Global Recession Watch: A Dozen Significant Economies are at Risk of a Hard Landing
Which countries around the world are at risk of a hard landing, i.e. a sharp growth slowdown and an outright recession? Following the U.S. the list is now growing. Countries now at risk of a hard landing now include: the U.S., the U.K., Spain, Ireland, Italy, Portugal, Japan, Canada, New Zealand, Latvia, Estonia and a few other central-south European countries.
Let us start the countdown and see the details of the recession risks in each one of these countries…
The United States is already in a recession; while headline GDP figures still show positive growth in Q1 many other indicators show that the US economy entered a recession in Q1: monthly GDP (as measured by MacroAdvisers) is down since February through April (so far available data); employment has been falling for five months in a row; most components of aggregate demand (durable and non durable consumption, residential investment, capex spending by the corporate sector) are already in negative growth territory; industrial production and manufacturing production are falling. So both on the demand and supply side it is clear we are in a recession. The only open issue is whether this will be a short and shallow V-shaped recession lasting six months (as the consensus forecasts) or a longer and deeper U-shaped recession lasting 12 to 18 months (as being argued in this forum). The worst housing bust since the Great Depression, the US consumer being shopped out, saving-less, debt-burdened and with plunging confidence, a worsening credit crunch and financial crisis that is spreading well outside of the subprime mortgage market, oil now above $130 a barrel, inflation rising leading to stagflationary risks and constraining the Fed’s behavior are all reasons why this will be a severe and protracted recession.
What about the rest of the world?
A hard landing recession is now highly likely in the UK, Spain and Ireland where housing bubbles even larger than the one in the U.S. are now going bust. In these three economies the credit bubble was not limited to housing; you also had – like in the U.S. – a surge in unsecured consumer debt (credit cards, etc.) that became excessive. Add to this bust the effect of overvalued currencies and real appreciation leading to large current account deficits and you get a dynamics very similar to that of the US.
In the rest of the Eurozone Italy and Portugal also look close to a recession. There the deflation of smaller housing bubbles is one factor. More importantly the strong Euro is really hurting the competitiveness of all of the Club Med Eurozone members (Italy, Portugal, Spain and Greece). These countries – whose exports tend to be more labor intensive and lower value added – were already losing export market shares to China and Asia even before the euro strengthened so much. But a euro close to 1.60 relative to the US dollar and the sharp appreciation of the euro relative to Asian currencies is really a massive problem for the Club Med.
Add to these woes of these countries – and more generally of the Eurozone economies – the following additional bearish factor: oil close to $140 (that even converted into a stronger euro is much more expensive in euro terms than a year ago);, the effects of the liquidity and credit crunch that affects European corporates ability to borrow even more than their US counterparts as they rely more on bank financing rather than capital markets; the fact that real domestic demand – especially consumption has been anemic in the Eurozone as real income/wages have been anemic; the fact that a lot of the growth of the Eurozone – especially Germany – was driven by net exports that will now slow because of the US recession and global slowdown; and finally the fact that the ECB – worrying about inflation – is on hold and likely to hike rates while at least the Fed has confronted downside risks to growth via a 325bps easing in the Fed Funds rate. So no wonder that – after a good Q1 – growth is sharply slowing down in Europe and the Eurozone, including Germany (as a euro close to 1.60 hurts even an export super-power such as Germany) where the forward looking Ifo survey now suggests seriously weakening business confidence. And the latest figures for industrial production in the Eurozone show an outright contraction.
So, in summary in the European/Eurozone area UK, Spain, Ireland, Italy and Portugal are headed to a hard landing recession while growth is slowing down dramatically in the rest of the Eurozone.
Another major economy at risk of a recession is Japan. In the last couple of years Japan was growing at an anemic but ok rate for two main reasons: a weak yen and the strong growth of exports to the U.S. driven by strong U.S. growth. But now the yen is much stronger than in the past and the U.S. recession is already taking a toll both on Japanese exports to the U.S. and the U.S. sales of Japanese subsidiaries (such as the auto transplants of Japanese car-makers in the U.S.). In addition to this double whammy there are two additional negative shocks to the Japanese economy: first, with oil well above $130 a barrel a country like Japan that imports every single drop of oil is hit by a nasty stagflationary shock; second, a variety of measures of the Japanese corporate sector signal weakening of performance, profitability and confidence. Put these four negative shocks together and Japan – after a good Q1 – is sharply slowing down and headed towards a likely recession.
Canada may also be headed towards a recession. Its GDP actually fell by 0.3% y/y in Q1 because of falling inventory and residential investment. 75% of Canada’s exports go to the U.S; thus a U.S. recession has significant effects on Canada, even if rising commodity prices have benefited the commodity exporting provinces of the country. In addition to the U.S. contraction there are other negative factors slowing down Canada: high credit costs and a strong Canadian dollar crowding out non-commodity exports; are offsetting strong commodity exports and buoyant domestic demand. Also with inflation rising the Bank of Canada is now constrained in its willingness to cut further policy rates.
New Zealand is now most likely in the middle of a mild recession. Consumption is declining as urban households are hit by a bursting housing bubble, high debt servicing burdens, high interest rates, and high fuel and food prices. The service sector (accounting for 2/3 of GDP) has slowed down sharply and experience a sharp drop in employment. Even rural households are in trouble in spite of high commodity prices: a severe drought has reduced farm production. Thus, falling exports, plus the increasing profits paid to the foreign owners of New Zealand’s oil fields are widening the current account deficit, already one of the largest among advanced economies. The central bank has hiked interest rates because of its inflation concerns. And the consensus forecasts Q1:08 GDP growth is at at -0.3% q/q followed by another contraction in Q2.
Finally, even some emerging market economies are at risk of financial stress and hard landing, especially the Baltic states and some central-south European economies. All the three Baltic countries are experiencing a sharp growth slowdown, with some analysts calling for outright recessions. Both Latvia’s and Estonia’s GDP contracted in Q1 (-1.9% and -0.5%, respectively), while Lithuanian growth was close to zero. Weak domestic demand is the main driver of the slowdown, propelled by tighter credit conditions and a real estate market bust after the bubble of the last few years. Adding to Baltic troubles is double-digit inflation, which is eroding consumers’ spending power and leading to concerns of stagfl
In Central-South Europe Bulgaria, Romania and Hungary have twin fiscal and current account deficits, balance sheet vulnerabilities (currency and maturity mismatches), overvalued currencies (especially Bulgaria and Romania). While they growth is still positive, they are most at risk that a sudden stop of capital inflows and worsening global credit conditions may lead to financial pressures (reduce availability and rising cost of foreign capital to finance their external imbalances and thus pressures on their currencies and other asset markets). Given that the housing boom in some of these countries was financed mostly in foreign currency mortgages there is a risk that a sharp downward movement in their currencies would lead to a severe balance sheet effect that would create financial stress for the household sector. Thus, conditional on a serious U.S. recession and a global economic slowdown these countries are vulnerable to financial stresses and risk a hard landing.
For more details on the countries at risk of a hard landing see also the RGE Monitor coverage of Global Recession Monitor: Which Countries Are on the Brink of Recession?
Also for a more detailed discussion see our Global Recession Watch overview with links to the relevant RGE materials and Spotlight Issues.
280 Responses to “Global Recession Watch: A Dozen Significant Economies are at Risk of a Hard Landing”
Well, I guess a hard landing is better than no landing at all… Another great post Dr. R!
oh gee look another DOW stock is crashing BA to new lows below march of ’07, below jan ’07 and yes even knocking on the door of summer of ’06 when the DOW was 10,700. were BA and MO not among the 2 best performers of this financial illusion of a bull market ? but wait, so far they have managed to rotate the crash stock of the day and offset with 1+% gains in many other stockstalk about BULLOCKS
Any landing you can walk away from, is a good landing. We will be able to walk again, right? Yes?Oh crap! I got the knapsack and pilot just jumped with last parachute.
What about Mexico? I see little in their growth over the past 14 years that ultimately did not have its foundation in the US Fed’s bubble-blowing. There have been no real systemic or institutional changes in that society which lead me to believe they are truly growing their own middle class. Corruption and oligarchy remain the standard procedure, and the society still has no idea about innovation or the self-analysis, personal and political, required for such…
i meant to say jan and march of ’08 lows http://stockcharts.com/charts/gallery.html?BA
sorry for off topic technical market garbage and i will settle down after this one – my one to two week price target for BA is 56 ish. there are clearly five waves and this is the 5th and worst one down which should capitulate around the same amount as 1 through 3 down (88 to 72 or 16 dollars) 16 below 72 equals 56 and lights finally out on this financial chirade, theatrical production, nominal currency shell game played on the unsuspecting masses who will now go poor and hungry as the cost of the shell game is HIGHER PRICES FOR EVERYTHING THEY NEED ! if you would like to see the 5 wave count theory, look at JPM’s (deep correction/ crash) chart for the past month and a half…
Apologies if a bit off the immediate topic.Bloomberg:American Express Co., the biggest U.S. credit-card company by purchases and cash advances, today said customers are falling behind on their debt at a faster-than-anticipated pace, signaling the economy is worsening. “Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” Chief Executive Officer Kenneth Chenault said in a statement.
