formed, that inflation continues to slowly creep up without a corresponding deflation period. Furthermore, when FDR abandons the gold standard in 1933, inflation rises to higher levels than it has in the previous 268 years. And since 1971, when Nixon closed the gold window to let the dollar float free of any fixed asset, inflation subsequently climbed to such heights that the previous 306 years of inflation appear as constant line in comparision.The point I believe Williams\’ is making is that the ~25% contraction of the Great Depression was so traumatic, that the subsequent 11 administrations have systematically used the \"debt standard\" to slowly eat away the dollar\’s purchasing power to insure there would not be another Great Depression. This currency debasement is quantified with a table showing the dollar\’s 80 to 98% loss in purchasing power since 1913 based on four separate parameter measurements. And he shows how 76 to 94% of this loss occurred since 1970.Williams\’ then discusses the policies of the last two Federal Reserve chairs and, of course, references Bernanke\’s infamous 2002 helicopter speech where he confidently proclaims the ability to regain control of an economy through \"positive inflation.\"Williams then turns to a David Walker type analysis of the Federal Government using generally accepted accounting principles to show, through a series of charts, that the US government is bankrupt. The key chart shows rather dramatically that the US government financial obligations are three times the rest of the world\’s combined debt ($62 versus $18 trillion); and it shows the US GDP is three time smaller that the rest of the world economies ($14 versus $40 trillion). In other words, how is possible for the USA to pay this debt? Who else will pay this debt? Our children? Our children\’s children?The classic answer to this question is that we live in a wealthy and powerful country that will use our economic engine to grow out of debt, like we did in the 1990\’s, but has that been true growth or just inflation masquerading as growth? Williams\’ then turns to the demise of the middle class by showing how even dual-income families h
ave hardly kept pace with inflation. And even though they have been a significant part of the GDP in the past they no longer have wealth. He astutely points out that even though the country still has great wealth, it is held in so few hands that it ends up locked away in investments that cannot drive (churn) the economy as the middle class would by purchasing appliances, automobiles, homes, etc. In fact, wealth is more concentrated today that it was in 1929 and nearly double that of any other advanced economy.On the other side of the national debt, who is holding the IOUs? The answer is approximately 70% foreign investors. And, at the moment, they are facing significant devaluation of the dollar or even the possibility of a loan default from the USA! These investors have to be seriously planning for the possibility of a \"flight to safety\" to protect their remaining wealth.Does our future portend a recession, depression, or the Second Great Depression? The answer lies in how our economy has shifted over the last two decades. Corporations have sought higher profits by pushing high paying manufacturing jobs offshore and, as a result, we purchase much more from offshore than we sell. Our trade deficit is the highest of any country in the history of the world and real earnings, adjusted for inflation, have declined by a factor of 300% since 1972. Thus, this structural inability to grow has made the Federal Reserve\’s interest rate adjustments, or government tax cuts, or increased federal spending ineffective in stimulating growth. Plus, the Congress continues to accumulate increased budget deficits at $4 or more billion per year.Thus, we are at the proverbial fork-in-the-road. Will our government call an end to this madness, stop spending money it does not have, cut back programs that promise more spending, cut back existing programs to reduce spending, cease offering money to \"stabilize\" the financial industry, and if necessary raise taxes to meet current spending? I guess not, what do you think? Or rather, will our government choose to increase the money supply by continuing to sell Treasury bills to foreign countries who are stuck with excess dollars in their sovereign wealth funds as a result of the ever expanding trade deficit? I guess yes. The government will use the increased money supply to pay for the Iraq war, the Wall Street bailout, defense spending and so on, while inflation continues to increase. (In a perverse way, not only is inflation a hidden tax on the American public, but the government is silently extracting wealth from its foreign customers in the form of a \"doing business\" tax.)Historically, a reliance upon foreign investment combined with an inability to grow and high government spending have lead to hyperinflationary periods such as after the US Civil War and after World War I in Germany.So we have the stage set for hyperinflation and the Federal Reserve is determined, at all costs, to support (monetize) the deflating financial industry with fresh money. The money supply has already increased by an annualized 17% in the first quarter of 2008, an estimated $2.5 trillion, and if multi-trillion increment continue, it will initiate a inflationary spiral of currency debasement, flight to safety, and hyperinflation. The only remaining question is will the financial industry deflate enough to tip the scales into hyperinflation? To answer this question, consider that the bulk of sub-prime defaults will not begin until mid-to-late 2008. The $1 trillion in mortgage related losses is a low estimate. Higher estimates put mortgage losses closer to $3 trillion.Besides the mortgage-based collaterlized debt obligation (CDO) problem are other asset backed securities (ABSs) such as credit cards, student loans, automobile loans, commercial leases, and so on that have also begun to fail. If that were not enough, there is another extended aspect of the financial industry, the un-regulated shadow banking system, that is free to create unlimited debt through its disguised insurance polices called credit default swaps (CDS) and other credit derivative instruments. Since these contracts are private, it is difficult to gauge the exact amount of debt created, but best estimates place the figure around $550 trillion of world-wide debt! And it is this very debt that collapsed Bear Stearns over a weekend and has everyone concerned about the viability of Lehman Brothers, Citi Group, and JP Morgan Chase. To answer the previous question, yes, there appears to be more than enough possible debt collapse to cause the Federal Reserve to increase the money supply to the point that it will tip the scales into hyperinflation.What happens in a world of hyperinflation? The first thing Williams\’ points out is a lack of physical cash. The Federal Reserve only holds about 1.5% of the total money supply in cash or about $200 billion plus another $50 billion in commercial bank vaults. Another $780 billion is held outside the USA in foreign bank vaults. So as the demand for more cash skyrockets, the limited cash supply will be quickly exhausted. Subsequently the government would release its so called red-colored high denomination paper money. Next, our debit and credit card based society would also cease to function in hyperinflation and, in turn, worsen the existing economic crisis.Small barter-based black markets will eventually evolve, but maybe not for 1 to 6 months. What little gold and silver there is would be used as a back-up reserve currency. Other valuable barter currency include high quality liquor (scotch & wine), as well as canned goods and personal services. But if you do barter with these physical goods, be sure to check the weight of gold & silver, check expiration dates and taste the liquor before completing the transaction. So, to be prepared for an economic collapse one needs a six-month store of essentials such as canned goods, toilet paper, booze, guns, and gold.

Written by RedCreek on 2008-04-10 16:52:57Thanks for the detailed info. It looks like you found great value in what you bought vis-avis other properties in the area, with the possibility of moving to a fixed with no penalty. That is great. Keep us posted on how you see things from there. Girlfriend coming over from the US or was she based in London already? You probably mentioned it but I read too much stuff so I forget….Enjoy the new place, the parking and the neighborhood! I am glad for you!

ANOTHER VIEW ON HOW LONG RECESSION/DEPRESSION LASTS No one knows by how much, or for how long, America\’s economy will be weighed down. The IMF\’s gloom is based in part on its reading of history. An analysis by the fund of post-war housing busts in rich countries, written in 2003, suggests that crashes typically last about four years and are often accompanied by banking crises. Economies end up 8% smaller, on average, than they would have been had they carried on growing at pre-crunch rates. Perhaps this time will be different, and the hangover will soon be gone. But given the scale of America\’s housing binge and of the financial crisis the bust has spawned, that seems unlikely. http://www.economist.com/world/na/PrinterFriendly.cfm?story_id=11016296

ptm,Thank you for (while paraphrasing) writing much more eloquently than I about what reality looks like. I just don\’t have the financial background nor vocabulary to write convincingly about what it is I can see from here. You have done, as others here are prone to do as well, a wonderful job of stating our case for why we think this is going to be unlike any other financial crisis before. It is now an overused phrase, but \"the perfect storm\" is indeed brewing. My sense of calm is returning as I get my house (literally and figuratively) in order; but I am also more certain than ever that we are correct here in thinking the worst.

test

guys, no inflation!!!! Treasury creation out of thin air to swap for toxic waste is not inflationary!!! More Treasury creation to encourage subprime lending and leverage betting is not hazardous. cheers. How rely on XXX Facility when you can just create tons of Treasury and swap for all toxic collateral. NO INFLATION!!!http://www.iht.com/articles/ap/2008/04/09/america/Fed-Credit-Crisis.php\"The auction program is intended to help financial institutions and the troubled mortgage market. The Fed said it would make as much as $200 billion worth of Treasuries available through weekly auctions.\"

@ ptm on 2008-04-10 17:31:21 Thanks. Great post, great insight, great tip on TP and canned goods. I suppose I should convert my paper currency to pennies as they will retain their value as a zinc feedstock for manufacturing plants in China Written by JP

\"peak oil\"????? oil is going higher after intermediate double bottom and break out. sure, there is no inflation, in those deflationist\’s dream.pretty scary stuff about unlimited Treasury creation to swap to toxic collateral. i wonder why Treasury is considered AAA??? It should be worthless like dollar by now.

London Banker,Go get \’em! If you run out of folks to hold accountable on your side of the Atlantic, I would like to offer some Maine hospitality and a comfy bed so you can come over here and chase down some on this side. You would be a very busy man.Seriously, it is nice to think that someone, somewhere is going to be held accountable.

ptm,I am stealing from Drew Carey here but:There\’s a support group for that. It\’s called RGE readers and they meet everyday on the blog.And don\’t worry about the commitment papers – I\’ve run into people a lot nuttier than anyone here (Godsend excepted) and they are mostly all still on the street.

JP on 2008-04-10 19:41:57 – great tip on TPIf I remember correctly I was reading an account of a Bosnia war veteran who said the most import commodity to consider in times of disruption was to maintain a supply of toilet paper. Life was just miserable without it.Of course, this whole blog is just pretend? right? Must be, this is my third attempt to post the same message…

http://www.house.gov/Welcome.shtmlTo the Honorable ___Please sponsor legislation that requires the Federal Government to report its financial statements in a manner consistent with GAAP.Public companies are required to report using GAAP to protect and inform shareholders. I am sure that you agree that it is prudent that at a minimum, the Federal Government be held to the same standard to protect your constituents, our citizens and taxpayers.Kind regards,

@ptm thanks \"So we have the stage set for hyperinflation and the Federal Reserve is determined, at all costs, to support (monetize) the deflating financial industry with fresh money\"the equation evolving before our eyes and many folks way more qualified to discuss than i have debated – how do you measure this magic discount window swapping ? the books are not printed yet on this one. common sense and logic tell me as well as this discussion, this is \"fresh money\" being added to the mix. one question I have is does \"The money supply has already increased by an annualized 17%\" include the discount window recycling program which takes in $.70 and spits out \"fresh\" clean $1.00 ?

over the counter derivativesin the latter half of the 20th century AD, human financial beings evolved creating an investment vehicle named derivatives which would ultimately lead to the destruction of the Earth\’s existing financial system in the early 21st century.call#1 hello, i am calling to exercise my OTC derivatives… sorry, you have the wrong number. call#2 hello, i have this structured derivative you sold me valued at 2 billion and i am calling to collect the premium. please hold. ok Sir, our records indicate that product is worth 1 billion. Well, now that is a bit of a problem. Wait a minute, can the Fed turn it into 2 billion at the discount window ? Of course, why didn\’t I think of that. Sure. I will call the Fed in the morning to make the exchange.

Written by GSM on 2008-04-10 17:21:45“Sorry KJF- A rosy scenario indeed. Give me reality anyday. … One only needs to understand the facts to see this is not a textbook situation.” Thanks for your reply. I expected to be challenged on my post, but you do not need to be sorry. I am not trying to convince anyone. I just wanted to express something that had been going through my mind the last few days.Only on a blog such as this one would my statement be considered a rosy scenario: I wrote, “I am beginning to think in terms of a reverse J pattern where the bottom is prolonged (12 to 18 months sounds reasonable to me) and growth resumes slowly, but does not return to previous levels for many years.”And I too prefer reality; so just what is the reality now? Unemployment is 5.1%. In 1982 it was 9.7%. In 1932 it reached 23.6%. Inflation is about 4% according to the government statistics, which are often cited as understated, and about 12% by shadow statistics, which are equally unreliable, if not more so, IMO. In 1980 inflation was 13.5% according to the GOVERNMENT data! And we had wage-push inflation then, but not now. Inflation was 14.6% in 1947, 10.97% in 1942, 15.9% in 1920, and over 17% in both 1917 and 1918. So the reality now is that we are in neither a depression nor a hyperinflationary economy. And to get from the current reality to such dire conditions requires an extrapolation that is just as speculative as my own prediction. The truth, which I readily admit, is that we cannot know what will happen; that is why I said my predictions were my opinion. To fear that such things might happen is understandable, but, IMO, it is impossible to draw such conclusions with any degree of certainty. As Niels Bohr said, “Prediction is very difficult, especially about the future.” You can cite all sorts of problems with $trillions of “toxic paper” and the like that exist now, but conclusions about how serious these problems are and that their existence will necessarily result in hyperinflation and/or a depression are nothing more than speculation. There is no more proof in reality to support a prediction of depression and/or hyperinflation than there is to support my prediction of a long recession with a J shaped recovery.It just seems to me that some people here WANT to see a systemic collapse, and I don’t understand why. I have perma-bearish / pessimistic tendencies, and I have been bearish on housing since early 2006, and on the economy and the stock market since March 2007. But some of the people here make me feel almost like a Kudlow Pollyanna!Lighten up guys; it really could be only a recession! And if it does turn out to be a depression or hyperinflation, it is not going to surprise us overnight; there will still be time to stock up on supplies when the evidence is clear that a collapse is upon us. But there is no such evidence yet.

