Close 2nd…

First Belgian…\"\"People need to be much more realistic about the vehicle that they buy and what they are willing to pay for it,\" Reed says. \"It really begins … with deciding what you\’re able to afford. People have been sold the American dream, which is a beautiful, sexy, hot car that\’s going to make everybody envy them. And now they\’re sort of paying the price for making a poor decision.\"No pal, you got it wrong. Your whole economic model is based on this. And when it no longer works, Uncle Fed will just keep sending checks, as long as the rest of the world envies your nation\’s economic magic…

Wish they\’d explain why they think so, instead of just popping out with these conclusory statements.Koolaid, grape flavoured

If more and more \"experts\" and recognised names keep saying that the worst of the credit crunch is over, us bloggers on NR\’s website might start to believe it.But then again….Chuckle, chuckle.

LIBOR Think for a moment what the tired, worn phrase \"banks are fearful of lending to each other\" means. It means each bank knows that it is insolvent and fears that its peers are also insolvent. The Fed has not changed and cannot change the fundamentals. The crisis is over??!!! One fine day in the coming months we will open the morning paper to find that Fannie and Freddie have been nationalized (or the equivalent). At that moment the insolvency of the US will be undeniable and all hell will break lose.

Who Will Tell the People? By THOMAS L. FRIEDMAN Traveling the country these past five months while writing a book, I’ve had my own opportunity to take the pulse, far from the campaign crowds. My own totally unscientific polling has left me feeling that if there is one overwhelming hunger in our country today it’s this: People want to do nation-building. They really do. But they want to do nation-building in America. They are not only tired of nation-building in Iraq and in Afghanistan, with so little to show for it. They sense something deeper — that we’re just not that strong anymore. We’re borrowing money to shore up our banks from city-states called Dubai and Singapore. Our generals regularly tell us that Iran is subverting our efforts in Iraq, but they do nothing about it because we have no leverage — as long as our forces are pinned down in Baghdad and our economy is pinned to Middle East oil. Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline. We are not as powerful as we used to be because over the past three decades, the Asian values of our parents’ generation — work hard, study, save, invest, live within your means — have given way to subprime values: “You can have the American dream — a house — with no money down and no payments for two years.” That’s why Donald Rumsfeld’s infamous defense of why he did not originally send more troops to Iraq is the mantra of our times: “You go to war with the army you have.” Hey, you march into the future with the country you have — not the one that you need, not the one you want, not the best you could have. A few weeks ago, my wife and I flew from New York’s Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we could barely find a place to sit. Eighteen hours later, we landed at Singapore’s ultramodern airport, with free Internet portals and children’s play zones throughout. We felt, as we have before, like we had just flown from the Flintstones to the Jetsons. If all Americans could compare Berlin’s luxurious central train station today with the grimy, decrepit Penn Station in New York City, they would swear we were the ones who lost World War II. How could this be? We are a great power. How could we be borrowing money from Singapore? Maybe it’s because Singapore is investing billions of dollars, from its own savings, into infrastructure and scientific research to attract the world’s best talent — including Americans. And us? Harvard’s president, Drew Faust, just told a Senate hearing that cutbacks in government research funds were resulting in “downsized labs, layoffs of post docs, slipping morale and more conservative science that shies away from the big research questions.” Today, she added, “China, India, Singapore … have adopted biomedical research and the building of biotechnology clusters as national goals. Suddenly, those who train in America have significant options elsewhere.” http://www.nytimes.com/2008/05/04/opinion/04friedman.html?ref=opinion&pagewanted=print

Federal Reserve, along with other central banks, said Friday that it was increasing the funding it is providing to banks and announced that, for the first time, it was willing to accept bonds backed by auto loans and credit cards.http://www.marketwatch.com/news/story/fed-expands-auction-accepts-wider/story.aspx?guid=%7BBD25FFE1%2DEF18%2D45C1%2DB984%2D3CD33807727B%7DI am speechless. Now Fed is accepting auto loans and credit cards as collateral.

Looks like the whole page is in italics…including the \"Post A Comment\" section;-PAnyway, what\’s the point with bringing out auto loans being upside down? Aren\’t auto loans mostly always upside down? After all a car hardly appreciates or even retains its value after you drive it out of the showroom. Unless perhaps if you are buying a Rolls Royce?

italics off?

I\’ve always said that the main reason many people can\’t get ahead was because they bought too much car. Aside from the actual cost of the auto, you usually have higher insurance costs and get less milage. Every thing required to keep it up, such as tires and batteries tend to be larger and more expensive. Then, when they manage to pay it off, they trade it in on a new one and start the process all over again.