In terms of disasters, I might add China, which appears to be headed down an inflationary rabbit hole.
You Might Want To Think Twice Before Gutting Your PreforeclosureBy twistWe’ve heard tale after tale of bitter homeowners gutting their homes prior to losing them to foreclosure. Now they might want to think twice: [Hat tip MR!] MERCER, Pa. — A former Mercer County mortgage broker who gutted his $1.2 million home before a sheriff’s sale has been sentenced to three to 15 months in jail and must pay more than $174,000 to an insurance company. Authorities say 40-year-old Scott McCuskey, of Sharpsville, stripped cabinets, toilets, a Jacuzzi, locks, garage doors and other items. He was convicted of defrauding creditors and fraud in insolvency in April. McCuskey unsuccessfully argued to Mercer Judge Thomas Dobson on Tuesday that he didn’t know he couldn’t take the items. His home was collateral on a loan he defaulted on in 2004. Dobson, noting McCuskey worked as a mortgage broker, didn’t accept the argument.The article noted that the home that he bought for $1.2 million was worth $180,000 after he finished. So much for his shot at an HGTV show.Leaving the fixtures might be a good idea after all.
eggie Middleton’s Boom Bust BlogA digital diary of my global economic outlook combined with a focus on fundamental and forensic analysis *Mark to Misery in the cash equivalent fund bizPosted by: Reggie Middleton in Investment Banks, Heard on the Street, Commercial Banks, Capital Markets on Jun 25, 2008 Print PDFReggie MiddletonThis is an unconfirmed, yet interesting email from a reader:A bond fund closed down yesterday and it brings up another interesting dilemma that few people if anyone wants to address, including the SEC and that is the public mutual funds that have invested in structured mortgage debt. Many, and I do mean many fund managers are very well aware that their holdings are incredibly overstated in value, yet they do not challenge the pricing companies that evaluate their holdings, unless they view the asset in question to be marked to low. A case in point is the Evergreen Ultra Short Fund, which just closed this week. Yes the fund is paying off itâ€™s shareholders at $7.48 a share, or yesterday’s net asset value. What was yesterdayâ€™s net asset value? Great question. Just recently one of the fund mangers was offered a bond, which is a matching position to current holdings at a price of 23, that is 23 cents on the dollar. Great value yet the fund manager was in a pickle and decided against purchasing the bond at such a cheap price. Why? As the fund manager said it would create an issue with his mark on the bond that was currently being carried at a dollar price over 95, or 95 cents on the dollar, yet at that point he knew what his bond was worth, yet choose not to challenge the pricing service and itâ€™s assigned value. The bond ended up trading that was offered to the Ultra Short fund manager to another account at a price of 9. The buyer was Tattersall, another subsidiary of Evergreen, yet the bond at Ultra Short was not remarked to the downside. This is happening with a great deal of regularity and is not being reported to the public, yet the public is the one who are at risk. The fund manager is not rewarded to be truthful and the SEC does not seem to care much about the current environment and protecting the investor. The losses that will be incurred could very well match or exceed the bank write-offs, after all who bought all those bonds over the last 3 to 4 years that the street has been selling. Not just hedge funds, that is for sure. I just thought you might be interested in this story, as I believe it will be a more common occurrence over the next several months. By the way, it looks like Wachovia will be financing the liquidation of the Ultra Short Fund and I would be willing to bet that the liquidation in the end will cost them a pretty penny. The values of many of the underlying holdings are severely mis-marked and when they finally end up selling all the paper it may very well cost them over $100 million, in my estimation. If the Bear Stearns hedge fund managers were charged with crimes then many of these managers are also looking at fraud or gross negligence because they know where paper is trading yet continue to let values on their books be reported as very inaccurate prices. The list is very long indeed. If this fund is down 18% this month it is not like the values of the underlying securities just dropped that much in June, no that is not the case. The fund managers were backed into a corner and no longer could hide the losses is my guess. Just another corner of the world that is lying about value.
Taxpayers Helping Bank Of America Finance Countrwide DealBy twistDoomers undoubtedly are aware by now of Bank of America’s pending takeover of Countrywide, but did you know that you are helping to finance the deal? June 25 (Bloomberg) — Bank of America Corp.’s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans. Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country’s biggest mortgage lender, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years, he said. Countrywide shareholders vote on the sale today. “Ken Lewis got a break,” Willens said. “What these losses do is reduce the effective cost of the deal so the headline price isn’t really what they’re paying. It’s entirely possible that the entire equity purchase price could be financed by tax savings.” We may not be doing Bank of America any favors though. Take for example the suit by the attorney general of Illinois against Countrywide: Today, the attorney general of Illinois plans to sue Countrywide and its chief executive, Angelo Mozilo, contending that the company engaged in deceptive trade practices in lending. The complaint, reports Gretchen Morgenson of the New York Times, accuses Countrywide of "relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its heavily advertised ‘no closing costs loan.’" "People were put into loans they did not understand, could not afford, and could not get out of," the Illinois attorney general, Lisa Madigan, told the Times, "This mounting disaster has had an impact on individual homeowners statewide and is having an impact on the global economy. It is all from the greed of people like Angelo Mozilo." The attorney general is seeking that any mortgages that used deceptive practices be rescinded or modified in some way. The Illinois investigation is one of a number into the company’s practices and into stock sales by Mozilo. The potential liability for Bank of America—in terms of both public image and legal costs—appears to be huge. Don’t you just love to see your taxes at work?
Here is a data point to back up NR’s opinion on industrial production…JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS, FLASH UPDATE, June 22, 2008, Industrial Production Contracts Year-to-YearAs reported by the Federal Reserve, seasonally-adjusted industrial production fell by 0.2% in May, following an unrevised 0.7% monthly plunge in April. Year-to-year change turned negative in May, down by 0.1%, the first annual decline in this series for the current recession. Such followed a revised 0.1% (previously 0.2%) annual increase in April. Annual contractions in industrial production are not seen outside of recessions.The latest reporting was consistent with the continued manufacturing contraction seen in the purchasing managers surveys and in the ongoing weakness in new orders for durable goods. It also virtually assures a second consecutive quarterly contraction in second-quarter production, an occurrence rarely seen outside of a recession.
@Eliezer ben YisraelYour message is being lost in the over-amplified ME,ME,ME dissonance of your rhetoric. Your desire to be an island unto yourself, but not really. Your assertion of absolute purity, innocence, and uprightness, but not really. Your belief that the Hell about you is the consequence exclusively of others cruelty, but not really.Hence you must also believe that He who oversees all, and who truly makes a promised people blessed, dispenses favour and curse in exactitude and accordance with eternal justice. Therefore, what does your present circumstance tell you ABOUT you? The moral code is His, with Judah as one mouthpiece, but Judah’s deliverance of the message comes with great exchange to her benefit (great benefit)…as is her custom.
Warren BuffetThere was a one hour interview on CNBC with Warren Buffet, the second richest man in the world, who has donated $31 billion to charity. Here are some very interesting aspects of his life: 1. He bought his first share of stock at age 11 and he now regrets that he started too late!2. He bought a small farm at age 14 with savings from delivering newspapers.3. He still lives in the same, small 3-bedroom house in midtown Omaha that he bought after he got married 50 years ago. He says that he has everything he needs in that house. Interestingly enough, his house does not have a wall or a fence.4. He drives his own car everywhere and does not have a driver or security people around him.5. He never travels by private jet, although he owns the world’s largest private jet company.6. His company, Berkshire Hathaway, owns 63 companies. 7. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. 8. He has given his CEO’s only two rules.Rule Number 1: Do not lose any of your shareholder’s money. Rule Number 2: Do not forget rule number 1.9. He does not socialize with the high society crowd. His pastime after he gets home is to make himself some popcorn and watch television.10. Bill Gates, the world’s richest man, met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So, he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.11. Warren Buffet does not carry a cell phone, nor has a computer on his desk. His advice to young people: A. Stay away from credit cards and invest in yourself and remember, money doesn’t create man, but it was man who created money.B. Live your life as simply as you can.C. Don’t do what others say. Just listen to them, but do what makes you think is right. D. Don’t go for brand names. Wear those things in which you feel comfortable.E. Don’t waste your money on unnecessary things. Spend on those who really are in need.F. After all, it’s your life. Why give others the chance to rule your life?