Overview: http://www.theoildrum.com/node/3726#moreOil IS Food!: http://www.energybulletin.net/281.htmlJust a couple of links from hundreds that are out there, all being discussed by a huge community of people, many of whom are industry leaders, not cultists. An understanding is fundamental to the coming world economic peak and where things are headed and why. The unlimited growth models cannot continue, and P.O. is one of the biggest reasons why. Our world money system came to mirror our growth system and has traced the same path since hydrocarbon use began scaling up in the early twentieth century. It all fits together.

OR the difference between the US and Japs..back then,when the japs got hit, the turmoil doesnt affect the world econ US consumers were still, well consuming,other parts of the world was moving nowits a different story,US consumers are hurting,purchasing power are depreciatingwith devaluation of USD, inflation can be seen in other parts of the earththis isnt about the banks anymore

Written by tutterfrut on 2008-04-11 05:44:13 This is getting very upsetting posting fails half the time! tutt: You read my mind! I was going to say it looks like this will spoil today\’s party. They had the beer kegs ready! AP GE Posts Lower 1Q Profit, Cuts Outlook Friday April 11, 6:49 am ET GE Posts Lower-Than-Expected 1st-Quarter Profit, Lower Full-Year Outlook on Financial Markets

Party over indeed. Retailers yesterday + Ge today should mean a significant correction in market expectations and indices booking substantial declines (i.e., at least 1% If markets were normal I would say at least 2%!) http://finance.yahoo.com/indices?e=futures

Against all odds: Posting is getting harder. Save your posts before sending!So the lesson for the \"wait and see\" crowd will be that they lost a fantastik opportunity to sell during the period of resilience we have seen since April 1st. As this repeats over and over they\’l get trained. Not much different from pupy training:-)Written by Octavio Richetta

U.S. IMPORT PRICES FOR MARCH RUN HOTTER THAN EXPECTED, UP 2.8%(marketwatch)

A victim of the MEW/HELOC dryup:http://www.nypost.com/seven/04112008/business/chap__11_next_for_linens_n_things_106086.htm

More political genious!Fears of a catastrophic outbreak rise as White House says it\’s likely to move research on one of the most contagious animal diseases from isolated island lab to U.S. mainland

Why is market not rallying? Maybe there is too much good news in the pipeline…

It will rally, PPT is still at the Starbucks and will arrive after some shorts have piled in.

Where can you follow up on trading volumes? Seems that past week volumes were way down from 12 month moving average(30%).

10:36 Economic Report: Consumer sentiment plunges to 26-year-low

Hey Hellasious!Since you\’re there ; i don\’t kmow if you remember you told me on your blog that you extracted the data on the Fed\’s balance sheet (H41). I would have three questions for you if you have time 1) Did you really get yourself the data for each single week or do you have access to a data table somewhere (could\’t find it so i did it myself until december, a bit long)2) Dou you agree that the balance sheet of the Fed appears on the 2) of the H41 et not the 1) (factors affecting reserves)3) I read this morning that there was less demand by the primary dealers for TSLF and PDCF in the last operations. On the contrary, the Discount window program increased by 45% (to depository institutions). What is your take on this.Thank youlili

#1\"It just seems to me that some people here WANT to see a systemic collapse, and I don’t understand why.\"#2\"Lighten up guys; it really could be only a recession! And if it does turn out to be a depression or hyperinflation, it is not going to surprise us overnight; there will still be time to stock up on supplies when the evidence is clear that a collapse is upon us. But there is no such evidence yet.@KJ Foehr, #1 Going way back, some banking crises (crisis defined – An unstable condition, as in political, social, or economic affairs, involving an impending abrupt or decisive change.) were resolved by a) rolling through town with bars of gold to show the people the bank had backing, b) or by having people go to the window and get small denominations and then walk around the back of the bank and redepositing the money to make it appear there was plenty there to go around (somewhere in Kindelberger\’s book)or c) by a foreign bank stepping in. Contrast these past solutions with the current credit crisis and see if you still have the rosy outlook. This time there is a web of credit derivatives throughout the entire world affecting every central bank to contend with. Who do you think honestly knows the numbers involved here ? The Roubini chart of projected loss that is predictions over calendar period is starting to go parabolic. If they are as it appears, astronomical and the old banking cartel wants to maintain control, the only path they have to take is to inflate astronomically. What is likely worse as in not rosier, is the fact that they DO NOT HAVE A CLUE. #2 Please wait until you hear reports of hoarding in the US before you buy any supplies, but re-read the definition of crisis and note the \"abrupt\" part. They are already hoarding in other countries.Personally, the glass is neither half full or half empty for me. It is financially broken. Had the Fed/Treasury decided to deal with the credit crisis instead of day trading the equity markets while dealing with the global financial system credit meltdown, perhaps I would not have to be so concise, truthful and honest about what I see coming.If you want rosy scenarios, watch tv or movies…

HellasiousYour point is well made. I plan to expand some of my comments in the near future. In the mean time, the fact that the USA is already embroiled in a serious credit crisis, and that Spain & UK are teetering on the verge of their own credit collapses is actually a pretty bad omen. The three countries in the world with the largest overall current account deficits are: the USA, Spain and the UK.We\’re almost certainly headed towards a future with massive expansion of the global monetary supply. No matter what the central banks may say – there is no way around it (that is, if the central banks plan to stay in business … or maintain the illusion of staying in business).PeteCA

Written by Guest on 2008-04-11 09:19:39This ain\’t fair Benny! The indices are a whole 1% DOWN! This ain\’t what you promised! Can I sue the FED? GE only missed the numbers Ge earnings where only 10% below last year\’s and 15% below consensus!it looks like we are up for slow death torture [of the longs that is!]

The power of the liquidity spigot the FED opened to the casino players (i.e., the PDs) can you imagine what the markets would do if some positive news came out?

It boggles the mind… No its mind numbing… nah, its freaking ridiculous.Lehman Brothers Holdings repackaged unsold debt and used the Federal Reserve\’s new borrowing facility to convert loans that investors mostly rejected into cash to finance its business, the Wall Street Journal reported. According to the Journal, Lehman transferred $2.8 billion in loans that included some risky leveraged buyout debt into a new investment entity called Freedom. Freedom then issued debt securities backed by the loans, and $2.26 billion of the securities got investment-grade credit rankings from Moody\’s and Standard & Poor\’s, according to the report. I LOVE THIS PART….\"the Federal Reserve could not be reached immediately for comment.\" didnt anyone have the the phone number… I am gettting sicker every day. http://www.cnbc.com/id/24064762http://www.cnbc.com/id/24064762RELATED LINKSLatest Headlines from the WiresThe bank used some of those securities as collateral for a low-interest, short-term cash loan from the Federal Reserve, the Journal said, citing people familiar with the matter. The move was meant as a test to see what the Federal Reserve would accept, and the size of the loan was not material, the Journal added, citing a person familiar with the matter.

Written by jd on 2008-04-11 11:08:16Things are so bag that a kill the shorties rally cannot be orchestrated. But look at yesterday, a guy from GS said we are closer to the end than the beginning of the crisis, a fully unbiased opinion of course, and the markets rallied despite all the bad news!Or if all else fails, Oil is up, energy and alternative energy will carry the day. But make no mistake, it is more dangerous than a tourist walking alone through the Rio slums.

can i repackage my worthless expired puts into a debt instrument to then go buy more puts ? please do not worry everyone, Lehman will probably take any liquidity they have gained in such a clever way and invest it in commodities further inflating this whole chirade…

Interesting take. I used to work in corporate finance for a global company. We would project revenue and earnings for the next year based on a number of factors. As real data became available, we would make revisions to the plans and estimates and make decisions around spending, hiring, capex, etc. accordingly. Pretty standard stuff.Corporate budgets for 2008 were set in the fall of 2007. As earnings are reported for end of Q108, budgets are getting revised in light of new information. This points to corporate spending pull-backs going into 2H08 as projects are curtailed, delayed, or outright cancelled (I see it happening now)The market will wheeze along for a few more months, focused on the glimmer of hope that it is a 1 or 2 quarter hicup and that all will be well for the full year with a strong recovery in Q408.

Dollar Must Fall Further: Economic Bureau\’s FeldsteinIntervention to prop up the U.S. dollar would be wrong because the greenback must depreciate further, Martin Feldstein, president of the U.S.-based National Bureau of Economic Research, was quoted as saying on Friday.In an interview with German daily Die Welt, Feldstein was asked if it was time for concerted action to support the dollar, which has fallen sharply against the euro in recent months.\"Any intervention would be a mistake, because the dollar needs to fall further,\" he said, according to the German text of the interview.\"I\’ve been saying for years that European countries need to get ready for a falling dollar. Because the United States needs to continue to reduce its trade deficit.\"http://www.cnbc.com/id/24061429My bet too, since looooooooong…

Written by GSM on 2008-04-10 17:21:45Written by ptm on 2008-04-10 17:31:21I am unsure what to do. So I have gold in the event of inflation/hyperinflation. And cash in the event cash is truly king. Unfortunately if one wins out, the other is likely to loose.@allI keep coming back to the thought that the Federal Reserve (Greenspan and Bernanke) seem not to have been independent as was the intent, but instead worked with the White House. When considering Cheney said that deficits don’t matter, combined with his anti dollar investments, is there a big picture out there in play? Or was Greenspan just not able to have the foresight? Are they trying to minimize the deficit through inflation/hyperinflation? I acknowledge these would be extreme methods. I am not on the inside, just someone trying to make sense out of what has been described as unforeseeable events by those who should be much smarter than I. I who seen this coming in April of 2004 and decided to sell some investment property.hlowe

Can you say we are starting another war…Navy: Iranian Boat Approached U.S. Ship in Persian Gulf- Report: Spy Photos Reveal Iran Missile Launch Site

It\’s so quiet here, I can hear bears holding their breath…

Inflation adds to G7 worries on markets crisisFri Apr 11, 2008 1:49pm EDhttp://www.reuters.com/article/politicsNews/idUSN1047747720080411?feedType=RSS&feedName=politicsNews&pageNumber=3&virtualBrandChannel=0&sp=trueGood reading more than meets the headline.

@tutterfrutLOL!I\’m conditioned to expect the 3 o\’clock rally, as anybody else here. Today I feel confused, what\’s up guys? who\’s not doing his duty?

C\’mon give the market some hope, you can do it…

YOU CAN\’T FOOL ALL OF THE PEOPLE ALL OF THE TIME The big news to today for me is not GE, but consumer sentiment numbers, the lowest since 1982. My recollection is that in 1982 we had just finished 18 years of a horrendous stock market and the the public had been mercilessly beat up by relentless inflation for years. People had been absolutely bludgeoned for years and years. The public now has reached the same point of pessimism, but the recession and housing crisis have a long, long way to go. This means a couple of things to me: 1) John Q. Public, who is at the front lines, knows that we are headed for depression, despite what the generals at the rear are saying. In other words they are not as stupid as TPTB would like to hope. 2)Consumer sentiment is going to go much, much lower and consumer spending, which accounts for 70% of our economy is going with it.

Todays NTPlunge in Consumer Sentiment Index Is SignificantThe Advancing Trend of Import Prices Is Bothersomehttp://web-xp2a-pws.ntrs.com/popups/popup.html?http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0804/document/dd041108.pdf

Written by Rosy Rosy on 2008-04-11 14:36:36Like your name:-) Was just reading a piece at CR about home lenders not giving 100% financing anymore, instead they are settling for a 3-5% down payment. There is still something bery bery bery wrong with the system!