Written by Gloomy on 2008-05-04 19:46:20“You can have the American dream — a house — with no money down and no payments for two years.”

zero downzero percent interestzero payments for one yearit was about one year ago that nissan (and others)were pushing this offer just about time to make the first pmt? jingle mail car keys? or just keep the free car or maybe the Fed will take on your balance sheet.

I need to sell Agency Paper in huge size-NOW!My car payment is due.STILL shakin\’ my headThanks for the help. jingle jingle

Italics on and off

Basta Aldino!\"….This Aldine italic became the model for most italic types. It was very popular in its own day and was widely (and inaccurately) imitated. The Venetian Senate gave Aldus exclusive right to its use, a patent confirmed by three successive Popes, but it was widely counterfeited.[2] The Italians called the character Aldino, while others called it Italic….\"(Wikipedia about the history of italics)

Italics Off?

ES,price of metal/steel is quite high nowdays,so selling sCRAP metal should be good for business:)Written by Guest on 2008-05-04 22:52:19I have a feeling the price of metal/steel is about to sh!t a BRIC, the wheels are turning, the fix is in, patience patience, it\’s on a time-delay.Take 3 Excedrin for that headache

The continuing Countrywide saga:BofA may renegotiate Countrywide deal pricehttp://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSBNG17385120080505?pageNumber=1&virtualBrandChannel=0Countrywide\’s loan portfolio has deteriorated so rapidly that it currently has negative equity and the proposed takeover of the company will be a drag on Bank of America\’s earnings due to the elevated credit expenses at Countrywide, analyst Paul Miller wrote in a note to clients.

The slowdown in auto sales is going to trigger major problems for the massive automotive supply chain, which will see an amplified reduction in their forecasted sales. This is what happened during the telecom bust of 2001. I wonder how many LBO\’s were done of companies in automotive. Falling auto sales will reinforce Nouriels expectation of higher LBO defaults on corporate and junk bonds.

The credit mess is old news and priced in. Stocks have it right-look, recession over:10:01 U.S. April ISM services above consensus 49.4%10:01 U.S. April ISM services index 52.0% vs 49.6 March

Markets green and headed higher on ISM suprise.

10:13[FMD] First Marblehead cuts 500 jobs to lower operating expenses

10:43 June crude last up 2.5% at $119.20/brl after a $119.70 high

This oughta rally shares higher!11:19 Crude futures rise to above $120 a barrel for the first time

@ ptm on 2008-05-05 09:07:51How did you attract purple martins? I got a brand new purple martin house, set up 24 feet in the air and all I can get are squatter sparrows. Since it is too late to attract purple martins this year, no sense in evicting the sparrows. Hmmm have the sparrows learned anything from the US homeowner and the Banks?

WOW!http://www.cross-currents.net/charts.htm

goldorcash on 2008-05-05 11:46:22 Does anyone have concrete evidence of government intervention in the gold market?Gold Anti-Trust Action (GATA) Committee has documented no less than 11 public statements by the Federal Reserve and International Monetary Fund that they actively \"lease\" or sell gold reserves to intervene with (suppress) the price of gold on the open market. GATA has filed a freedom-of-information request with the Federal Reserve and the Treasury in December of 2007. The Fed has reported it is reviewing approximately 400 pages of \"gold swap\" related documentation for release to GATA. World-wide consumption of gold exceeds production by 1,000 tones per year (2,400 versus 3,400) and the Western central banks must sell off their stockpile to suppress prices. Since bank activities are secret, central banks have never been audited to confirm that they hold the amount of claimed gold reserves. GATA estimates that Western central banks have sold off approximately half the 32,000 tonnes of gold claimed to have in their vaults, so price intervention can not be continued indefinitely. http://www.gata.org/node/6241

An interesting Wall Street Journal article details the increasing number of hardship loans being taken out against 401k savings. At the end of 2007, 18% of employees with 401k plans had loan balances outstanding from their plans, up from 11% in 2006, the Journal reported citing a survey by the Transamerica Center for Retirement Studies, a nonprofit corporation funded by Aegon NV\’s Transamerica Life Insurance Co.