No rate change, Fed says economic wekness has abated and inflation risk is elevated although they see it moderating by the end of year
“Although downside risks to growth remain, they appear to have diminished somewhat,"bull shit
I can’t beleive the Fed is hanging their economic hat on a juiced retail sales number from the stimulus checks! What the hell happens when that is over???
It was dovish, IMO. USD down, oil and gold up after the announcement. Commodity inflation will continue. Equities will probably decide they don’t like the statement.
Market going bonkers with my two real-time tickers showing disparities of $2 or more on some stocks/ETFs. Volatile. Like two armies just crashed together.
This is interesting:DJ Washington State To Try To Rescind Countrywide LicenseJune 25, 2008 14:41 ET I wonder if that would still apply if the name changes from Countrywide to BOA…
ET phone home.
Miss America–got a roadside flat, require assistance.
the bank gets a face lift and becomes the bank of amerasia?
WTF is the fed looking at? The bigger ? is the markets are buying it!!!! Bank stocks up 3%, dollar up, gold down, oil down
Dolar falling and oil reversing course…feds bluff being called. Wait until the vile spewed on the general public tonight about wall thiefs "up day" on fed news that economy is expanding and worst is over…sheeple…
Well, this is a bit off topic, but I thought you oil buffs would find it interesting:http://europe.theoildrum.com/node/4188 This BERR assessment (960 kb pdf, 58 slides) of oil and gas production on the UK continental shelf arrived in my mail box last week. It is one of the best summaries I’ve seen and should be read by all with an interest in the future of UK and European energy security. The chart above is based upon the BERR forecast for UK oil and gas production. It is time for Alistair Darling and Mervyn King to explain to the British people why they see current problems with energy prices and associated inflation as a transient blip when the UK seems to be in a terminal dive towards insolvency.
RIMM disappoints!What would 30-somethings give up first? Their Blackberry, broadband service at home, or sex?
So much for all those piling into tech today….
4:37 Zions says it will raise capital, won’t cut dividendMore dilution to celebrate!
"Saudi Arabia rounds up more than 700 ‘followers of deviant ideology’ — a reference to Al Qaeda — on suspicion of plots to attack oil industry".
"No rate change, Fed says economic wekness has abated and inflation risk is elevated although they see it moderating by the end of year"I spit on Fed’s credibility. I missed the day this Nicolaz guy had so much faith in Fed. And Mish’s faith in Fed is misplaced too. Fed not pumping liquidity? Those people are delusional. Fed is like Treasury now "USA support strong dollar". Except Fed says "inflation risk is moderating". LOL.
my short blood is all over this battlefield. I have shorted them through rapid fire reckless rate cuts, I have shorted them through ill-advised bail outs, I have shorted them in the hills and on the water. Through the annals of the markets throughout all of history, these imbalances have always corrected and the truth prevailed. So Shall the SHORTS !advance decline 2 to 1 52 week highs to lows 1 to 10 !it could not happen on the day of the Fed announcement, it has already started with this NKE, RIMM, ORCL trifecta of losers after hours. looking forward to BA being joined by the others tomorrow in the route of the century. BA down $4 plus 5 times in last 25 days. where are the 4 sigma event guys ? has BA hit this measure again and again and again and again and again ? do not pass go, do not collect $200, the GAME IS OVER LONGS !!!!!!!!!!!!!!
Says Bill Fleckenstein in this week’s column: “The central bank is trapped — unwilling to raise rates even as inflation ratchets higher– because it (rightly) fears what higher rates would do to a weak economy.“Likewise, I find it stunning that anyone would take any prognostication by Alan Greenspan or Ben Bernanke, on any subject, as worthy of consideration, given that the past and present Fed chiefs, respectively, apparently understand nothing about what has been the engine of the economy for more than a decade — that is, speculation. “Just last week, Greenspan could again be heard shooting off his mouth. He now sees the reduced possibility ‘of a deep recession’ and said, regarding the mortgage crisis, that ‘the worst was over or soon would be’ (as paraphrased by Bloomberg). “What really made me burst out laughing was this headline (again on Bloomberg): ‘Risk managers should learn from market turmoil.’ What’s so ironic is that the man who created the turmoil is the one person who has never seemed to learn anything.“Meanwhile, one can only wonder if any Fed heads (they, of the inflation-ex-energy-and-food camp) have gassed up their cars in the past several months. Of course, the bullish contingent still wants to believe that somehow the Fed will make inflation go away without raising interest rates and that somehow oil will trade lower — thereby sustaining the fantasy that our economy will have a Goldilocks outcome…”http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/WhenWillTheMarketFaceReality.aspx
@ KJ Foehr on 2008-06-25 13:45:44Re:Countrywide LicenseSeems like a pointless gesture to me. As a federally chartered bank BOA falls under the OCC, which means that the states can’t touch ‘em. Learned this while researching mortgage origination licensing for the lower 48. Took me forever to get NJ on the line with a real answer of what was required. When I told them I worked for Bank X she said we weren’t under her state’s jurisdiction. Not actually true for what I was researching. FWIW, lawyers take care of their own. Seems like being a lawyer qualifies you to be a mortgage originator pretty much everywhere without following the rules for all non-lawyers.
Scavenging at Countrywide — The Countrywide office across the hall was being cleaned out. It looked like they left in a hurry — half drunk frappucino, food in the frig, etc. The mover told us to help ourselves, since he was going to throw away most of the supplies. So I just snagged myself a wireless phone headset, a CD of ’50s rock, and a can of chicken noodle soup. There were desks for about 30, maybe four were left by the time it closed. Funny thing was that it only opened about a year ago. The sign on the door said any loans in process were to be handled at the head office. No notice of where the staff went — presumably laid off.We now have about a year’s worth of paperclips thanks to Countrywide.
I am wondering if the Fed decision to keep rates unchanged was not by default. You know, when you are so confused and undecided, you do not know what’s going on or what to do, just wondering for and against, back and forth until time is up. Ooops, already? The time decided for you.The dollar did not like it. Bonds neither. Well tech companies just been releaved the bill is not due today, waiting for another coming notice of payment.
American suburbs are dying. They are stuck between a double wammy. Houses there are the hardest hit by delfating prices and negative equity. And they are the ones who need to commute more often with an increasing fuel prices. They cannot refinance or get loans any more and their job income is stagnant.
http://blownmortgage.com/2008/06/24/celebrate-our-independence-with-the-08-housing-bailout-bill/sick, whoever support this bill is sick. this is what i called rape of middle class.
No one is dying. This is simply a scenario where your standard of living is being reset.1. The continual dropping in the dollar erodes your purchasing power.2. Inflation of the money supply erodes the value of your assets and savings.3. Price inflation from both of the above activities runs faster than any wage increases.So the net result is simply that you are poorer than you used to be. This process has been going on for years and has not ended in people living in bomb shelters with guns. Poor people can be just as happy as anyone else.
Bank Loan Costs Rise as TED Spread Widens to 100 Basis Pointshttp://www.bloomberg.com/apps/news?pid=20602007&sid=a4HmU0_y1uHM&refer=ratesHave you looked at mortgage rates lately?http://www.bloomberg.com/markets/rates/index.html30yr 6.3%, 15yr 5.88, 1yr adjustable 6.13%Written by Octavio Richetta
Written by Ralph on 2008-06-25 18:30:56http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2008/Global+Central+Bank+Focus+McCulley+A+Kind+Word+for+Inflation.htm
I have been saying this for 2 years:Wait until after the Olympics and the elections in November. TPTB are only trying to hold it together until then.
@ OR, It is a pleasure to hear from you."To be sure, the Fed must be aware of the dreaded second and third round effects, constantly checking to make sure that real wages and real profits are being eroded by the aberrantly high headline inflation."I might agree with the message of the PIMCO article but not on the way it presents things. Did they mean the Fed lowered the interest rates below the inflation rate just to save the economy? If the Fed did know this mechanisms from the start, why did they put themselves in this difficult spot? Just to see what it feels like?The article presents the negative real rates as a given not a result of prior decisions to save the banking system and inflationary policies during the last few years.