Makses the GE surprise so shocking is that less than a month ago the CEO was bragging about the numbers in a conference call…Market ScanGeneral Electric Shocks InvestorsMaurna Desmond, 04.11.08, 11:10 AM ETThe juxtoposition of General Electric\’s weak first-quarter results and lowered 2008 expectations against Immelt\’s sunny confidence during his shareholder webcast and in his annual letter less than a month ago is making investors that much more nervous about the future of the conglomerate.http://www.forbes.com/home/markets/2008/04/11/ge-earnings-update-markets-equity-cx_md_0411markets14.htmlI tend to forget checking Forbes more often; some good reporting of day-today activity goes on in that shop.

hlowe on 2008-04-11 13:14:13 1)And cash in the event cash is truly king. Unfortunately if one wins out, the other is likely to loose. — 2)Cheney said that deficits don’t matter — Or was Greenspan just not able to have the foresight? — 3)Are they trying to minimize the deficit through inflation/hyperinflation?1)Cash is king in a bank failure like we assumed would have occurred in March before the shock & awe of the Federal Reserve. Gold is king in a monetary crisis. BTW, some suggest that you buy a $1,000 bag of scrap silver and use the coins for barter rather than gold.2)All accounts I read is that these are savvy, astute, political animals. Williams believes there must be an implict understanding in Washington of the situation, but only Ron Paul has the courage to stand up!3)My understanding is that we are not doing anything about the deficit, just let it build up, consume 33% of the Federal budget in interest payments and be the next administration\’s problem.

Da bear did it. -2% touch down!

Da bear did it. -2% touch down!

Global Economy Risks Credit `Death Spiral,\’ UBS\’s Magnus Says By Jennifer Ryan and Naga MunchettyApril 11 (Bloomberg) — The global economy risks a “death spiral\’\’ if governments fail to take “active and unorthodox\’\’ measures to address the seizure of credit markets, UBS AG economist George Magnus said. http://www.bloomberg.com/apps/news?pid=20601015&sid=alvli1ciqEgo&refer=munibonds

I forgot to post this with the above post“It\’s impossible for central banks to resolve this on their own,\’\’ Magnus, senior economic adviser at UBS\’s investment- banking unit, said in an interview today on Bloomberg Television. “In the end, all crises of this nature require active and unorthodox government intervention.\’\’

Written by Gloomy on 2008-04-11 15:11:03They important question is which goes down first, his job or the credit markets:-)

Largest U.S. Municipal Bankruptcy Looms in Alabama: http://www.bloomberg.com/apps/news?pid=20601039&sid=ahSJgzIBbboA&refer=homeHow many more of these will we see?

a guy from GS said we are closer to the end than the beginning of the crisisWritten by Octavio Richetta on 2008-04-11 11:24:47I wonder if he has a job today?Goldman Sachs Cutting Jobs Amid Market Weaknesshttp://www.cnbc.com/id/24070828

Black Monday is upon us…Retail sales (or lack-there-of) will crater stocks on Monday-they have no choice now but to price in a full-blown earnings recesssion.

I am wondering how many more GEs will we have before hunting season is over?

UPDATE 1-Lehman makes move to turn unsold debt to cashNow they don\’t only sell the public their cocaine, they are soda baking it into crack!It\’s the code of the street. And the street is saying:\"i learned at a early age whats important in lifeits a game,bet your money,dont get caught in that dicei had tony montana dreams of takin overgetting rich mixing yae,wit dat baking sodatheres 3 options get money,death or jailf**k college,my career wuz right there in those scalesnever personal,nah im a businessmancut off a n*** hand he come up short on a gramput your money where your mouth iz,ill take yo chipscuz if dont make dollars,den it dont make senseask any n*** dat did dirt wit da godi used to work hard,robbing niggaz dat work hardso if youre slanging keysor slanging cdsthe more you sell,the more jealousy youre gonna seeim olny good at doing drugs,sports and entertainmentthats what i told the judge in court at my arainment\"

\"the whole business ran off supply and demandwit dis i had a whole STREET inside my handjust taste it,swear your tongue be numb for a weekbut try to jerk it,swear yo azz be unda the sheetkeep flipping it raw,keep sellin that weighttill they,kick in the door,its the american wayorganized crime,infratated the forcewe above the law,thats cause we paying em offwho could get the most cars,collect the best womenyou cant judge nobody cause its all essense whoever die wit the most money in the end win\"-chorus- AMEN AMENlyrics: Sticky Fingaz

@OctavioYes, I\’m sure the UBS guy\’s comments affirm all the experts view that the worst is over for UBS.

That Fingaz stuff rhymes pretty well with what Lee-man, Da Bear, JP Morgue and other street-wise (WS backwards) guys are doing… They don\’t get no jail time though:-)http://www.stickyfingaz.com/

The betz take take on LEH\’s latest alchemy I have found so far. Just yesterday Benny was teling us how careful they are with the collateral:=) These junkies will never learn!http://online.wsj.com/article/SB120788118712507147.html?mod=mkts_main_news_hs_hHow Lehman Opened the Fed\’s SpigotDeal Takes Advantage Of New Lending FacilityBy SERENA NG and SUSANNE CRAIGApril 11, 2008Financial engineering helped get Wall Street into its current credit-market problems. Now, Wall Street\’s Lehman Brothers Holdings Inc. is using a little engineering — and some help from the U.S. Federal Reserve — to bolster its finances.In recent weeks, Lehman moved $2.8 billion in loans, including some risky leveraged-buyout debt that has been difficult to sell, into a newly created investment vehicle it named \"Freedom,\" which in turn issued debt securities backed by the loans.About $2.26 billion of the securities received investment-grade credit ratings from Moody\’s Investors Service and Standard & Poor\’s. Lehman then pledged some of the securities as collateral for a low-interest, short-term cash loan from the Federal Reserve, according to people familiar with the matter.The result for Lehman: By repackaging unsold debt and turning to the Fed\’s new borrowing facility, it was able to turn loans that had been mostly shunned by investors for months into cash it could use to finance its business.Fed officials had worried in the early stages of the credit crisis that banks would be worried about the stigma of borrowing directly from the central bank. But use of the Fed borrowing facility has been robust.The Lehman deal shows how some of the issues brought to light by the credit crunch — such as the market\’s dependence on credit-rating firms and Wall Street\’s affection for complex investment structures — are still very much a part of market activity.\"The loss of confidence in structured-finance ratings is at the heart of the current market crisis,\" said Ed Grebeck, chief executive of Tempus Advisors, a debt-strategy firm. \"For investment banks to go back to the ratings firms and say, \’Here\’s a new structure for you to rate investment grade\’ — that\’s shocking to me.\"A spokesman for the Federal Reserve Bank of New York said it doesn\’t comment on the collateral it takes on individual loans.Bundled UpLast month, after a liquidity crisis nearly caused the collapse of Bear Stearns Cos., the Fed introduced a new lending facility for investment banks that would give them more ways to borrow against their holdings. Called the Primary Dealer Credit Facility, it accepts a range of securities as collateral for cash loans that can be rolled over daily. Among other things, the securities pledged by dealers must have market prices and \"investment grade\" credit ratings.As of the end of February, Lehman held $17.8 billion in leveraged loans. These are typically issued to companies that have below-investment-grade, or junk, credit ratings and were commonly used to finance leveraged buyouts. The market prices of such loans have dropped significantly from levels nine months ago.Unlike commercial banks, which can use loans as collateral for borrowing from a different Fed borrowing facility, called the discount window, securities dealers and investment banks can pledge only securities, not individual loans.Lehman\’s Freedom vehicle is commonly called a collateralized loan obligation, or CLO, on Wall Street. CLOs are securities backed by a pool of loans. Freedom bundled together more than 60 of Lehman\’s loans and divided up the risk by issuing two groups of securities, which Lehman kept.One group of securities, valued at $565 million, wasn\’t rated and was structured to bear the first 20% of losses among the $2.83 billion in loans in the pool. The other group, comprising $2.26 billion in securities, was assigned an \"A\" rating by credit-rating services because the debt pool would need to lose more than 20% before these securities suffered losses.Was It \’Brilliant\’?One person familiar with the matter said the vehicle was named Freedom because it was designed to give Lehman freedom to tap as much cash as possible if needed. The size of the borrowing from the Fed wasn\’t known, but the person said it wasn\’t \"material\" and was meant as a test of what the Fed would accept.The loans in the pool included debt that was issued to finance last year\’s leveraged buyouts of First Data Corp. and TXU Corp., a person familiar with the matter said.A number of Wall Street executives called Lehman\’s move \"brilliant\" and said they may follow suit. One senior finance executive at a rival of Lehman\’s said his main reservation with Lehman\’s move was that it might lead to criticism that Wall Street is taking its junk to the Fed for cash. Still, he noted that unlike many troubled mortgage securities, there is a discernible market for leveraged loans.\"It\’s a very creative way for investment banks to get liquidity from assets that they don\’t want to sell at fire-sale prices,\" said Todd Kesselman, managing director of Precision Capital, an investment-advisory firm that specializes in structured credit and private equity.Firms are finding other ways to unload corporate loans that have piled up on them. Citigroup Inc., for example, is close to selling $12 billion of its leveraged loans to a group of private-equity firms for about 90 cents on the dollar.Since the summer, when many parts of the credit market seized up, banks and Wall Street firms have been stuck holding hundreds of billions of dollars of loans, bonds, and complex securities backed by mortgages and other assets. The banks created the debt with the intention of selling it to investors for handsome fees.When many investors backed away from riskier debt last year, banks were forced to keep the debt, which has strained their ability to trade or to make new loans. Liquidity in the market dried up as a result.To encourage firms to trade more freely with each other, the Fed has taken a series of unprecedented steps to boost liquidity in the markets, including expanding its direct lending to securities dealers. So far, the Fed\’s measures have helped alleviate some of the strains in the credit markets.Write to Serena Ng at serena.ng@wsj.com and Susanne Craig at susanne.craig@wsj.com

Guys, I need your help. I have an international finance exam tomorrow, followed by portfolio management and strategy exams. Any recommendations?I heard there is a question in the exam asking \"how can company X hedge its position using derivative instruments against a rise in the dollar?\" – follow the path of Barings, Orange county and LTCM?Another question is \"calculate the Value at Risk for the hedge fund Y for a 5% probability?\". 5%? you\’re kiddin\’ me?A strategy question may ask \"how can an investment bank Z ensure getting rid of its market risk?\" – how about legally \"bargaining\" a government agency to take all the risk to its books?Thanks for your help

I happened to meet with a hedge fund yesterday (unlevered, BTW) and it comments in passing were telling. They are seeing very large volumes of mortgage paper even though, this fund has not bought a single mortgage and expect that there is even more that would be offered if buyers were stepping forward. In addition, credit default swaps traders tell them that that market is in perilous shape. A great deal of the protection was written by hedge funds, who were typically levered. When they get into trouble, their problems will redound to the investment banks, both through their exposure as CDS counterparties and as lenders to failed hedge funds.The fact that CDS traders are discussing such a grim viewpoint with people outside their firms (let\’s fact it, most businesspeople don\’t go around saying their product is about to implode) suggests that it is a common knowledge in the dealer community. I wonder if this topic is getting short shrift for a reason. The media has been known to overlook the foibles and failings of public figures until they are on the ropes. There may be similar self-censorship operating here, since the press probably does not want to be accused of fomenting panic.http://www.nakedcapitalism.com/2008/04/investment-bank-demand-for-fed.html

\"Libyan leader Moamer Kadhafi has ordered the abolishment of most of the government ministries and handing over their powers to the people. \"For years, Libyans have been unhappy with the workings of their country’s ministries which have been transformed into a labyrinthine bureaucracy in which corruption and maladministration reign,\" Kadhafi told Libya’s parliament late on Sunday.http://www.menareport.com/en/business,Economy_and_Trade/223065Sounds like the West should take a good look at this rather modern and unique solution to useless socialist bureaucrats er parasites, and blood-sucking \"corrupt and incompetent\" politicians, et al LOL I like it!PeterJB