2:00 80% of banks tighten standards for commercial real estate2:00 Record number banks less willing to give installment loans2:00 60% of banks tighten standards for prime mortgages2:00 Banks tightening lending standards for consumers, firms

Very good article on liquidity, worth a read in full.\"Liquidity isn\’t apple pie…Similarly, in financial markets, we want liquidity at some times and in some places. But there are times and places where we want, even need (gasp!) illiquidity!Illiquidity. That word is so ugly. What might be another word for the same phenomenon? How about \"commitment\"? When a person invests in something that is not very liquid, they are committed. They are necessarily betting on its fundamental value. Liquid securities can be bought or sold as a trend or a trade or a play for a greater fool. But if the thing you are buying can only be sold with a big haircut, you\’d better hope for a really gigantic fool if you have no confidence in its underlying value. (Clever managers did find ways around this problem, but let\’s put principal/agent issues aside for the moment.) When financial markets are too liquid, everything looks like cash. Superfluous distinctions — like the economic meaning of the assets bought or sold — fall by the wayside. Sure, investors always prefer liquidity to illiquidity. An option to buy or sell quickly and cheaply is preferable to an option to buy or sell slowly and with large transaction costs. But just because investors like something doesn\’t mean that it\’s good. Investors like rainbows and ice cream and free money from taxpayers. But the rest of us prefer that investors make serious, informed decisions about what is and isn\’t of value, and that they be paid for evaluating and actually bearing risk, rather than artfully shifting it (or whining when it cannot be shifted, because omigawd-there-is-no-liquidity!)….\"http://www.interfluidity.com/posts/1209978923.shtml

WASHINGTON (MarketWatch) — Consumers and businesses found it harder to borrow money over the past three months, the Federal Reserve reported Monday, a sign that the historic credit crunch now hitting the economy is still worsening despite Herculean efforts by the Fed.More than half of the banks surveyed by the Fed said they had tightened the screws on commercial and industrial loans, commercial real estate loans, residential mortgages, and home-equity lines of credit. Almost no banks eased credit terms for any type of loan, the Fed said in its quarterly senior loan officer survey. Read the full survey results. The credit squeeze has moved far beyond the subprime segment to affect nearly every borrower. Tighter credit could slow economic growth, especially consumer spending, economists say. Lack of credit could sink the commercial real estate market as well. The crunch showed few signs of abating. The net fractions of banks reporting tighter lending standards \"were close to, or above, historical highs for nearly all loan categories in the survey,\" the Fed said.

More good jobs news!4:31[MRK] Merck to cut 1,200 U.S. sales force positions

Digging still deeper into the ISM reports — Manufacturing export orders rose; non-manufacturing export orders fell. Included in non-manufacturing industries are agriculture, which surprises me. I guess all our surplus farm produce is going into ethanol.

Greetings from Sao Paulo! We are slowly working our way up north.I guess Hummer lovers will find some really cheap deals.

Regarding exports and trade deficits, I noticed that the \"gap\" has shrunk. If, as is indicated here, exports really haven\’t been going up, then this is pretty telling- it means that imports have really dropped off. Yes, the consumer is on his/her back…Mark

ptm on 2008-05-05 16:02:14“Based upon the wonderful news y\’all keep posting, here is my big picture view to date. I cannot see anything changing this scenario through 2008.” A plausible forecast, but what about the mitigating effects of the 3.25% cut in the Fed funds rate, trillions of dollars in liquidity still sloshing around the globe in SWFs, etc. looking for investment homes, $168 billion in fiscal stimulus, global growth / exports, and capital investment into alternative energy?Will these things do nothing to hinder such a worst case scenario?

K J Foehr on 2008-05-05 17:36:53 – A plausible forecast, but what about the mitigating effects of the:A)3.25% cut in the Fed funds rate – As NR has said, it\’s a solvency problem, not a liquidly problem. These cuts have not passed through to consumer loans and are being absorbed into the banking system (I think). And as I understand it, LIBOR spreads looming large again indicating more credit squeezing. Sooner or later (within a year?) banks will have to pay the fed loans, go bankrupt, or get a free pass on a non-recourse loan pushing inflation up.B)trillions of dollars in liquidity still sloshing around the globe in SWFs, etc. looking for investment homes. This is a good question. If I were a SWF manager, what would I do with the all of those USDs? Previous posts suggest they are \"stuck/trapped\" into buying US Treasuries and agents. But what else can they do? Can\’t buy commodities for fear of further distorting that market. Then buy propriety, but US Gov will not let them buy US companies, so I guess build Dubai and hope the tourists will come?C)$168 billion in fiscal stimulus – Borrowed money directly adding to the national debt, devaluing the dollar, and putting more pressure on inflation. Total \"stimulus\" already consumed by increased gas prices.D)global growth / exports – Don\’t have enough details on the numbers, but my guess is that the $40-50 trillion world wide GDP is dwarfed by the order of magnitude larger $500 trillion credit bubble. So it may have some kind of effect now early on, but not much later on.E)capital investment into alternative energy – I see this more of a long-term economic policy issue rather than something that has a direct effect on the looming credit bubble.F)Will these things do nothing to hinder such a worst case scenario? – I don\’t know. Based upon past posts, you are much more sophisticated at these matters than I am. As I said before, I do this for my own understanding of how bad things can get and when it might happen. I am also discovering it upsets people and maybe I need to tone down the doom & gloom. Just keep the forecasts to the next six months or so…