"I am wondering if the Fed decision to keep rates unchanged was not by default."You never want to listen to what the Fed says … especially not now. The Fed is losing its groove. More and more the outcome for the US economy is being influenced by global trends. Take a look at the price of oil. Although America grumbles, threatens legislation, and jawbones incessantly – the price does not come down. My guess is that the Fed is secretly very worried about a new round of the credit crisis, and they’re saving whatever ammo they’ve got left for one or two more 50-point rate cuts. Let’s face it, by the time they get down to 1%, they’re pretty much out of credibility.PeteCA
So the good news is we can hold inflation in line, because there will be no demand for higher wages from the US worker. The GOP for the past 25 years have been very successful as painting the Unions as bad and the free markets as good. They have turned our attention away from wage equality and turned it towards religious fundamentalism. Well let me ask you how successful they have been at stopping abortions, and stopping gay marriages and getting prayer back in public schools. They have been far more successful at lowering the middle classes standard of living and off shoring all our manufacturing capabilities while at the same time making themselves much richer. Well keep voting them back in office I am sure they can solve all of our problems the next time around…
More wage inequality worldwide.Soaring private jet use reflects and is emblematic of skyrocketing wealth inequality, in the United States and globally. Private jet sales grew in parallel with commercial air travel until 1997. as wealth inequality began to ascend to stratospheric levels, so did private jet use.Thenhttp://www.counterpunch.org/weissman06252008.html
More good news for Unions. At least supreme court is againts abortion and for school prayer.To anyone interested in the future health of organized labor, they should know that it just took a decided turn for the worse. On Thursday, June 19, the U.S. Supreme Court struck down a California law which had made it illegal for employers to spend state-provided funds in their propaganda campaigns to discourage employees from voting for union representation. http://www.counterpunch.org/macaray06232008.html
2008-06-25 — bnn.caSEC – "let’s ignore ratings now." Tavakoli: "insanity." Indeed, that would be a little too convenient, we think.http://watch.bnn.ca/squeezeplay/june-2008/squeezeplay-june-24-2008/#clip62240
Dear professor,Do you have an anti-virus, anti-spam software? I think it is time to run it.
Peak CreditThe Marlin Company 14th Annual Attitudes in the American Workplace Poll reports the following results on June 24. More than one third (41%) of US workers are cutting back on utilities, nearly half have reduced food purchases (48.5%) and a large percentage are buying less clothing. The national survey of US workers, conducted May 12-14, 2008, also found that younger workers (between the ages of 18 to 29) are being hit the hardest by the economy and are the most desperate about their economic future. More than one third (34.3%) of young American workers say their financial situation has caused them to “feel hopelessness or despair about their economic future.” That compares with 28.8% of workers age 30 to 49, 23.5% of workers 50-64 and 17.9% of workers 65 or older. Nearly a third (31.4%) of workers report being occasionally kept awake at night because they worry they will not meet housing payments, credit cards, or other personal expenses, 36.8% of whom were between the ages of 18 and 29. And nearly one fourth (23.4%) of US workers say their financial situation has distracted them on the job, with the most distracted being young workers, age 18 to 29 (36.8%). “US workers are hurting on multiple fronts, and their pain is growing,” stated Kenna. “This year’s poll clearly illustrates exactly how damaging the current state of the US economy is to its workers.” In particular, with gas prices topping $4 a gallon this summer, more than a quarter of workers (25.7%) are already choosing alternatives to driving into work – such as carpooling or public transportation; 35.9% were between the ages of 18 and 29, with more females (32%) than males (23.1%) conserving.Complete survey results can be found on The Marlin Company Attitude Survey press release.For more on attitudes please see: * Changing Social Attitudes About Debt – February 25, 2008 * Moral Obligations Of Walking Away – February 7, 2008 * Attitudes Lead, The CPI Lags – March 19th, 2008 * Cool to Be Frugal – April 24, 2008Secular Attitude Change UnderwayThere is a secular attitude change happening right now. Boomers close to retirement are now (finally) scared to death as the equity in their houses has been vaporized. School age children are seeing homes foreclosed, and families destroyed over debt. The American consumer, who nearly everyone thinks will be back as soon as the economy picks up are mistaken.Secular shifts like these come once in a lifetime. Sadly it’s too late for many cash strapped boomers counting on equity in their houses for retirement.Lessons Of The Great Depression ForgottenThe lessons of their great grandfathers who lived in the great depression era were forgotten. Over time, everyone learned to ignore the dangers of debt, risk, and leverage. Belief in the Fed and the government to bail out any problem are ingrained. Bank failures are distant memories.Anyone and everyone who wanted credit got it, and on the easiest of terms: subprime, pay option arms, reckless leverage, and covenant lite debt and toggle bonds that allowed debt to be paid back with more debt. That’s what it takes to hit a peak.Peak CreditPeak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. No one listened to them. That is the nature of the game. The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none.Children whose parents are being destroyed by debt now, will keep those memories for a long time.Deflation Is HereIf you don’t know what inflation is, or if you think it is about prices (it’s not, and it’s not about a falling or rising dollar either) then please read Inflation: What the heck is it? and Interview With Kasriel.Right now, China, India, Brazil and other countries are on a different credit cycle than the US. Growth in China is providing huge strength in the commodities sector. In addition, horrid economic policies in the US are weakening the dollar.Those two factors are causing those who don’t know what inflation is to scream inflation or stagflation. The real wackos are screaming hyperinflation. They are all mistaken. We are in deflation now. Most do not see it because they do not know what it is.Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.com
I would like to join the others here who have asked that the discussion not become consumed with religious propaganda. This is an economics blog and while our frequent political talk can stray off course, the religious zeal of some is most unappealing. I can tolerate and welcome debate with anyone on a political topic, but religions are just of no interest to me – if I want to talk about who has been most wronged or victimized throughout history, I will seek it somewhere else. I humbly ask that we remove the bloggers here who are not interested in economics, but preaching. Otherwise, some of us may find our time spent here less valuable.
@Prof. Roubini,I am surprised India and China don’t appear in your list. China has no financial institutional infrastructure to support a combined equity market and real-estate market downturn. A second look at the graph of Shanghai index suggests that the landing could end up in a meteor hit.India’s RBI is forced to protect the middle class and tighten the noose on real-estate. With the Sensex in a complete bear run, both wheels are coming off just as in China. Make that meteor hit #2.If you think that Miami-Dade and IE are bubble country, check out the outskirts of Shanghai and New Delhi (National Capital Region). Entire cities with multiple towers have been built on speculation with no residents or operating businesses in sight. The arrogance seems to be: If God can create so can Man. (Couldn’t resist the capital M)Are the following stories any different?1.http://www.tradingmarkets.com/.site/news/Stock%20News/1711595/Quote with emphasis added: "The real estate developer got sales income of CNY 4 billion in the first half of the year, one quarter of the full-year goal. It plans to spend CNY 3.5 billion in buying more lands in the second half, said Xu Shitan. The company has slashed the full-year sale income goal from CNY 17.4 billion in the face of tepid property transactions due to the stiffer macro control measures."2. http://economictimes.indiatimes.com/Real_estate_sector_facing_severe_cash_crunch/articleshow/3130151.cmsQuote with emphasis added: "Industry sources told SundayET that the liquidity crunch has forced many developers to pick up cash from the unorganised market at interest rates as high as 35% to 50% annually."Best,Print First Ask Questions Later.
Belgium(Europe)inflation figure June:5.8%But what the heck, the sun is shining, everybody is on strike for higher wages and never before more holidays where booked. All this while our biggest bank Fortis(Belgian-Dutch bank) is crashing 17% today to 10.5 euros(came from a peak of 36 a year ago).Belgium, soon to be added to the professor’s crashlist…
8:30U.S. Q1 GDP just below 1.1% forecast8:30U.S. Q1 GDP up 1.0% vs 0.9% prev est.8:30U.S 4-wk. avg. continuing jobless claims rise to 3.10 mln8:30U.S. continuing jobless claims rise 82,000 to 3.14 mln8:30U.S. 4-wk. avg. initial jobless claims up 2,250 to 378,250
MASHIACH BEN CHANA on 2008-06-26 01:34:19Enough is enough. I hope the professor bans your account/IP address from the blog.
http://www.cnbc.com/id/15840232?video=773976060&play=1http://www.cnbc.com/id/15840232?video=777242678&play=1http://www.cnbc.com/id/15840232?video=772597109&play=1A little tech-analysis from the Yamada/Elliott tag teamTime to short Nasdaq?
@ORYou don’t sound as someone on a relaxing holiday…LOLGlad to have you back though!
Kasriel: Most people are not aware of actions the Fed took during the great depression. Bernanke claims that the Fed did not act strong enough during the great depression. This is simply not true. The Fed slashed interest rates and injected huge sums of base money but it did no good. More recently, Japan did the same thing. It also did no good. If default rates get high enough, banks will simply be unwilling to lend which will severely limit money and credit creation.
Does this equation make sense?High headline inflation + low core inflation= lowest consumer confidence in 20 yrs.Basically this means people are not getting raises to keep up with headline inflation!
@CaponeHow do you reconcile the world growth story (oil at $138) with Boeing at $69 down 40% in the last 11 months?Which on of those is wrong?