First let me just take a moment to praise OR for his recent 3 part post. It went well above and beyond the call of blogger duties and was a great read. It has inspired me for the moment to put up a slightly more substantive post. My state of the union! Bear Stearns, Bailouts, and the current calm.The Gov’ts laundered cash has effectively returned cash (credit) to the system, and unfrozen markets that were seizing up. There are lots of theories on the BS bailout, some obvious. IMO, the most important factor was to keep the markets moving. The interconnectedness of the players that BS dealt with would’ve potentially stalled the engines of so many other participants. (Bankruptcy proceedings, especially for a player like BS, would’ve gunked up the system for quite some time, and with the current pace of the volatile markets, that just wasn’t an option!) Likewise, in the Derivatives markets, winning bets need to be paid. So that’s the deal on Bear. The next seize ups will hit, when the next round of write downs by Wall St removes enough cash to force the next round of freezes. We are rapidly closing in on the pain thresholds for those write downs! Investing:Over the summer, I advised a couple of wealthy friends to look towards the commodity markets. My best advise was, not just the commodities themselves… but the companies that gathered those commodities (gold mining, oil, etc) Those avenues are now very well played, and smart money has already been followed by the piles that follow yesterday’s profits. (so now there will be more of a tendency for manipulation plays in this arena) “Useful Consumption Commodities” are the only true commodities that will have a future here beyond the speculating. My advise that I gave these same friends earlier this year (and I believe is still the play) was as follows:Think US Based multi national – that does not have a financial arm! (avoid anything where their assets are cash/credit/debt)The Multinats that I would go for would sell small products that sell everywhere, and don’t have a major net price rise with inflation. (…but the % gains are greater) Ex: Ford Car – $20,000 to $20,200 is only a 1% price gain, but it is $200 out of pocket.Coke – $1.00 to 1.10 is a 10% price gain but only $0.10 out of pocket.Both increases anger the customer, but the coke hit isn’t as bad. (plus you get a smile) …so with that said, I said Nike, McD’s and those types would weather the storm slightly better then the rest of the market. In addition, I still like the Tech sector companies that are based in R&D. If you want long term investments… Invest in “production based”, “tangible innovations” for energy creation! This is the next eventual bubble. (robitics will be around the corner. SERIOUSLY!!!) ***p.s. The industry right now is scaling back bets in a big way. The Deriv game is IMO unwinding quite a bit, as Risk vs Reward is being replaced by Risk vs Reality models.*** Where the Market is going? I wrote a few months back: “If the current “rules” don’t change, and I were to make a long term prediction, (i.e. the bubble is forced to fully deflate in a controlled manner), I see DOW somewhere between 10,800 and 10,100. (S&P 1,180 and 1,100) If control is lost, I see a bottom at DOW 8,500 and S&P 900. Short term, I have a hard time seeing us back above 13,000” I still hold to this theory. The Gov’t/Fed/TPTB have proven in round 1 that they have been able to keep this under control. (through MASSIVE EFFORTS!!! …but they know it will take these efforts, and they know the support for this will come) ….if they continue to ease the freeze, then they will maintain control. The financial war of bits and Bytes will roll on. Price discovery / transparacy creation initiatives will lead to the stripping the poorly connected hedgies. So what will be the turning point??? It will take a combination of many events! …and there will be wildcards! I see Cuba as the greatest wildcard around. The resources alone are huge. 1 major storm followed by US aid, or a change in US Administration/Gov’t views will pave the way for a shot in the arm. I believe we will see Banks return to banking (over investing) …and their new inventories of houses will create new business opportunities for them as the will start their own Bank Run real estate divisions that can better access risk, while adding business (to make up for lost investment revenues) The lack of house sales, consumer spending will, coupled with debt consolidation will prove to turn the negative savings rate around. (IMO – this will be the first real indicator of a bottom) Credit card payments will thrive with round 1 of Gov’t rebates. What will come of this?There are some financial messes that can’t be fixed. That’s where financial engineering and creativity will take hold! For these problems (ex. Soc Sec) euphemisms for socialism that sounds like capitalism or a blend of the 2 will be step 1. Eventually a new breed of “worldwide hyperinflation” that sees world currencies split, yet manage to avoid debt splits. (sounds impossible??? I don’t think so. Our future debt can’t be bet against) This crisis couldn’t come at a better time! With environmental issues like global warming hitting, food shortages, etc… it will force us as a race, to step up to the next level. We have gotten lost in our trek to creating Utopia. We’ve grown lazy because of the ability to amass wealth can be had by pointing and clicking a mouse. (This has been an important era because its an age of mental creation and information age sharing that hard times will turn into actual creation) Our Complacency with progress has thrown us off the goal of living like The Jetsons!All it will take is visionaries that need to eat! Like Walt Disney. I am an “Imagineer”, and the future is still bright. Miss America p.s. “guests” Don’t be so offended by my prior comments, I do still read many of your coments too. …but I only reply to named posters. (because I wouldn’t want to offend the wrong guest) p.p.s. LB welcome back!

Roumania(EU)Workers have ended a pay strike at Renault\’s Dacia car factory in Romania. They went back to work after being offered an increase in wages of around 23% on average this year. They had demanded a 65% pay rise which Renault called \"unrealistic.\" The unions said both sides had compromised.http://www.euronews.net/index.php?page=eco&article=480217&lng=1Bulgaria(EU)The workers of the Czech-owned electricity provider CEZ Elektro discontinued the strike that started on Thursday after they reached an agreement with the company management.The two sides have agreed on a 25%-increase in the workers\’ salaries, which was their main demand.http://www.novinite.com/view_news.php?id=92137Some \’striking\’ developments in Europe\’s emerging markets…

Written by Miss america on 2008-04-12 02:40:09Great post thanks for the compliment. BTW, on the market action that followed the BSC bailout, there is a great analysis at http://www.contraryinvestor.com/moprinter.htmYou see saving BSC \"saved\" some but it hurt others (think GE). Did you notice how the CEO said yesterday that on the day of the BSC bailout the world changed? Well, on the day BSC was bailout CDSs on Bear debt went down like a falling rock. What do you think happened to the people who held those betting on a Bear bankruptcy? Not a bad bet at the time. Also, with the FED new PD auction facility same happened with LEH and others. They got a lease on life. If GE was betting against BSC, LEH, etc. there was no bailout for them!BTW, RE: the problem with the spacing: don\’t leave any space between paragraphs.

On the possibility GE \"screw\" the quarter numbers by betting against financials. I think Immelt wanted to pull a \"GS type stunt\" but failed.http://biz.yahoo.com/ap/080412/earns_general_electric.htmlHARTFORD, Conn. — General Electric Co. CEO Jeff Immelt was expected to tell the world Friday how the conglomerate\’s global strategy had paid off and allowed it to ride out the credit crisis….The company blamed disruptions in its financial business late in the quarter for its inability to advise Wall Street in advance about the deterioration in its earnings. Executives faced tough questioning from analysts in a conference call….\"I think clearly we are in an unprecedented area, vis-a-vis what we have seen in March and at the end of the day, our earnings — I\’m not giving an excuse — our earnings being down 20 percent vs. the industry are still reasonably strong and so I think our business model is still strong,\" he said.Scott Davis of Morgan Stanley, however, said GE\’s business model may need work.\"You have underperformed in the up cycle and now you are on pace to underperform in the down cycle,\" he told company officials.Immelt said in GE\’s annual report, issued less than a month ago, that the conglomerate would outperform the Standard & Poor\’s 500 Index this year….

One of Abelson\’s best. Great humor, great writing, and best of all great analysis!UP AND DOWN WALL STREEtMONDAY, APRIL 14, 2008 Snake Oil\’s Cousin; We\’re in a Recession and The Bear Market Isn\’t About to Roll OverBy ALAN ABELSONBOB POPPLEWELL. DOES THAT NAME RING A BELL? DON\’T DESPAIR, there\’s no reason it should. Until a few weeks ago, we\’d never heard the name, either, and knew absolute diddly-squat about the fellow whom it belonged to. But we now intend to keep it in our mental Rolodex, for Mr. Popplewell is obviously a man with a future.Mr. Popplewell, we\’ve learned, is a Texan obviously of the old school and the proud proprietor of Bayou Bob\’s Brazos River Rattlesnake Ranch. Anyone capable of raising rattlesnakes, we submit, is singularly equipped to run an investment-banking operation for just about any of the great Wall Street firms.Of course, times being what they are in the Street, he might be better advised to lend his unique know-how, gained via years of serpentine proximity, to political up-and-comers, particularly on the national scene. And his timing, this being an election year and all, couldn\’t be better.We should make some mention that before he pursues either of those careers his occupational background seems to make him such a natural for, he\’ll likely have to settle a frivolous little complaint from the fussbudgets at the Texas Alcoholic Beverage Commission. The allegations are so trivial, we hesitate to give them further airing — but, oh well: Mr. Popplewell supposedly slipped baby rattle snakes into bottles of vodka and sold the exotic potion to satisfied customers eager for something with a real bite.It seems to us that snake vodka can be viewed as a near relation to snake oil, but less harmful. And if you look at snake vodka as a first cousin to snake oil, a dispassionate observer couldn\’t help but agree Mr. Popplewell\’s enterprising marketing of it demonstrates beyond cavil what a perfect fit Mr. Popplewell would be in either Wall Street or Washington, let the Texas Alcoholic Beverage Commission tut-tut as much as it likes.For that matter, his manifest familiarity with snakes would certainly be welcome at the Labor Department. Let us be quick to say that\’s not to disparage in the slightest our hard-working civil servants who carry on the people\’s business at Labor or, heaven forbid, to suggest that Mr. Popplewell shows the slightest evidence of bureaucratic tendencies. It\’s merely that his experience with the reptiles has doubtlessly endowed him with a considerable knowledge of sinuosity, a quality much prized by the department\’s data constructors.No better example of what we mean than one of our favorite bugaboos, the so-called birth/death model, employed by the Bureau of Labor Statistics to capture, as part of its monthly report on employment, jobs created by new businesses. Purely by coincidence, we\’re sure, that calculation, hypothetical rather than substantive, has been adding appreciably, with rare exceptions, to the reported monthly payroll numbers.Such enhancements have been particularly suspect in recent months as the recessionary chill put the kibosh on job creation in the private sector. In March, for example, the official tally put the jobs-lost total at 80,000. Bad enough, especially if your job happens to be one of the 80,000. But, in fact, except for the fortuitous (or something) but plainly mythical 142,000 additions provided by the birth/death model, job losses would have swelled to 222,000. Which, at the very least, would make a much more graphic headline and induce serious palpitations among the powers-that-be (and we\’re not talking about the secretary of labor, whose name at the moment eludes us).But if Mr. Popplewell is hot for big bucks (and who isn\’t?), Wall Street, even in its current not-so-ebullient state, might still be his best bet. If nothing else, he might earn a pretty penny from the surviving pooh-bahs of the brokerage business by selling investors on the notion — voiced last week by, among others, the head of Goldman Sachs — that we\’ve seen the worst of the credit crisis.In support of their argument, the never-say-die bulls cite the Fed\’s frantic efforts to stanch the bleeding and recent guesstimates that subprime-mortgage write-downs have already exceeded well over half the anticipated aggregate of $280 billion or thereabouts.What they aren\’t focusing on, though, as Ed Hyman\’s ISI Group drily observes, is that the banks hold a tidy $4 trillion or so in \"unsecuritized loans on their balance sheets, much of which is home-equity, interest-only, option ARMs\" and that ilk; in other words, regrettable relics of the burst housing bubble, ripe to yield huge losses this year and next.For some reason — maybe it\’s the strain of trying to count up to four trillion on our fingers and toes — we suddenly have a real hankering for some of that vodka Mr. Popplewell peddles, with or without the snakes.WHAT IS IT WITH THE RECESSION REFUSENIKS? You know, those well-intentioned souls who are bound and determined not to be swayed by the facts and stoutly insist that, while the wheels of commerce and industry may be turning a mite more slowly, it\’s nothing serious enough to merit the \"R\" word.That consumer confidence, as measured by the venerable University of Michigan survey, has sunk to its lowest level since 1982 — for the arithmetically challenged, that\’s over a quarter of century ago — prompts at most a stifled yawn among the refuseniks. As does the remorseless rise in foreclosures and personal bankruptcies, punk retail sales in March (they draw solace from the gains by Wal-Mart and Costco, blind to the possibility that stringency has forced some of the patrons of Tiffany, Nordstrom and their like to trade down) and that a long and glorious wining streak in corporate earnings is coming to an end.Some of the recession refuseniks are just incorrigibly sunny. They simply can\’t envision an economy in retreat. Or that the light they keep seeing at the end of the tunnel might just be a small fire set by a fellow who lost his house and his job, has exhausted his unemployment benefits and needed something to warm himself by.Some of the refuseniks are investors who doggedly bought the dips that often turn into drops and now are in desperate search for the slightest sign of a turn in the economy that they hope would spark the market and get them even. (At which point — and you can lay odds on it — they won\’t sell, but load up on margin.)But, to judge by Friday\’s action, their confidence that a revived economy and a new bull market are just around the corner suffered a big jolt when GE, which has been flourishing under the skillful guidance of Jeff Immelt, unexpectedly reported a decline in first-quarter earnings and shaved its estimate for the full year. It might not be true that — to paraphrase Charlie Wilson\’s maxim about GM in its glory days — as GE goes, so goes the nation. But, only because GE is likely to fare a good deal better than the nation.The same resolute, even obdurate, optimism is evident and occasionally even rampant among investors. And just as we view the refusal to recognize we\’re in a recession as something between silly and, to be more polite, misguided, we believe the touching faith that the bear market has run its course and a sustainable upswing in stock prices is about to begin is bunkum.On this score, Friday morning, before the market plunged, brought some pungent analysis from Scott Anderson of Wells Fargo. Scott is not a card-carrying market maven but, instead, a perceptive economist (which all too often is an oxymoron). In any case, he had some worthwhile and rather prophetic things to say.The equity market, he notes, has been flashing mixed signals. In the face of \"worsening economic and financial news,\" the market has been going up. Before the final session\’s nose dive, the Do
w Jones industrials had appreciated more than 7% since March 10.At the same time, he goes on, equity volatility has subsided. The VIX index, also fondly known as the \"fear index,\" which measures the volatility of the S&P 500, is down to a calmer 22, from a peak of 32 on March 17. And the frequency of virtually daily 100-point rises and swoons in the Dow has diminished.The stock market technicians, Scott says, \"see this as a bullish sign that the markets have put in a bottom.\" Which we can confirm, thanks to a smattering of recent conversations with some of the guys who practice that black art. Scott, however, begs to demur. Or, as he put it a tad more assertively, \"I think it\’s bordering on the delusional.\"The equity market, he explains, \"has not yet fully priced in a prolonged downturn in economic growth.\" And, he adds, \"earnings estimates for the second half of this year are likely still far too high, reducing the upside for stocks.\"He also points out that with the Fed possibly inclined to moderate its penchant for massive rate cuts, \"the likely path for interest rates ahead is higher, not lower.\" That obviously will \"reduce the present value of future earnings, adding another headwind for stocks.\"For some strange reason, we have the feeling that technicians may take umbrage at Scott\’s remarks on the grounds that he\’s an economist, so what does he know about stocks? But even economists can be right on rare occasions. And while some of our best friends are technicians and we generally hold a benign view of technical analysis, in this instance, we find ourselves pretty much agreeing with Scott (we trust that won\’t excessively discombobulate him).In any event, we resoundingly second the investment advice offered in the title of his piece: \"This isn\’t time to be a hero.\"