It\’s funny but I have a feeling that we become a sort of egg-or-chicken economy, with a loop effects. At least according to analysts:When commodities analysts are asked why Oil is surging they say it\’s (partly!)because of weakening dollar.And when FX analysts are asked why dollar is weakening they say it\’s (partly!) because of the boom in Oil.Does this mean that even if no new information (good or bad) are released, these two will just keep feeding on themselves?

ptm on 2008-05-05 18:54:24“As I said before, I do this for my own understanding of how bad things can get and when it might happen. I am also discovering it upsets people and maybe I need to tone down the doom & gloom. Just keep the forecasts to the next six months or so…”I am not sophisticated on these matters. But the Prof is and he is not calling for a depression or hyperinflation.Also, I don’t think such views upset anybody here; we are used to it! And many, no doubt, more or less agree with you.My point is just that there are always opposing arguments to be made. The global economy has so many moving parts, and we are always dealing with incomplete information, some of which is not even accurate, e.g., CPI, GDP, NFP, etc., that it is impossible for anyone to predict with any significant degree of accuracy what will happen in the economy even one year into the future. Anyone who does is more lucky than prescient, and will certainly be humbled over the long term. We may be able to predict a slowdown or growth, but the extent of either cannot be consistently predicted accurately, IMO.Usually people, on both sides of an argument, have the view that they are right and the other side is wrong, even if the evidence begins to go against their case. This is human nature, but as investors we need to remain open to the possibility that we are wrong so we can adjust our investments accordingly before we are knocked out of the game.I am very bearish on our economy and the stock market, but I try to resist the temptation to extrapolate the current situation into nightmare scenarios that are, based on the lack of hard evidence, merely speculation. Of course, it is a good idea to be aware of the possibilities of what might happen, just don’t be the ranch on it.

hmmm…Would not surprise me if they were to start selling camels in U.S. soon. No credit? Bad credit? No problems! Anyone qualifies for a camel at Joe\’s Used Camels.Another option is that more people join these folks:Tired of paying through the nose, Americans try praying at the pumphttp://news.yahoo.com/s/afp/20080505/lf_afp/usreligionpovertyenergyoilWASHINGTON (AFP) – At a Shell gas station in Washington, Rocky Twyman and an unusual group of activists were mad as hell about soaring fuel prices.\"Last week, this station was 3.51 dollars. Now it\’s practically 3.60. So it\’s gone up nine cents in one week,\" Twyman said as he pumped five dollars\’ worth of gas into his thirsty American car.…\"Lord, come down in a mighty way and strengthen us so that we can bring down these high gas prices,\" Twyman said to a chorus of \"amens\".\"Prayer is the answer to every problem in life… We call on God to intervene in the lives of the selfish, greedy people who are keeping these prices high,\" Twyman said on the gas station forecourt in a neighborhood of Washington that, like many of its residents, has seen better days.…

If religious Americans think that those causing high gas prices are evildoers, should not Mr Bush do something??

Apropos that list on \"The Top 100 Intellectuals list by Foreign Policy magazine\"…sadly the list omitted website programmers, because we would need at least one to fix this italics issue.

@Written by ptm on 2008-05-05 16:02:14Sorry to say this but these type of step by step crystal ball gazing prognostications of oracle like discoveries, such as yours above are about as useful as hip pockets in a singlet. What a load of clap trap.Endowing us with evidence of your significant intellect and ego is not (repeat) NOT going to aid investment success one single iota. It is simply – crap.

Barton Biggs thinks 1450 on the S&P is “easy” and new record highs are possible this year. I used to think he was a good contrary indicator, but he has been bullish and right recently so I’m not sure now.http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vP9wHuM8.Quk.asf

KJF, It seems like all the analysts are being forced to be positive right now. Look at David Rosenberg from Merrill Lynch. Have not heard from him in a little while. Samething with the other Morgan Stanely analyst (Stephen Roach)…they moved him to Asia.

Re Rosenberg, there should be a period after recession in the first sentence.