@ CaponeI hope you’ve been riding this wave down. Vindication, baby..
@Play On, sorry the only view i have on BA is based on the current chart. It should be blowing down NOW. When you have a controlled descent such as this one so far, they have to hold it in place while they beat up the financial pieces of the DOW this morning.
@Capone on 2008-06-26 09:34:09I have been holding BA for 10 yrs. The technicals tell you that 70 is an important threshold. It is the 12/00 high, the 5/01 double top and the breakout in 2006. There is alot of support there. I dont think it goes down much from here!
Which on of those is wrong?Written by Play On on 2008-06-26 09:13:33Neither. High oil prices are bad for airline profits. Boeing customers are broke.
I have deleted and I will keep on deleting items that are religious propaganda and/or not germane at all to the topics broadly discussed in this forum. And if some commenter persist in inappropriate writing/postings their access to this forum will be permanently shut down.Nouriel
Dr. Roubini:Thank you, thank you, thank you!SWK
@Play On, sorry to hear that. best wishes on long BA i think we already closed below that support yesterday – we agree to disagree then…@Guest on 2008-06-26 09:32:19, i am a stubborn masochist apparently and now only have shorts in stocks that will go down only in the event of a crash…
seems like some of the ones behind the debt-based economy are getting a reality check:Countrywide -5.2%Citigroup -5.5%General Motors -11%
@Octavio Richetta on 2008-06-26 09:46:44If oil prices sustain these prices ($138) it shows the world economy is strong. Ebergy prices are a leading economic indicator of strong economies. But if the world economy is so strong that it can sustain these oil prices, why is Boeing acting so poorly?
Citibank stock is now at its lowest level in nearly 10 years:http://www.bloomberg.com/apps/news?pid=20601087&sid=aZD7nAjRgWuQ&refer=homeSWK
PULLING THE WORLD OUT OF RECESSIONI was doing some techie search engine analyses and discovered an interesting anomaly. The World Economic Forum’s Annual IT Ratings have apparently been eliminated. The last publication of them was April 2007. See the proof:http://arstechnica.com/news.ars/post/20070403-world-economic-forum-releases-annual-it-rankings-us-slides.html?relHere's the April 2007 results:Top 10 countries by Networked Readiness IndexSource: World Economic Forum (full list available as a PDF)Country 2006-07 rank 2005-06 rank Denmark 1 3 Sweden 2 8 Singapore 3 2 Finland 4 5 Switzerland 5 9 Netherlands 6 12 United States 7 1 Iceland 8 4 United Kingdom 9 10 Norway 10 13 Mexico was rated 49, Japan 19, China 59 and India 44; way below the top ten in IT and communications technological innovation. All this data suggests a positive proof to a basic assertion; those countries (like European countries) who control population growth do well in technological innovation.Coincidentally, the 2008 follow on annual data was apparently eliminated. Perhaps the truth about technology ratings contradicts many decisions made in America to utilize more technology outsourcing away from expertise countries to subpar overpopulated ones; to save labor costs?Irrespective, the truth shines out anyway in 2008, documenting per capita income food impacts globally causing a systematic financial risk. See the proof:http://www.weforum.org/pdf/globalrisk/report2008.pdfWe must deopoulate worldwide ASAP or the house of cards balanced on peak oil will tumble soon. Decreased per capita incomes is fueling the house price collapses worldwide as greed for lower (even technologically subpar) labor rates and more uncontrolled growth blinds us to make the housing collapse worse and in my opinion, no end in sight.
Intraday the DJIA has fallen below the lows of both March and January, and is now down about 18% from the Oct. highs.The S&P500 is lower than the Jan closing lows, but has not fallen below the March lows. It is now down 17% from the Oct. highs.I believe both the Dow and the S&P will move into true bear market territory (down over 20%) on this leg down: they will not bounce of the 20% down line this time.The “hard” part of the hard landing is upon us. GLTA!
The “hard” part of the hard landing is upon us. GLTA!Written by KJ Foehr on 2008-06-26 10:23:20It is all developing (economy and markets) in super slow motion but we are getting there.
Today’s equity market action following a FED meeting is a long overdue slap in the face to Benny and friends.
In a day like today, where are all Da’bears? I am slowly crawling back to my mid-March highs. I do things gloomy style.
Octavio Richetta on 2008-06-26 10:33:32“It is all developing (economy and markets) in super slow motion but we are getting there.”Yes, and I can’t help but think that the eventual recovery will be painfully slow as well.Greetings OR, I trust you are enjoying your winter in warm climes and comfortable surroundings.
http://www.backwardsbush.com/http://online.wsj.com/article_print/SB121443502741304977.htmlBush Misread War-Powers CasesBy JESS BRAVINJune 26, 2008; Page A10WASHINGTON — At the Supreme Court, it has become a biennial ritual: The Bush administration loses a major war-powers case. In 2004, 2006 and again this month, the justices rejected the president’s claim that he can effectively do as he wishes with prisoners he designates as "enemy combatants."1 With the third and most-recent rebuke, it has become clear that the president’s counterterrorism strategy rested on a critical legal miscalculation. In all these cases, the administration argued that a series of World War II-era opinions, largely forgotten before 9/11, empowered it to fight 21st century terrorist groups with the same sweeping authority Presidents Roosevelt and Truman asserted against the Axis Powers in the 1940s.From the start, the Supreme Court rejected the administration’s reading of the World War II cases, not in cursory fashion but in detailed lessons that distinguish the old precedents from today’s very different situation.The court’s liberals and moderates have been the most skeptical toward Mr. Bush’s claims. But even the conservatives have chided him. A 1948 decision, Hirota v. MacArthur, was a "slip of a case" that "cannot bear the weight the Government would place on it," sniffed Chief Justice John Roberts in a recent opinion."The bottom line is that the court is not buying off on this concept of the global ‘war’ on terror," says retired Col. David Crane, a law professor at Syracuse University and former war crimes prosecutor. "We don’t have a situation with the Japanese imperial fleet coming into Los Angeles harbor, or the country dividing itself over slavery, or the British burning down the White House."The Justice Department declined to comment. But an administration official familiar with the legal strategy said the government thought it was on solid ground, and noted that it prevailed in most of the lower courts. "With the respect to the executive branch, all we can do is look at the cases as they are in the books," this person said, but "the Supreme Court is free to evolve the law" as it sees fit.Courts traditionally are reluctant to second-guess the president on national-security issues. But in two decisions handed down in June 2004, the court made clear that while prisoners captured overseas in battle zones or through counterterrorism operations may lack all the rights of a civilian defendant, they are at least entitled to have an independent hearing to challenge the government’s accusations.In Rasul v. Bush, the court found that the federal statute spelling out habeas corpus rights — the legal procedure to contest unlawful detentions — applied to Guantanamo Bay, where hundreds of prisoners were locked up. And in Hamdi v. Rumsfeld, the court ruled that a Louisiana-born Arab American captured in Afghanistan was entitled to a "meaningful opportunity" to contest his "detention before a neutral decision maker."Mr. Bush’s so-called war council — a group of top lawyers who charted post-9/11 legal policy — put its faith in the World War II cases. These people believed Johnson v. Eisentrager, a 1950 case concerning German prisoners of war convicted by a U.S. Army commission overseas, created a rule that noncitizens held abroad could never have their habeas petitions heard by U.S. courts.The court disagreed. Then-Justice Sandra Day O’Connor suggested the majority’s underlying concerns. Even "a state of war," she wrote in Hamdi, "is not a blank check for the President when it comes to the rights of the Nation’s citizens."Administration lawyers "were shocked when they lost," says Ronald Rotunda, a law professor at George Mason University who was then a special counsel to William J. Haynes II, the Defense Department’s top lawyer and a member of the war council.Guantanamo had been selected as a detention site in large part because the lawyers believed it would fall under the Eisentrager exception. Although formally within Cuba’s "ultimate sovereignty," the U.S. had occupied the bay since the Spanish American War and could indefinitely exercise "complete jurisdiction and control" there through a lease obtained after ousting the Spaniards.But in Rasul the court found that the habeas statute covered Guantanamo because it was de facto U.S. territory, since Washington had "plenary and exclusive jurisdiction" over it. Citing cases dating as far back as the 17th century, Justice Stevens wrote that the detainees’ claims fell within "the historical reach of the writ of habeas corpus."Current and former administration officials describe heated debates over the proper response, but say that remaining members of the war council — particularly David Addington, now Vice President Cheney’s chief of staff — refused to budge from aggressive positions on executive power.Instead of narrowing its claims, the administration treated the 2004 cases as technical rulings, creating pro forma military hearings to approve detention decisions and obtaining congressional legislation excluding Guantanamo from the habeas statute. In other areas — notably the president’s effort to create military commissions that operate outside established law — the administration continued to assert that 1940s precedents gave the president a free hand.The administration’s plan to prosecute alleged foreign terrorists before military commissions was inspired by a 1942 episode when Roosevelt convened a secret tribunal to try eight German saboteurs arrested in the U.S. In a case known as Ex parte Quirin, the Supreme Court quickly approved the procedure, and six of the defendants were executed within days.Administration lawyers viewed the 1942 precedent as a landmark of executive power, but even Antonin Scalia, the conservative justice, had doubts about Quirin, writing that "the case was not this Court’s finest hour." The majority opinion found that Mr. Bush’s attorneys had misread both Quirin and legal history.In his majority opinion, Justice Stevens wrote that Quirin was no "sweeping mandate for the president to ‘invoke military commissions when he deems them necessary,’" as the government argued, but rather affirmed that such tribunals could function if they operated in accord with the law of war.The Quirin court, Justice Stevens observed, didn’t simply approve President Roosevelt’s action but examined "whether the law of war had indeed been complied with in that case." And while FDR’s commission may have followed the law of war in 1942, subsequent developments — the 1949 Geneva Conventions, the Uniform Code of Military Justice — had vastly changed the landscape, he wrote.Again, the White House response was to seek legislation that effectively overruled much of the court’s decision. Congress obliged with the 2006 Military Commissions Act, providing a statutory basis for affording alien defendants fewer rights than U.S. service members would receive if prosecuted for the same crime, and quashing the dozens of habeas petitions Guantanamo prisoners had filed after the Rasul decision.The Supreme Court has yet to consider whether the new military commission procedures are lawful. Earlier this month, when it ruled that constitutional habeas rights extend to Guantanamo, it chided the administration for misreading its precedents."Whether one agrees or disagrees with today’s decision," wrote Justice David Souter in a concurring opinion, "it is no bolt out of the blue."