Oh-Oh? BARRON\’S COVER: 75 Top Hedge Funds. Enough said?…It\’s still a slick course these funds are racing on. January, for instance, was a disastrous month for many funds, coming on top of last summer\’s abrupt decline. Even some of our winners, like Kinetics Partners and Dynamic Power Hedge, saw 14%-plus losses in the first month of 2008. Already in the fourth quarter of 2007 the flow of money into hedge funds had dropped to $13 billion from $39 billion in the third. Many funds are imposing restrictions on investor withdrawals, but that may not be enough to stem an outflow this year.The general deleveraging of the credit markets means fewer mergers and acquisitions for arbitragers to play and much tighter terms for bank loans, which are the lifeblood of many funds. Strategies that use a lot of leverage to generate low-risk profits will now be tough to pull off.James Melcher of Balestra: Doesn\’t believe financial crisis is over. That\’s why big institutional investors like major pensions keep homing in on new ways to get good performance while spreading their risk. The $52 billion Ontario Municipal Employees Retirement System, for instance, is in the process of shifting its annual asset allocation mix from 90% financial instruments and 8% alternative assets in the early 1990s to a roughly 50-50 mix by 2010.OMERS is even going a step further, buying hard assets on its own. \"There\’s just too much volatility in the public markets to provide the match that OMERS needs to fund its long-term liabilities,\" says Michael Nobrega, president. He acknowledges that no capital pool can escape the volatility of public markets. \"Even if we don\’t have asset-backed commercial paper, we wind up getting caught in the down-draft,\" he notes. \"Financial assets give the illusion of liquidity. Down-drafts affect everyone who can\’t get out at their price. We find that a lot of pension funds are coming in our direction of an asset mix strategy that shifts toward the acquisition of hard assets and away from financial assets,\" Nobrega says. Either way, however, investment performance remains at the heart of the issue…

\"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. — Edward Bernays

the spin cycle really took a hit with the parent of CNBC crashing yesterday… the Fast Money folks issued a subtle buy (a while back when I used to watch CNBC) as they are not allowed to promote GE directly of course by alluding the CEO buying shares with his own money. Reel \’em in and then BAM ! The casino is open !

Fed can print infinite dollar. Treasury and government agency can print infinite treasury bill, note, and bond. All these liquidity can be swapped for toxic waste. Government can do infinite stimulus by asking Fed and Treasury to provide the moneyDeflation???? Where ?????

\"we will need to create a Federal Reserve that believes in its own regulatory mission more than it believes in prudence at the banks.\"we need a Fed that knows its mandate and enforce it. given the current and past record, i don\’t see it happening at all.

we need a Fed that knows its mandate and enforce it. given the current and past record, i don\’t see it happening at all.Written by Guest on 2008-04-12 10:34:06The fed is a quasi-governmental agency. Youthink the private owners will play by the rules? They have alreay shown their evil side.

@ Written by Guest on 2008-04-12 11:36:50The US was blessed/cursed with bountiful oil reserves in the earlier part of the century. The structures of american life evolved with them being economical on what was once so plentiful. Such patterns of development are no longer possible in the United States, since it no longer has vast amounts of petroleum resources. Europe, with its earlier city formation and less reserves, had already adopted patterns of habitation conducive to a less than intensive petroleum lifestyle.As most american cities and communities are very new they were built upon cheap oil. Without cheap oil the American way of life becomes quite onerous. While this is inevitable, cities and communities take time to adapt to changing circumstances so raising the price of gasoline to european levels would choke off the economy and lead to increased public outrage and severe political repercussions.More sustainable development patterns could have been implemented earlier, as they already existed, but were not.Resources will always need to be utilized. Efficiency is important, but so is the goal of what they are employed to create. One can have a very efficient bonfire and soon find out that they no longer have wood. I would argue that the current economic situation is a result of employing economic resources towards objectives that are quite unattainable by them. One\’s quality of life is more positively enhanced by stronger community and social relationships than it is by expensive cars and plasma TVs.Until this is accepted by the vast amount of people who populate this planet such economic outcomes will most certainly be more frequent and more pronounced. Such knowledge though is very dangerous to those who work in our current system, if they cannot convince you that you need their shit then what value do they bring?Well, I could go on and on, but I will save the rest of this rambling discourse for a book I am now composing.Cheers,~KJS

Bomb explodes in Iranian mosque, 8 dead: report 47 minutes ago TEHRAN (Reuters) – At least 8 people were killed and 50 injured when a bomb exploded in a mosque in southern Iran on Saturday, the semi-official Fars news agency reported. \"The death toll is expected to rise above eight because some of the injured people are in critical condition,\" Fars said, without giving a source.It said the bomb exploded during an address by a cleric in the Shohada mosque in Shiraz city. No further details were immediately available and there was no indication who might be behind the attack.…http://news.yahoo.com/s/nm/20080412/wl_nm/iran_blast_dc_3Is someone trying to destabilize Iran? I wonder who? And for what purpose?

from MishJefferson County Death Spiral SwapsThe Largest U.S. Municipal Bankruptcy Looms in Alabama. What caused this mess is an interest rate swap Jefferson County officials entered into when they financed a $3.2 billion sewer cleanup. For weeks county officials claimed they would work things out, but that is increasingly unlikely. Let\’s pick up the story from Bloomberg.Talks on the sewer system\’s debt crisis aren\’t making progress, increasing the odds that the county will file municipal bankruptcy, Jefferson County Commission President Bettye Fine Collins said Tuesday.This is how it ends for the little county that was going to teach America how to use interest-rate swaps. The Jefferson County bankruptcy, if it comes, and it\’s hard to see how it can be avoided, will eclipse that of the 1994 filing by Orange County, California. Derivatives are at the center of both death-spirals.Jefferson County played the derivatives game as part of financing a $3.2 billion sewer cleanup. The county engaged in a batch of interest-rate swaps with the banks that helped underwrite the debt, in a strategy designed to save the county and its taxpayers some money. The strategy backfired, demonstrating the speculative, risky nature of swaps.Jefferson County In DefaultJefferson County failed to post $184 million in collateral in early March and has been in technical default since then. JP Morgan and other investment banks are on the other side of the swaps.The investment banks want Jefferson county to raise taxes to cover its obligations. Jefferson County wants the Wall Street brokers to renegotiate the swaps and insists it will not raise taxes.\"We are dealing with a virtual immovable force on Wall Street\" the Birmingham News quoted Jefferson County Commission President Bettye Fine Collins as saying.According to Joe Mysak at Bloomberg, the SEC is investigating this deal as part of a larger probe into the reinvestment-of-proceeds business across the municipal market in general. \"This has been going on for years, but there are signs it will erupt with a barrage of criminal prosecutions.\"Mysak goes on to say \"The stock-market guys say you have to reach a bottom before you can recover, and that a bottom is often signaled by the collapse of some big entity. Many people thought it was Bear Stearns Cos. In reality, it\’s Jefferson County.\"On that I say \"No Chance\". There are $45 trillion credit default swaps, and over $500 trillion total derivatives, so expecting a default on tiny deal of $3.2 billion to mark any sort of bottom is strikingly Pollyannaish.

@London Banker\"By the end of July, the G-7 wants financial companies to “fully\’\’ disclose in their mid-year earnings reports their investments that are at risk of loss. Firms should also establish “fair-value estimates\’\’ for the complex assets that investors have shunned and boost their capital as needed, the G- 7 said.\"IF FINANCIAL COMPANIES REALLY COMPLY WITH THIS, MANY WILL HAVE TO ADMIT THEY ARE INSOLVENT. DO GOVERNMENTS REALLY HAVE THE WILL TO MAKE THIS HAPPEN IN ORDER TO START CLEANING UP THIS MESS OR IS THIS JUST ALL B.S.?http://www.bloomberg.com/apps/news?pid=20601087&sid=aXL58O.8xf1M&refer=home

@JMa on 2008-04-11 16:58:19\"take a page out of an ex wall street chairman\’s book and light up a joint before the exam – it all will become clear then\"Thanks JMa for the advice, it put me on the mood of the exam.\"Q6.Set up the double-entry accounts showing the appropriate debits and credits associated with this transaction:Columbian drug dealers receive $10 million in cash for the cocaine they ship to the US market. The money is smuggled out of the US and then invested in the US corporate bonds on behalf of a Cayman Islands bank.\"And no, that\’s not a joke.

http://www.bloomberg.com/apps/news?pid=20601039&sid=ahSJgzIBbboA&refer=homeThey\’re talking more about Chapter 9 municipal bankruptcy in Jefferson County, Alabama, the home of the largest city in the state, Birmingham. Jefferson County played the derivatives game as part of financing a $3.2 billion sewer cleanup. The county engaged in a batch of interest-rate swaps with the banks that helped underwrite the debt, in a strategy designed to save the county and its taxpayers some money. The strategy backfired, demonstrating the speculative, risky nature of swaps.You have to be kidding! County governments are playing with CDSs?!? Oh God, I\’m going to Costco and stocking up.