Nice to see some check on the executive powers in USA. Almost makes you believe in the healing ability of the Republic, but it is really only at the margins. OR, you are a humanist with a large reservoir of compassion for your fellows. I’d like to think that if I were in Germany 1933-1945, I’d be with you and share in convictions.BTW, Da’Bears are passively reading, and since you generally say it so well, haven’t the need to contribute.
http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vRYNM9ngWNzw.asf&vCat=/av&RND=634022112Like Gary Shilling’s take, but Fisher? Not enough O2 at birth.
Hello OR, i am nowhere near March highs – so relatively quiet ;( good for you that you are ! AND the day job is currently requiring serious attention – one eye on each tick of DOW and one eye on spreadsheet…
Goldman downgrades fellow banksAnalyst cites industry deterioration and a lengthy economic recovery for lowering its view, rating Citigroup a ‘conviction sell.’ By Aaron Smith, CNNMoney.com staff writer Last Updated: June 26, 2008: 9:19 AM EDTexcerptNEW YORK (CNNMoney.com) — Goldman Sachs said it lowered its rating on the U.S. broker industry because of continued deterioration of the banking industry and the prospect of a lengthy recovery."We are lowering our coverage view on the brokers to Neutral from Attractive, as we see limited near term catalysts," read the report, published Wednesday by Goldman Sachs analyst William Tanona. "Fundamentals continue to deteriorate as expected, but the pace of deterioration appears to be far worse than we originally anticipated."…"… we are hard pressed to find a catalyst that will move the group significantly higher over the next few months as fundamentals continue to deteriorate," wrote Tanona. "In addition, we also believe a recovery will take longer than originally anticipated."Goldman Sachs also downgraded Citigroup (C, Fortune 500) to "conviction sell." Tanona expects the firm to take an additional $8.9 billion in writedowns in the second quarter. The analyst also expects "significant" writedowns for Merrill Lynch."We see multiple headwinds for Citigroup including additional writedowns, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," read Tanona’s report.…andGM Falls Most in 3 Years After Goldman Cuts Rating By Greg BensingerexcerptJune 26 (Bloomberg) — General Motors Corp., the largest U.S. automaker, fell the most in more than three years after Goldman, Sachs & Co. cut its rating on the shares to “sell” because of a worsening sales outlook. The shares may be headed for their lowest close in at least 46 years, according to Standard & Poor’s Compustat data. The Goldman revision follows Fitch Ratings’ cut yesterday of GM’s long-term debt to B-, six steps below investment grade. On June 23, Bank of America told investors that the automaker might need to raise as much as $8 billion. …“GM’s automotive cash flow burn this year and next is likely to lead it to look to raise capital,” Goldman analyst Patrick Archambault said in the research note. That “could lead to significant shareholder dilution.” …Declining Sales The automaker’s U.S. sales tumbled 16 percent this year through May as consumer preferences shifted to cars and smaller sport-utility vehicles. GM has cut truck production and announced plans to close factories. The automaker hasn’t had an annual profit since 2004. …GM shares have lost 84 percent since May 31, 2000, the day before Rick Wagoner became chief executive officer. It’s the worst performing stock in the 30-company Dow Jones Industrial Average during the past 12 months, with a 69 percent decline. Short-seller James Chanos, president of Kynikos Associates Ltd., said in a Bloomberg Television interview yesterday that GM should consider bankruptcy. He said he is adding to his short position on the automaker. …http://www.bloomberg.com/apps/news?pid=20601087&sid=at9q3anYMMB8&refer=homeMethinks Goldman is short equities, and long bonds and commodities.Look for another “beat” by GS in its next earnings report. How can they lose when they “talk their book” so effectively?
@KJ, perhaps Goldman is finally positioned for a crash. Dirty games with investment banks and banks downgrading each other…@All, maybe at some point traders realize there is no bounce coming and then we FINALLY capitulate…
We are doomed. The Fed lost the last credibility it had left and the market told Ben Faust Bernanke to "go and #*@% !&*()^~#"I miss Gloomy. At least he was saying that so I didn’t need to do and put me in the side of "it is not that bad".Mr. Lewis said the Countrywide deal was still attractive.Mr. Lewis said Investment banking was an attractive business this year.He is in a worse spot than Bernanke. Like if all financial analysis of how it is a bad idea to go for the marger, he is going to acquire a business that in a matter of less than one week, had a nice track record:Lawsuit filed by Illinois AGLawsuit filed by California AGInvestigation by Washington to revoke CFC License and impose fines.
@OR and CaponeI have been on the rebound fast, and my March highs are within hailing distance. But I expect the rate of my gains to slow as I am heavily weighted in financials and regional banks, and they probably have less room to fall now – the rest of the market will probably catch up so I may move into broader ETFs and some tech shorts.Live long and prosper!Capitulation? VIX appears to be signaling complacency not panic, but that can change too — fast or slow, we will get to the same place, IMO.
PPT won’t allow this to go on much further…
PrintFirst, I Agree.. Being from India I see it first hand, even in a small town where i live we have 5000 apartments in various stages of completion that are waiting for buyers.In comparison the scale of construction activity and prices in middle east countries is mind boggling, Dubai alone would have more activity than half of India put together. Any thoughts where that will end.ARS
@BohemeJust enough to get the Lowry Boys to jump off?Insanity laughs Under Pressure
oreclosure Resales Boost Existing Home SalesShareThisBy PAUL JACKSONPublished: June 26, 2008Related stories: * Existing Home Sales Post Second Straight Monthly Gain; Prices Drop 3.1 Percent * Are pending home sales really negative? * NAR: August Resales Off 12.8 Percent From Year-Ago Levels * Existing Home Sales Pace Hits Record Low in October * Home Prices Post First Annual Decline in At Least 40 YearsVisited 143 times, 143 so far todaySales of existing homes increased in May, beating analyst expectations, as an increasing volume of distressed real estate sales — including REO and borrower short-sales — helped resales edge up 2 percent to a 4.99 million annual rate, according to statistics released Thursday morning by the National Association of Realtors. The May estimate is still 15.9 percent off from last year’s pace, however, the group said in a press statement.Median prices fell to $208,600 in May, down 6.3 percent from a year ago when the median was $222,700, an outcome that the NAR said was due in part to mushrooming REO inventory in key housing markets.“Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices,” said NAR chief economist Lawrence Yun.While a drag on prices, distressed real estate also appears to be spurring a growing number of sales transactions in a side of the market that has historically been so small relative to so-called “retail sales” that it has rarely, if ever, put a dent into the national housing picture. But the current market is, if anything, unusual.An earlier story on HW (”A Tale of Two Housing Markets: There’s REO, and Then There’s Everything Else,” June 2) looked at how bank-owned and other distressed asset sales are affecting key housing markets — essentially driving a wedge between more traditional home resales, where prices have remained more stable, and the distressed market, where prices have taken a much sharper downward turn.The as-of-yet unanswered question is whether or how long the rest of the more traditional “retail” housing market in certain key markets can hold out in its desire for higher home prices, relative to the aggressive pricing now being exhibited by institutional sellers.The NAR, of course, was quick to pop the sales numbers as proof that borrowers are finally “getting off the fence,” citing “greater access to affordable mortgages” — which, if anything, has little to do with the trending in current transaction volume. Most REO is purchased by investors, rather than owner-occupants, for one; secondly, access to mortgages is more constricted now than it has been at any time in recent memory.In its release of statewide existing home resale data Wednesday, the California Association of Realtors was less sanguine on the sales bump within the state, noting that most of it was of the “distressed sales” variety.The increased activity, however, brings with it a concomitant positive — some lightening of the inventory overhang looming over key local housing markets. Total housing inventory at the end of May fell 1.4 percent to 4.49 million existing homes available for sale, the NAR said, which represents a 10.8-month supply at the current sales pace, down from a 11.2-month supply in April.For more information, visit http://www.realtor.org.