AfA on 2008-04-12 17:35:29Columbian drug dealers receive $10 million in cash for the cocaine they ship to the US market. The money is smuggled out of the US and then invested in the US corporate bonds on behalf of a Cayman Islands bank.Well they\’ll get their reward if they are dumb enough to invest in anything US:-P

Not only are state and local gvts playing the derivatives but some have bought gold to try and hedge against inflation because their pension funds are in so much trouble. The website, Pension Watch carries the articles daily coming out about that pension crisis many cities and states face.quote:* California Assembly Refuses to Release Cost Projections on Golden-Handshake Pension Offers* Conflict-Of-Interest Laws Hamstring Pension Board in Marin County, California* Orange County\’s Financial Debacle of 14 Years Ago May Soon Be Surpassed by Jefferson County, Alabama* San Diego/city: It Won\’t Be Easy to Cut Off Legal Fees for Ex-Officials in Pension Fraud Case* San Diego/city: Challengers in City Attorney Race Would Abandon Pension Roll-Back Case (with audio and transcript)* San Diego\’s Pension Woes Might Be Others\’ (editorial – Modesto Bee)* A Promising Idea for California Workers Who Have No Pensions (editorial – Mercury News)* Orange County Transit Officials Vow to Stop Public Employees\’ Free Tollway Rides While State Expands Coverage* MBTA Has \’Richest Retirement Program in America\’ Says Massachusetts Taxpayer Advocate* New York Attorney General Broadens School District Lawyers\’ Pension Scam Inquiry* Alaska Ready to Issue $5 Billion in Bonds to Deal With $8 Billion Pension Fund Deficit* Wisconsin Restructures $948 Million in Pension Bonds* Retirement Joy\’s Not in the Bag (column)* Turkish Unions to Stage More Protests Against Social Security Reforms* French Pension Reform Plans Draw Flak From UnionsApril 10, 2008* California Assembly Panel Passes State-Run IRA Proposal* San Diego Officials in Trouble Over Pension Fiasco (editorial – Sacramento Bee)* San Diego/city: Close Program That Allows Both Pay and Pension, Mayor Says* San Diego/city: City Workers Are the Wrong Target, Says Employee Union President* San Diego/city: Readers Find Labor Chief\’s Words Off-Target (letters)* California Bill Limiting CalPERS, CalSTRS Investments Is Withdrawn* Bloomington, Illinois Struggles to Keep Up With Public Safety Pension Funds* PAPO – Pension Actuary Pecking Order (blog)* Universal Pension Could Help Protect World\’s Poorest Against Rising Food Prices, Says British GroupApril 9, 2008* California Governor Backs Opening CalPERS to Private Sector* California Governor Opposes Sovereign Wealth Funds Bill Aimed at CalPERS and CalSTRS (op-ed)* San Diego/city: Mayor Calls for No Help With Legal Bills for Officials Charged With Fraud* San Diego/city: Finally, SEC Acts (editorial – Union-Tribune)* Omaha, Nebraska Police Union Proposes 99% Pension After 30 Years* Massachusetts Pension Fund Loses $2.3 Billion in Asset Value (news blog)* Massachusetts Court to Decide if Car Use Can Boost Public Employee Pensions* Evanston, Illinois May Seek Legislative Help for Its $140 Million Pension Fund Debt* Control Public Employee Overtime to Control New York\’s Skyrocketing Pension Costs (editorial – Buffalo News)* Public Sector Offers More Attractive Employee Pension and Benefits Packages, BLS Survey FindsApril 8, 2008* San Diego/city: SEC Files Fraud Charges Against Five Former Top City Officials* San Diego/city: SEC Says Five Officials\’ False Statements Were at Heart of City\’s Pension Scandal* Moorlach\’s Mad Motivation: A Profile of Orange County\’s Public Pension Reformer (subscription required)* Pension Shortfall Means Painful Cutbacks for Springfield, Missouri* Florida State Colleges Employ Almost 500 \’Double Dippers\’* Non-Surplussed: Large Company Pension Plans Now Underfunded After $70 Billion Drop in First Quarter* Make Way for the U-Boomers (column)http://www.pensiontsunami.com/

\"The World Bank has now published numbers which say that the price of wheat, as of February, has gone up over the last 36 months by 181% (!), and that food prices overall have gone up 83% (!) over the same period. \"\"LOS BAÑOS, Laguna–The Philippines is calling on the international community to start focusing on solutions to what is being described as a \"rice price crisis\" in countries worldwide.At a press briefing Friday, Agriculture Secretary Arthur Yap quoted M. Syeduzzaman, chair of BOC Bangladesh Ltd., Bangladesh Rice Foundation, as saying that \"global rice prices will not abate within the next 18 to 24 months.\"\"Old Mother Hubbard… \"I warned the FAO, the WB, the UN, China, Japan, IRRI and WFO, etc., etc., about this eventuality in Year 2000 and through 2003: I traveled the World with this message but these professional bureaucrats cum thoughtless parasites and incompetent pseudo-academics heeded not my message as they are \"The Experts\".It is also NOT irrelevant that the grains industry is controlled by a few American body corporates which have annual gross revenues which exceed the GDP of many countries of this World.Civil unrest: Bet on it coming to a shore near you; soon.Ho humPeterJB

I\’m reading a case – it\’s part of the program – about the debacle of LTCM and how it was squeezed by the increase in liquidity \"price\" after the russian government defaulted on its bonds and the flight to liquid assets. The case finished by providing lessons that: – market value is more important than fair value in times of disruptions; – pricing models should be stress-tested; – liquidity risk should be integrated into the models (\"capital is as patient as its least patient provider\")and – financial institutions should aggregate exposures accross direct/indirect businesses.Ten years later, it seems that NONE of these lessons were learnt. Why should I?

@Joseph Stiglitz video above: ”Worst Recession Since the Great Depression” — “Professor Stiglitz discusses the current economic situation: recession (\"worst since Great Depression\", \"long and deep\"), house prices (probably fall another 10% to 20%), stimulus package (\"not well designed\"), exports will help, and more.”I agree with Professor Stiglitz’s assessment, but he is off base, IMO, in what he regards as top “policy response” to nip this recession in its full bloom. First, he says, the economy needs a much bigger and better stimulus package that increases unemployment insurance. The country, he says, is suffering from a lack of jobs, not a lack of work incentive. This will produce the most economic bang for the buck, he says. He considers the present stimulus package a drop in the bucket, a drop that erroneously focuses on consumer spending, which, he says, contributed to the current problem in the first place.Secondly, he says, the Federal government must supplement the declining incomes of states and localities that are having to downsize through no fault of their own, but by fault at the Federal level. If the revenue drain on state and local governments isn’t plugged, he says, it will lead to further economic downturn.In short, Stiglitz is an advocate of bail out mania. The tax payer is bailing out investment houses, bailing out banks, bailing out builders, bailing out borrowers, bailing out subprimers…. There’s only one thing left to bail out – Government!The taxpayer needs to bail out government! Why? Because Government has the payroll! Government has the workers — all 22,387,000 of them! The taxpayer must keep these people on the job. It is far better to bail out Government and all these people than to have the crooked taxpayer eat his daily bread and drive his $3.85 a gallon gas guzzler to work…when Government is Suffering!Another thing we should do! We should take money out of the U.S. Treasury and give it back to the Treasury. Treasury money is needed money isn’t it? The more money we can give to the Treasury, the richer the U.S. will be. We could buy Europe. The Fed is too shy about this. We NEED a $2 Trillion Recession Bailout. Let’s nip this sucker in the bud. Call Gov. Schwarzenegger and give him some money. Get him out of bed if you have to. It’s a shame Eliot Spitzer isn’t there: we could send him some.Oh yes. Stiglitz says we need to “increase our infrastructure to increase production.” He doesn’t say how, but, hey, why not dun Joe Tax Payer for a WPA government work program? I mean Congress off shored America’s manufacturing job base, didn’t it? What a Government given opportunity!

Suecris on 2008-04-12 22:33:28 – So – it\’s a chicken and egg thing with gold and inflation – people run to gold for a safe haven in times of trouble and the fact that they\’re willing to pay higher and higher prices for it *drives* inflation.I wish it were that simple. I have yet to read an economics text that tells me people are willing to pay higher price?. They will pay higher prices if there is no alternative and they must have the commodity.Maybe you mean that people run to gold and then they cash it in for higher prices when they need to buy?

Guest on 2008-04-12 22:56:25 – Oh yes. Stiglitz says we need to “increase our infrastructure to increase production.” He doesn’t say how, but, hey, why not dun Joe Tax Payer for a WPA government work program? I mean Congress off shored America’s manufacturing job base, didn’t it? What a Government given opportunity!I got the impression that Mr. Stiglitz was a good guy caught in the headlights. His hesitations occurred exactly when I would have said: \"Well you\’re f*&ked!\" And to that end I give him credit! I would be happy to invite Mr. Stiglitz to dinner so we could talk about how tough it is to be interviewed on Fox TV .

PeterJB on 2008-04-12 23:40:20So, wake up indeed but do not expect anything of substance during the process. Ho hum.Ho Hum indeed! You doubt my mastery to reach into the Limbic (reptilian) brain and titillate those fear-and-flight neuorns! They will be eating out of my hand (but a little depressed I fear).

Suecris on 2008-04-12 23:45:24 – \"(It was not until later in 1933 that he devalued the American progressively to 59.06 cents, in terms of its former gold value, through the amazing…scheme of progressively raising the price which the United States would bid for gold.)\" When I read this, I realized that the recent run-up in gold prices was a driver of inflation, not just a symptom.Sorry Suecris, me no understand word salad…

Guest on 2008-04-12 11:36:50@ Guest on 2008-04-12 11:09:50In Europe(Germany) the Gallon is 8,2 $.Why not in the Us.Maybe it s better for the enviroment when you learn to deal economical with the resources.The price for gasoline is roughly that amount in many Eurozone countries. And has been so for a long time. But I do not think the US economy can handle it, looking at how their companies are doing. I do not know why people cannot afford to pay, if the Europeans can. Perhaps the use (and availability) of public transportation is more common in Europe? Or maybe for Americans their salaries have to stretch to so many more things (education, health care, etc)? I am sure that multiple reasons are in play.

The bursting of Oil and food bubble would be another aspect in the upcoming financial meltdown. I believe the extent and timing of the commodity bubble burst is likely to have a bearing on the shape of the cureve – U,W or L.Commodities markets seem to have become a den of gambling. With commodity derivatives being packaged into financial instruments, these are now traded like stocks and behave like stock market. And will most likely fall like the stock markets.For instance, the rise in price of crude oil to around $110 now from $ 50 a year back is not justified by purely demand-supply issues. The world production of oil as well as physical inventories are enough to meet the current consumption needs.I believe we will hit the bottom of the economic cycle with the oil, food and real estate bubbles bursting. Crude oil bubble would most probably be the first to burst followed by others. Only then will the recovery cycle will begin.Here is what\’s happening ——————————Pure financial investors are investing in commodities, creating an artificial demand. They are not interested in buying bags of wheat or barrels of oil, but are keen to make a sell it off at a profit without taking delivery. (Can you imagine an investor sitting in Nariman Point/ Wall Street , trading in front of a computer screen, and taking delivery of barrels of oil…!). When inflation is the way up, the price of commodities rise faster and become a still better avenue of investment. It just becomes a self feeding loop.Commodities like oil, rice and wheat have doubled or more in the past one year, with most of the rise coming by in the the current year itself. A large portion of the rise seems to be driven by speculative interest.And what about the non speculative reasons. —————————————————–They are absolutely there and here the key demand-supply related reasons:–Rising demand for commodities from countries like China and India to fuel their growth engines-Use of foodstock as biofuels across the major economies of the world-Increase in the consumption of meat in countries like China, resulting in lower resources being allocated to food production-Accidents and calamities in some of the food producing areas, thereby impacting supply.How much is real and how much speculative—————————————————–So how much of the commodity price rise is \’real\’ and how much is speculative. Here are some rumblings across the globe that I came across by :– As per Commodity Futures Trading Commission, which regulates commodity futures in US speculators account for around 37 percent of outstanding contracts in U.S. crude oil. The commission would be holding meeting of agriculture market players sometime this month to figure out the speculative position in foodstocks- There is a research carried out by a researcher in Korea very recently where the researcher has tried to approximate the % contribution of key factors (speculation, demand-supply, dollar weakness and geopolitical reasons) in the commodity price rise. It seems for oil and wheat more than 40% of the price rice has been contributed by speculative interests and another approx 40% by demand-supply reasons- Oil ministers from nearly all the OPEC countries from Saudi (the biggest) to Qatar (smallest producer) are vociferous in their statements that there is no shortage of oil, that the inventories are piling up and the price rise has been driven by speculative interests. Is anybody listening to them ?So what\’s likely to happen ?———————————In previous recession, the bottoms had been characterized by significant correction in factor prices (though not all exactly at same time, but pretty nearby). The previous recession had also been characterized by higher oil prices which subsequently corrected. Here\’s my directional estimates of sequence of events :-Step 1——–Oil, food or the real estate bubble will burst, very close to each other. The prices of these commodities will correct significantly. Step 2——–Across the globe, factor price correction will take place. - significant drop in price of real estate - interest rates will come down - wages would be impacted - corporate profits would be hit – government fiscal deficits will rise.At this point in time the atmosphere would be absolutely dreary and it would seem as if there is no hope of recovery . Exactly the feeling at the bottom of cycles in previous recessions too.Step 3——-Inflation would be down. Consumption will slowly start picking up. Leading to a pick up in investment demand. And that\’s how the economic cycle is likely to start turning upwards.Amar Harolikar

This is possibly the most objective look at the possibility of debt-induced deflation. The historical note on Fisher is very interesting as well. The bottom line is that deflation is much less likely than in the 30s. We have Benny know who knows what he is doing(?). But deflation is a lot about lack of demand and with the US consumer being the key driver of demand, the high debt level, the decline of house prices, and the cutting of credit to individuals may tip us over to deflation. Bearish Shilling sees mild deflation and still recommends the 30yr bond as a great investment. The guy has a great track record and I don\’t think he has gone insane, so I would have to give the very low inflation-mild deflation scenario about an even chance. http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20080414_198701_198701&page=1

What I see of the \"conservative\" management of the economy horrifies me. Strip away all of the rhetoric and Regan/Bush economics boils down to rapid government growth financed by massive borrowing. It\’s banana republican economics. consider that government spending went up by 53% during the first seven years of the Bush administration (versus only 23% during the first seven years of the Clinton administration). At the same time, government revenues increased by only 27% during the first seven years of the Bush (67% for Clinton). The difference between spending and revenue has been financed by the Chinese. Long term irresponsibility by the government will undermine everyone\’s retirement. This crop of our elected officials has shown that they can not handle the nations finances responsibly.