@CaponeRe: capitulationI have been holding my SKF and regional bank shorts expecting a bank failure (perhaps WM or NCC). If that does happen then we should / could see some capitulation and I will take profits at that point and move into more non-financial shorts, after the likely rebound.Sounds like a good plan, right? But, unfortunately, they seldom work out as expected…p.s., I tried to buy some calls on the VIX earlier this week, but they are not available through my broker! I guess that’s one of the drawbacks of doing business with discounters (Scottrade). If you can get some Aug, Sep, or Oct 25s or 30s, they might payoff well.
I don’t see Australia in Professor R’s list.Anyone care to predict?
Report: J.P. Morgan eyeing SunTrust for mergerBy RUSSELL GRANTHAMThe Atlanta Journal-ConstitutionPublished on: 06/26/08 excerptSunTrust Banks is at the top of J.P. Morgan Chase’s wish list for potential merger targets, the New York Post reported Thursday, citing unnamed sources.The newspaper said Washington Mutual, a large thrift that has been wounded by fallout from the steep downturn in the housing market, is also at the top of the New York banking giant’s list.…http://www.ajc.com/business/content/business/stories/2008/06/26/suntrust_merger_report.htmlFurther consolidation in financials is probably inevitable.Which will happen next? A bankruptcy, a BSC type bailout / buyout, a CFC type “takeunder” or a normal buyout?A normal buyout / takeover would probably rally financials. The other three would probably lead to further selling / capitulation.
repost from Friday off a couple of days ?June 23, 2008 – Frightened investors in the US looked on as the world-wide sell-off continued. They looked to Ben hoping he could yet again save the day. Ben reached into his holster for his rate cutting laser day trading gun to fire at the falling equity prices but could not pull the gun from his side ! High oil prices were dripping all over the gun and he could not grab it. Finally, he managed to pull the gun from his holster, take aim and fire at the falling equities. Amazingly, the equities continued to fall and all were confused. It had felt great for Ben to machine gun rattle off almost 30% of his clip in 8 days in January. However, Wild Ben Bernanke had fired all of his bullets ! Now what ? The people expecting their savior to deliver them once again watched in horror as this near deity was helpless. They cried, wept and gnashed their teeth. With every last ounce of energy they could muster and little sanity left, they yelled SELL SELL SELL !Written by Capone on 2008-06-20 15:50:22@KJ, i still hold my crash puts and have nothing to reallocate… u may want to consider reallocation / rebalance if you have had great success on your SKF. remember EVERYTHING gets taken out in a crash. and consider trades immediately following a crash. covered writes for example – buy 100 shares of say JNJ after it has been obliterated and sell a call against it. with the VIX at 45+, those calls will be nice to sell at a very high premium IMHO. keep it tight !
OIL! WOW! It may be the price of oil that pushes equities into capitulation. And it will be Ben’s insufficiently hawkish statement yesterday that caused it all!@CaponeI do very little with options because I usually lose when I do, so I don’t know much about them, but don’t you mean sell covered puts when the prices are high on them after a crash? You got VIX puts?
TWO AMERICASThe East Bay Business Times has surveyed local businesses to see how they are coping with the recession.Down – A landscape and garden design firm says they would normally be booked six months out but now they only have two jobs. Their suppliers now add an 8% fuel surcharge to every delivery. A lumber yard is reporting a 15% decline in sales. It has also tightened its credit policies to contractors.Wages falling – a remodeling contractor is seeing lower labor costs, as trade contractors are willing to negotiate. His business is up 15% which mainly consists of remodeling jobs in affluent neighborhoods.Up – Business Jet Center, which fuels and services executive jets at the Oakland Airport says that fuel sales are up 13% so far this year.Trouble is, if those on the top continue squeezing those on the bottom, after a while, there is no one left to sell to.
Short term trade: long financials?Expecting a little bounce here.
covered write is buy stock 100 shares and sell call at a strike above it to create income during quiet markets. you ARE exposed on the downside on the stock and the premium you collect on selling the call is income and some hedge for downside on the stock. it seems interesting to me AFTER a crash when JNJ goes down 20-30% unimaginable right ? so JNJ is now 45 – you can buy it there which i would think it is becoming VERY interesting from a value perspective anyways AND sell the 50 call or even the front month 45 call against it for probably 4 or 5 dollars ! so 10% collection of premium selling the call. if the market goes up they take your stock and you keep the 10% on the call you sold. you could also much riskier of course just sell the 45 put probably for $5 or more to get long JNJ at 45 and SHORT the VIX or volatility at 45 or 50 or higher… IMHO no VIX for me but i would own calls on VIX…
those games sure do suck a lot of water… and i think the shock is already here /changing WATER patterns Beijing has one of the world’s lowest per person available water resources, at one-thirtieth of the world average.The city has constructed water-guzzling golf courses since the 1980s and projects across the city, including landscaped gardens and artificial lakes, for the Olympics.
You watch…the PPT will close the Dow down only 150 points by the close.
House of CardsYou thought the housing crisis was bad? You ain’t seen nothing yet.By Danny SchechterThe MessNationwide, two million homes sit vacant. Home sales are at a nine-year low. Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. We still don’t know the full extent of the colossal subprime rip-off, but a recent Bank of America study did some guesstimating on the scale of the consequences of the “credit crisis.” The meltdown in the U.S. subprime real estate market, the bank said, had led to a global loss of $7.7 trillion dollars in stock market value since October.While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy. You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.While campaigning in Edinburg, Texas, in February, Barack Obama met with students at the University of Texas-Pan American. “Just be careful about those credit cards, all right? Don’t eat out as much,” he said. After the foreclosure crisis, he warned, “the credit cards are next in line.”The coupling of home equity debt and credit card debt has gone hand in glove for years. The homeowners at risk can no longer use their homes as ATM machines, thanks to their prior re-financings and equity loans, often used in the past to pay off their credit cards. Indeed, homeowners cashed out $1.2 trillion from their home equity from 2002 to 2007 to pay down credit card debts and to cover other costs of living, according to the public policy research organization Demos.To compound the problem, fewer people are paying their credit card bills on time. And, to flip the old paradigm, more are using high-interest credit card cash to pay at least part of their mortgages instead of the other way around.How bad is it?• Financial analysts say that in the U.S. alone more than $850 billion in unpaid credit card balances is at stake and fast approaching $1 trillion, roughly the same amount as in the subprime market.• CNN reports that worldwide, consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year.• The unpaid debt portion of this is continuing to pile up, with U.S. consumers last year adding $68 billion against their credit lines, boosting credit card debt by 7.8 percent, the largest increase in seven years, just when the last recession was beginning.• Even as they spent, consumers have been going into default at a stunning rate. The percentage of people delinquent on their credit cards is soaring, and credit card companies are now writing off somewhere near 5 percent of payments.• By last fall, the major banks were setting aside billions for loan-loss reserves while anticipating an increase of 20 percent in non-payments over the next two to four quarters.• Capital One, one of the biggest credit card banks, was forced to write off $1.9 billion in bad debt just in the last quarter of 2007.•By October, according to a survey of only the leading credit card banks by the Associated Press, the value of credit card accounts at least 30 days late was up 26% from the previous year, to $17.3 billion. Serious delinquencies among some of the biggest lenders rose by 50 percent or more in the value of accounts that were at least 90 days delinquent.