@ ORInteresting, very simple but convincing theory of Fisher. Good reading. What horrifies me more are not the simularities between then and now, but the differences. The outstanding amounts of derivative products, the destruction of ready-to-retire baby-boomers home equities and savings, the astronomical public debt that reduce the room for manoeuver by the government.\"“Today you have central bankers who are very conscious of the dangers associated with debt-deflation.” Dimand believes central bankers will avoid deflation at all costs.\" This however didn\’t change, in my opinion. The same old laugh-we-are-taking-picture optimism and monetery zeal. Yes they might. And the cost could be much more expensive then the price (the price would have been paid by THEM, the cost is of course the matter of taxpayers, who cares)The article says that the interest rate was lowered to reflate prices back to equilibrium, out of depression. Huh??? That\’s what the Fed has been doing to save the credit and financial markets. Credit is still frozen (or has dried up). Old economics do not work anymore? decrease rates and economy recovers. That\’s when the Fed used to do that to revive the economy not the credit markets. Now we have a trichotomy in the markets: real economy, currency and credit. And the current crisis is Stag-flation-deflation in the same order.A new theory? I want a Nobel prize, and an Oscar and an Emmy!! (of the most nowadays famous categry: NonSense)

@ Octavio Richetta on 2008-04-10 17:32:47Apologies for my late response (again – the move takes a lot of effort). London, with frequent stays in New York and Hong Kong.

@Amar Harolikar on 2008-04-13 03:34:37Your alertness to the economic developments in different points around the world gives us viewpoints and analyses that we definitely aren’t getting in this country from our grant-financed and corporate-partnered economists. We certainly hope you’ll continue to share your observations with us. Many thanks for a great and invaluable post

@ Sam:; Not only are state and local gvts playing the derivatives but some have bought gold to try and hedge against inflation because their pension funds are in so much trouble. The website, Pension Watch carries the articles daily coming out about that pension crisis many cities and states face….California Assembly Refuses to Release Cost Projections on Golden-Handshake Pension Offers…Orange County Transit Officials Vow to Stop Public Employees\’ Free Tollway Rides While State Expands Coverage…San Diego/city: Close Program That Allows Both Pay and Pension, Mayor Says…Bloomington, Illinois Struggles to Keep Up With Public Safety Pension Funds…Omaha, Nebraska Police Union Proposes 99% Pension After 30 Years…Control Public Employee Overtime to Control New York\’s Skyrocketing Pension Costs (editorial – Buffalo News)… Florida State Colleges Employ Almost 500 \’Double Dippers\’…”My neighbor, an attorney, recently retired in his early 50’s from a public defender’s job in a large West Coast city at almost full pay – his pay topped $200,000. Now the taxpayer must pay both his retirement and the salary of his successor. Multiply this ad infinitum and it can’t be done—cities already are bankrupting. To add to the problem, when a taxpayer’s tax load begins to exceed his ability to pay, he frequently departs for friendlier tax climes.The country has reached that point where, as Lewis H. Lapham put it, “The supply of government exceeds the demand.“ It’s useless to demand something for which you can’t pay.

Folks, when discussing deflation please keep in mind that deflation is not the problem. The problems are:1 – inflated asset prices2 – debt that will not be repaid3 – an economy with huge overproduction in bubble items (houses, financials, consumer discretionary, etc)The root of the problems is the bubble-time attitude of investors and banks that have lent to people that had no chance to possibly service their debt.Once the system run out of suckers of either the lender or the borrower type the asset bubble burst and we get our chance to observe a deflationary spiral in action. But the deflationary spiral is not the problem, it is a symptom of the real problems and in fact deflation is a piece of the solution.Fighting deflation in and of itself is as good as not addressing the actual problems at all. Ask Japan how useful has been the ZIRP in spurring economic activity. The only real outcome of fighting deflation is to reward those who blew the bubble (borrowers, lenders and bubble items industry) at the expense of everybody else. And the only real reason central banks are obsessed with fighting deflation is that the banks are the biggest bubble blowers.

@ Miss America: “p.s. “guests” Don’t be so offended by my prior comments, I do still read many of your coments too. …but I only reply to named posters. (because I wouldn’t want to offend the wrong guest)”Thanks for the explanation: I appreciate it. I read your posts because I enjoy them, albeit I am sometimes on the other side of the debate. In the final analysis, it’s the debate that shakes out the truth and where Roubini is, good debate will be found.

Afa said: \"That\’s what the Fed has been doing to save the credit and financial markets. Credit is still frozen (or has dried up)\"it looks like after all the FED\’s effort, the only thing that may work in reigniting consumer demand is, literally, using Benny\’s helicopters. I hope they do it during one of my brief visits to the US. I\’ll make sure my wife and I carry large bags. I don\’t think they can prevent tourists from catching some green fallen from the sky. Instead, they should advertise the operation so as to increase much needed tourism.

Written by Alessandro on 2008-04-13 12:43:09Thanks!You forgot at least a few (and I am sure I will forget a few as well): Wolf in the Wilds, Giraf, LB, Miss America, JMa despite (I\’ll venture here, just because of the \"a\" and thw caring nature of the posts) her April fool\’s day stuff which fortunately comes only once a year:-); and Da\’ greatest of them all: Martin! BTW, Martin how is city doing?Citigroup, Merrill May Post $15 Billion Writedowns, Times Says By Mathew Carr April 13 (Bloomberg)http://www.bloomberg.com/apps/news?pid=20601103&sid=a14SC3UVha.4&refer=newsCitigroup to Keep EMI Loans as Hands Restructures, Person Says http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqjoS.gLRqNQ

Ups! Alessandro I misread your post! You were referring to specific comments on this thread!

And on the other hand, for a huge Ben Bernanke belly laugh, this link supplied by \’sg\’ at Mish\’s blog:http://tinyurl.com/6cox6g

BLACK SWAN RISING?Dominique Strauss-Kahn said progress in recent years on development can be destroyed by rising food prices, which can lead to starvation and shake the stability of governments, even if they have nothing to do with the increase in food cost. \"We are facing a huge problem,\" he said.Strauss-Kahn had said Saturday that the problem could also create trade imbalances that would impact major advanced economies, \"so it is not only a humanitarian question.\"http://www.cnbc.com/id/6149151/for/cnbc

@PeterJBmaybe there is something to the Mayan calendar ending on dec 21, 2012.

\"Written by Alessandro on 2008-04-13 12:23:07\"Fed is still blowing and harder. They will not let deflation (even though it is is a piece of the solution to the problem) to happen. Now they will inflate commodity prices.

@ Euro-GuestThanks for the fascinating links to the Eggerton paper and analysis of Fed actions in that context. I don\’t know which is scarier: thinking that the Fed is acting irrationally or thinking that the Fed has such disasterously flawed plan.@ sam and Peter JBAfter reading your posts I went and found one of my favorite Gandhi quotes: \"When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible but in the end, they always fall — think of it, ALWAYS.\"On my bleak days I contemplate the evils of the military-industrial complex and financial elite who have gutted America\’s constitutional freedoms and bankrupted its government. On my optimistic days I contemplate the miraculous growth and inspiring social advances in America and all over the rest of the world, and remind myself that America is just 300 million of more than 6 billion people shaping the course of human destiny. I draw inspiration from Europe, which unified following two great wars that slaughtered entire generations of young, and has recently embraced ex-Soviet states within this framework for peace and prosperity.Despite the evils and abuses of Washington elites today, and the chaos they wreak in the US and abroad, the American model for representative government and individual freedoms continues to inspire Americans and others seeking a better political and economic future.The Bushes and Rockefellers of Hoover\’s day wanted fascism in America – and toured Germany with admiration having financed much of its progress – but when the crisis of economic collapse came in the 1930s, the American people opted for more humane and responsible government under FDR and he survived the attempted coup by elites in 1934 because the military refused to back the businessmen. I hope Americans will be as enlightened again, and if they are not, many others in Europe and Asia will be, and so the model will still inspire.Free market doctrines will be abandoned as governments are forced to recommit to the imperative to meet basic human needs for food, housing, employment and dignity. Some governments – remote from their people\’s interest – will choose opression to protect elites, but these will not succeed forever, as all have failed in the past. Even Zimbabwe might change because its people have suffered too much loss and want something better.Hard times ahead, sure. Government abuses and dangers, sure. But there\’s also the internet, the awakening of people to their own collective power to shape events, and a new broad-based political engagement replacing apathy.I started today pessimistic. I\’m ending it optimistic.

@ Euro-GuestThe paper which lays the groundwork for the Fed\’s strategy as exercised through all the secret new facilities and debasement of collateral is by G B Eggertsson (not Eggerton as I had above):The Deflation Bias and Committing to Being IrresponsibleIf I understand correctly, Eggertsson (and by implication Bernanke) believe that if they can create sufficient inflationary expectations, they can prevent consumers and investors defaulting or selling assets and so spurring deflation. The Fed fuels inflationary expectations by encouraging massive Federal deficits, nodding at tax cuts, smiling on tax rebates, taking junk as collateral for good Fed funds, and buying (either directly or through Wall Street/hedge fund agents in the know) gold, stocks, commodities and other assets which shape perceptions of inflation.If I believe my house will go up in price relative to my mortgage (which is set at low rates fixed to Fed rates) because the Fed is fuelling inflation, then I am less likely to turn in my keys. If I believe equities are a safe haven because equity prices will keep pace with inflation, then I am less likely to dump my stock.So counter to all popular understanding, the job of the anti-deflation Bernanke Fed is to fuel inflationary expectations to keep debtors, consumers and investors all playing the rigged game. That the cronies of Hank Paulson profit handsomely from being on the Fed\’s team and having access to all the wonderful new inflation-promoting credit facilities is just icing on the cake of (ir)responsible public policy.All I can say is I hope Mervyn King hasn\’t read that paper, or that if he has, he shredded it and washed his hands afterwards.

Written by sam on 2008-04-13 19:26:39from the article this is very telling..Officials at Wachovia could not immediately be reached for comment. However, the Charlotte, N.C.-based bank released a statement late Sunday saying it would release its first-quarter financial results Monday morning. The company previously had been expected to announce the results this Friday. this market is so manipulated. GE and wachovia releasing earnings on the same day without the wachovia deal? The dow would have been down much more.

for those who THINKS oil is in a BUBBLEits not…Amar i suggest you learn about Peak oil a lot deeper before coming to a conclusion Oil is ONLYexpensive because investors are bidding it upsupply is just hanging on by a thread trying to match demandsoon it will NOT be able to do so..http://www.hcn.org/servlets/hcn.Article?article_id=17613&utm_source=newsletter1&utm_medium=emailA message to our grandchildrenESSAY – March 31, 2008 by Stewart and Lee Udall Among other accomplishments in a life of public service, Arizona native Stewart Udall was perhaps the most influential secretary of Interior ever. He served in the Kennedy and Johnson administrations from 1961 to 1969, and played a part in some of the nation’s landmark environmental laws, including the Clean Air Act, the Wilderness Act and the Land and Water Conservation Fund Act. He now lives in Santa Fe, N.M., where he and his wife, Lee, penned this letter to their grandchildren. My dear ones, your generation will face a series of environmental challenges that will dwarf anything any previous generation has confronted. I’m hoping to add some insights of my own based on things I learned as a policymaker in the 1950s and ’60s, when I observed and participated in some monumental achievements and profound misjudgments. As a freshman congressman in 1955, I regrettably voted with my unanimous colleagues for the Interstate Highway Program. All of us acted on the shortsighted assumption that cheap oil was super-abundant and would always be available. This illusion began to unravel in the 1970s, and it haunts Americans today. Oil lies at the epicenter of a critical energy crisis. Petroleum is a finite resource and is the most precious, versatile resource on the planet. Cheap oil played a crucial role in the development of American power and prosperity, and sustains the military machine that dominates the world today. Oil is now nearing a historic transition that will alter the civilization Americans have come to take for granted. As world oil production reaches its apex and begins its inevitable decline, it will have a radical impact on everyday American life. It will take bold political leadership and awareness on the part of individual citizens to craft a full-scale, creative response. I watched with admiration in 1974 as my friend, President Gerald Ford, persuaded Congress to adopt a 55 mph speed limit to reduce our reliance on imported oil. He also got a law passed which mandated production of more fuel-efficient automobiles.

Written by Guest on 2008-04-13 20:52:10\"Amar i suggest you learn about Peak oil a lot deeper before coming to a conclusion Oil is ONLY expensive because investors are bidding it up\"I suggest you do the same.

@ London banker\"survived the attempted coup by elites in 1934\"please elucidate – unaware of this eventg

Written by Euro-Guest on 2008-04-13 15:39:15The working paper by Dr. Eggerston was eventually published in: Journal of Money, Credit, and Bankinghttp://www.ny.frb.org/research/economists/eggertsson/pub.htmlLook at the rankings. You decide.http://www.tinbergen.nl/research/ranking2.html

Market alone can\’t halt CO2 emissions: British climate officialPARIS (AFP) – A top British climate change official backed an embattled European Union scheme Friday to tax industrial carbon emissions, but also allowed for exceptions in highly competitive sectors.Adair Turner, the newly-appointed head of Britain\’s Climate Change Committee, also expressed skepticism toward the reliance on industry-wide agreements and new technology favoured by the United States for reducing the greenhouse gases that drive global warning.…While there is general agreement on the need to keep global temperatures from rising above two or three degrees Celsius compared to pre-industrial levels to avoid catastrophic climate change, the world \"has not quite woken up to the fact that it will require very, very radical action,\" he said.But even if the needed measures cost one-to-two percent of world GDP over the next several decades, the cost is a relative small price to pay.\"The great wars of the 20th century cost 30 or 40 percent of GDP and millions of lives. Compared to the sacrifices previous generations made, this is trivial,\" he said.So is he saying that the loss of millions of lives is trivial?Sounds like someone who would advocate drastic population reduction as the means to reduce greenhouse gases. On the other hand that sort of would not surprise. Mankind, and especially the U.S., first drives the situation to such a disaster that there seem to be only bad solutions left.

buckle up!Treasuries Rise as Stocks Decline Before Retail Sales Report April 14 (Bloomberg) — Treasuries rose as Asian stocks fell and before a government report that economists estimate will show retail sales in the U.S. stagnated in March…The MSCI Asia Pacific index of regional shares lost 2 percent, the biggest decline in four weeks. Retail sales were unchanged after dropping 0.6 percent in February, according to the median estimate of economists surveyed by Bloomberg News ahead of the Commerce Department report today. U.S. consumer spending is waning as fuel prices rise, property values fall and unemployment climbs. The collapse of the U.S. subprime-mortgage market led to a seizing up in capital markets and has triggered $245 billion in asset writedowns and losses since the start of 2007. “The chain of bad news may not have come to an end,\’\’ Italian Finance Minister Tommaso Padoa-Schioppa said April 12* as the International Monetary Fund held its semi-annual meetings in Washington. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. ^Believing an Italian Finance Minister on this is like believing Clinton in:\"I smoked but didn\’t inhale\" or \"I did not have sexual relations with that woman\"

@ Professor Roubini, \"Miss Italy\" and all,Does RGE Monitor ever hold any type of events in NYC ? It would be great to meet all here. Not sure if I would necessarily reveal myself as JMa It could be fun to spend the first hour guessing who is who if it is not straightforward after the first hour of drinks or something… Professor Roubini, please let us know of such an excellent event and the flight to NYC from Chicago will be booked without a doubt. It is a pleasure to be a part of such a great place ! Many thanks to ALL !

Appropos John Williams and toilet paper, he is interviewed on Financial Sense this week, and said something to the effect that hyperinflation could be confirmed when the largest bill in general circulation, in this case a $100 bill, would become more valuable as toilet paper than as cash. His vision is truly grim. It is remarkable that he is willing to predict a hyperinflationary depression in 2010 with such conviction. I wonder if anyone else here listened to the interview and considered it (perhaps along in relation to ptm\’s paraphrasing above of his newsletter). He seems awfully deterministic to me, even fatalistic. Also, if Bernanke is such an avid student of the Great Depression, one would think he had some passing understanding of the hyperinflationary situation in Weimar Germany. If so, why would Williams be so certain that the Fed would not be able to avoid it? Anyway, is John Williams an eccentric, a kook, or is he some kind of economic prophet? I guess we\’ll have to wait until 2010 to find out. I am curious, though, if he has made any other such dramatic predictions in the past, and how they panned out, if anyone knows.

@ GuestSorry about the bad link. Trying again. The Business Plot@ liliMany thanks. Time to start invoicing in euro, I guess. I can\’t see those Bundesbankers at the ECB going Eggertsson any time soon.

@Written by Guest on 2008-04-13 02:04:57\"The price for gasoline is roughly that amount in many Eurozone countries. And has been so for a long time. But I do not think the US economy can handle it, looking at how their companies are doing. I do not know why people cannot afford to pay, if the Europeans can. Perhaps the use (and availability) of public transportation is more common in Europe? Or maybe for Americans their salaries have to stretch to so many more things (education, health care, etc)? I am sure that multiple reasons are in play.\"The American way of life is automobile-centric. Well, that\’s not exactly it. Automobiles are used to subsidize the trucking industry. In an odd sort of way this is highly socialistic; one could argue that the richer people are subsidizing lower costs for food and other items that would otherwise be more expensive if the transport costs of the goods were borne directly by trucking. On the other hand, poor folks are subsidizing fuel costs (through increased food costs -think biofuels- and general taxes).Here in the US, especially the West, towns/communities were never laid out with concerns for transportation costs. Vehicles were increasingly cheaper and oil abundant. Further, continued growth helped subsidize inefficient infrastructure.Dick Cheney\’s \"American way of life\" can ONLY exist on cheap fuel! But now days as those holding the oil cards are less willing to give away oil (at the barrel of a gun or otherwise) it\’s looking like the fat lady is starting to sing.I have for several years now cautioned folks on trying to guess/peg future oil prices as I think that it\’s immaterial. What matters is affordability. Most of the world\’s population cannot afford to drive automobiles, let alone purchase fuel to operate them. Contrary to China\’s trajectory, I don\’t see an upward trend occurring.Speaking of China\’s excursion into the automotive-centric way of life, I see this as all being a plan by the West (esp the USA) to conquer communism by spreading a consumerism plague (spread by the \"attraction\" [read \"marketing\"] of automobiles). The ever-paranoid minds of the neocon types hell bent on killing communism will effectively cause their own collapse through resource exhaustion. Man made systems just don\’t scale well…Mark (the original? one)

Octavio Richetta: \"Believing an Italian Finance Minister on this is like believing Clinton in:\"I smoked but didn\’t inhale\" or \"I did not have sexual relations with that woman\"\"You would have been right in 99% of the historical occurrences, but Tommaso Padoa-Schiappa belong to the other 1%.

I\’d like to be bullish and seemingly confident, but I will be realistic and confident in my estimate of bearishness and economic mayhem. I see USA real gdp contracting (aka negative growth of gdp) come the April 30th report of the Commerce Dept, and I see the stock markets hurling to the downside strongly. I see no end in sight for the bottom, other than Q2 being worse than Q1. I think maybe at the definition of a recession the stock market will stop depreciating, but the dollar is doomed. Municipalities may be in for tough times too ahead. Banks may fail, the treasury needs to be bailed out too at nearly 10 trillion of total debt outstanding, as a result of the reckless spending congress and the president\’s budget of the past eight years, which has essentially doubled the debt outstanding in just eight years! Consumption sill slow as mortgage equity withdrawl grinds to a halt, investment will slow as capex spending falls significantly, corporate profits will decline or be negative, and government spending may be restrained by the next administration, before ya know it net exports will somehow decline too, and we\’ll have one strong recession firing on all cylinders in a mega way! Housing and commercial property is failing just like Japan 1989, when their stock market was at nearly 40k, now it\’s at 12 to 13k— 19 years later! Just remember in Sept of 1929 the DowJonesIndustrialAverage was at 386.1 and now it\’s less than 12,600, which over 78.5 years annualizes to about +4.4% before inflation and taxes! Inflation has been about +3.16% annualized over the same 78.5 year span, and taxes will take a nip of about 30% off that. Get used to sub one percent returns for a long time folks, have realistic expectations! The market has no where to go but down down down! I see no catalyst whatsoever for the stock market to apprecaite anytime soon (but at least it might stop depreciating in about the July to October space of 2008)! Happy trading folks. I\’d strongly recommend fixed income, try tickers FNMIX, PEMDX, PLMDX, EMB & PCY.

oh, and don\’t forget that unemployment is up, labor force participation rates are down, many many jobs have been lost, and inflation has been accelerating known as reflation. And the US Dollar has lost about 50% of it\’s value over the past eight years. Gee, look what G.W. Bush\’s deficit spending galore can do for America and the global economy! Just remember that Bush, he has an MBA!!!

Oh, and lets NOT (let me just repeat that, it will \" NOT \") start acting like new regulation, new statutes, new US Code, or new laws will help in any way, shape, or form. ******* NO NEW REGULATIONS!!! *******

The Wachovia News link:http://www.bloomberg.com/apps/news?pid=20601087&sid=aQNx4k09teqY&refer=homeThe first-quarter loss of $393 million, or 20 cents a share, compared with earnings of $2.3 billion, or $1.20 a year earlier, the Charlotte, North Carolina-based company said in a statement today. Analysts had been estimating Wachovia would earn about 40 cents a share, according to a survey by Bloomberg. Wachovia was down 2 percent at $27.27 in recent German trading. Chief Executive Officer Kennedy Thompson said he was “deeply disappointed\’\’ after Wachovia posted its first quarterly loss since 2001 and reduced the dividend to preserve $2 billion of capital. The company\’s market value has dropped 50 percent since its $24.6 billion takeover of Golden West Financial Corp. in 2006 at the peak of the housing market. I don\’t care what anyone says, a CEO as stupid as this guy should be kicked out the door with not a penny in his pocket (even have him return all stock options and bonuses for the last five years)

Wow! cannot believe it! Futures a bit in the red:http://www.bloomberg.com/markets/stocks/futures.html

I agree 100% with Alessandro on his comment on the reliability of Padoa-Schioppa.Octavio, non despair, you will be correct again if, as it\’s likely to happen this week, Berlusconi will become Prime Minister again. His Finance Minister will follow his friends in the current US administration along the same path of lies and probably along new, inexplored fantasy games… IMOMiss Italy

Shanghai dropped 5.62% last night, equivalent to 690 point drop in the Dow.

Maybe if there\’s a total default of treasuries and a total default of the US Dollar, maybe the Canadians will peacefully invade the United States in an effort to maintain the peace??? What will happen if there\’s a total default?? What happened in the immediate aftermath of a default to e.g. Russia in \’98, and Yougoslovia earlier? Argentina? Chaos? Crime? Will the USA be sectioned off and split up into many pieces as Russia was, if, and/or when a default occurs?? Isn\’t it true that a US Dollar crisis is in the cards?? *** Let us know what you think Dr. Roubini!!! ***