• Making matters worse, or more widespread throughout the economy, just as with mortgage debt, credit card debt is put into pools that are then resold to investment houses, other banks and institutional investors. About 45 percent of the nation’s $900-plus billion in credit card debt has been packaged into these pools, and so many companies, not just a few, are at risk of being forced out of business by credit card debt write-offs.What this adds up to, and what Obama didn’t say, is that we are actually face to face with the results of the most massive failure of our political and economic system since the Depression. Since Ronald Reagan, we have been living in an era in which neither the meltdown of the savings and loan banks in the 1980s nor the Enron-like scandals of the Bush years has stopped the relentless advancement and protection by both parties of the ability of financial institutions to make a buck at any cost to the social good and economic fabric. Which is what you get, of course, when both parties are so dependent on massive financial contributions to get their candidates into office and when the corporate media, heavy with advertising from the FIRE sector – Finance, Insurance and Real Estate – doesn’t warn the public or investigate the egregious fudging, misrepresentation and outright fraud that underpins the subprime and looming credit card crisis.Priceless!The credit card industry (Visa, MasterCard, American Express, etc.) and the 10 banks that dominate the industry as the primary card issuers spend an estimated $2 billion a year in endless marketing worldwide. We are all bombarded with their solicitations and sales tie-ins and gimmicks. They know that they might only have a 2-3 percent return rate, but that more than pays the enormous costs. They have thus succeeded in supplying 1.5 billion cards to 158 million U.S. card holders. That averages to 10 cards per person. In the last few years, retailers, banks, a wide range of companies, sports teams, unions and even universities have launched specialized card programs. Like the car companies that discovered that they made more money on car loans than automobiles, the benefits of what’s been called “financialization” is obvious to more business sectors.Credit card advertising for new card holders is especially effective now as inflation drives costs up and consumers have less to spend. “Charging it” on yet another new credit card is for many the only option to meet their budgets or maintain their lifestyles, especially as gas prices rise. It’s become habit for many to spend more than they have. As a result, overall U.S. credit card debt grew by 435% from 2002 to year-end 2007, from $211 billion to approximately $915 billion.The relentless, continuing push by the credit card banks doesn’t target potential customers alone. Constant focus group studies and other research techniques are still being used to persuade retailers to encourage more credit card transactions. Increasingly, businesses simplify their use by “swiping” and other gimmicks, no signed receipt needed.“More and more sectors of the American economy recognize that their financial success is based on the success of the credit card industry,” explains Robert Manning, the author of the definitive Credit Card Nation and a leading expert who has been sounding the alarm about the consequences of credit card debt.“Everything is very clearly thought out and premeditated. Whether it’s having conferences and think tank sessions about how to encourage people to accept more debt [or] to work with merchants – for example, to persuade merchants with empirical information that … if they use a credit card that they’ll buy 20-25 percent more.”Manning notes that saving and thrift was historically a positive value in the U.S. As recently as the l980s, the national savings rate was 10 to 11 percent. Since 2005, Americans have saved less than 1 percent of their disposable incomes. In fa
ct, the most recent figures from March show that the savings rate is negative, below zero. And also in March the government reported that for the first time since the Depression, Americans owe more on their ≠homes than they have in equity. Essentially, on average, America is broke and its credit cards played a dominant role in getting there.Manning, who teaches at Rochester Institute of Technology, has taken on the issue with original research and financial literacy courses for students. He found that many of his students already had credit cards before they arrived on campus, some for years.As we all know, the companies don’t tell about the downside when they are seducing customers. They offer low introductory or teaser rates, in the same way that mortgage brokers enticed sub-prime customers. They offer rewards, frequent flyer miles and other prizes. Students are especially targeted because they have little real-world financial experience. The U.S. Public Interest Research Group, which is campaigning against student debt, says the average is $4,000 per student, but it easily climbs after four years to $15,000 to $20,000.All of this, in our globalized world, is not unique. Clear across the world and down under, the New Zealand Union of Students’ Associations (NZUSA) and bank workers’ union Finsec are joining forces to try and keep students out of high-interest debt. The amount students owe on credit cards has increased by 32 percent since 2004, according to the NZUSA Income and Expenditure Survey. Credit card debt has increased at a higher rate than low to no interest overdrafts.Here in the U.S., one mother, Joan E. Lisante, has set up a website targeted at other parents, http://www.consumeraffairs.com, so they can tell their stories. She wrote recently about what she calls the “plastic prison.”“My 22-year-old son Jon, a college senior, got 52 credit card offers in the last year. I know this because, like a CIA operative, I intercepted the offers pouring into our mailbox.“He got 19 from Capitol One, 13 from Providian, six from Washington Mutual, four from Chase, four from eBay and one each from an assortment of lenders ranging from PayPal to First Premier Bank in Sioux Falls, South Dakota (co-capital with “Small Wonder” Delaware of the credit card kingdom).“Most begged Jon to rip open the envelope and wallow in instant gratification. Capital One, the most persistent suitor, shouted, ‘Offer Status: Confirmed. No Annual Fee!’“‘16 Card Designs’ (but none that tally the total whenever you use it). You could get a response in as little as 60 SECONDS when you apply online.“Now this kid has never held a job (yet) for more than one summer. He spent one summer working in the FEMA flood insurance call center, which shows how much expertise you need to work there. Although he is familiar with the inner workings of Blockbusters and Starbucks, Jon’s not yet a member of any corporate elite, prestigious profession or skilled craftsman’s guild. Does this matter? Apparently not.”“The key for the banks,” Manning says, “is to get them dependent upon consumer credit, shape their attitudes towards savings, consumption and debt and to then multiply the number of financial products that they’re buying from that particular bank so the credit card will lead to the student loan, to the car loan, eventually to a home mortgage and then maybe some insurance products and investment opportunity.The banks, he says, want students in a condition of dependency. “Young people today that see credit as a social entitlement have no understanding of what it is going to entail to repay those loans back. Once they’re used to living on borrowed money, then the banks realize that they’ll be following that pattern possibly for the rest of their lives. By the time they graduate they’re so indebted, and they’re so dependent upon the use of credit and debt, that it’s already presaged their future. They can’t possibly pursue the kinds of careers that they anticipated.”Defaults on student loans are climbing. Many students used those loans to pay off credit cards. Military recruiters are now promising to pay off debts to entice enlistments. Other government agencies are also offering funds as part of their head-hunting.Rise Up“Many of you have probably forgotten that the American Revolution was largely driven by the great American planners, that were heavily in debt to European banks and they had very onerous terms,” Manning said in a lecture I attended when I was making my film In Debt We Trust. “And they recognized that they could not financially prosper under such outrageous financial demands.”On the day I visted Manning’s lecture in an alcove literally right next door to the lecture room in the student center, local branches of banks like Chase and HSBC were signing up students for checking accounts and credit cards. Freshmen lined up at the tables to set up accounts. The banks had permission from the same school administration that hires Manning to counsel students to avoid getting into debt.I listened in at the pitches.BANK REP: “You don’t need anything for deposit, and we’re giving out free backpacks.”BANK REP: “You get zero percent on the purchases for the first six months and then it goes to the standard intrest rate.”QUESTION: “What’s the interest rate?”BANK OF AMERICA REP: “The interest rate is variable … to be honest with you, off-hand, I don’t know the interest rate off-hand. Sorry.”A student is counting out twenties as his first deposit.BANK REP: “I just need your signature. Right here, please.”ANOTHER BANK REP: “And it’s free while they’re a student.”What will happen when they do have to pay it back includes nonstop calls to them and their parents. Credit card collection agencies know how to harass, threaten and then sweet-talk cardholders who are late. They even have a term for people squeezed by debt: “sweatbox.” They also know that the longer the debt goes unpaid, the larger the potential profit for companies, as interest builds up at rates of up to 30 percent. Credit card promoters call people who only pay minimums “revolvers.” Those of us who pay our bills in full? “Deadbeats.”Recently the companies unilaterally hiked late fees and penalties that compound the debt. A few missing payments can earn you an interest rate hike to 29 to 30 percent. If you are late with a payment on some other debt not related to your credit card, you can readily find your interest fee doubled on your credit card. Some companies make more on fees and penalties than on interest payments. The companies racked up more than $17 billion in 2006, the last year for which records are available.Like many of the homeowners who accepted subprime mortgages, and like you with your credit cards, youths and adults alike signed dense agreements that are largely unreadable. The credit card banks constantly update these with those small print notices with which you get assaulted in the mail, these drafted by risk-minimizing lawyers. Of course, it’s unlikely you bother to read these. In part of the unread text, the companies give themselves the right to unilaterally change the deal even after it is signed. Other small print insures that consumers cannot sue them over differences. All grievances have to be arbitrated in a process the companies created and control.Even the Federal Reserve Bank condemns some of these practices, noting: “Although profitability for the large credit card banks has risen and fallen over the years, credit card earnings have been consistently higher than returns on all commercial bank activities.”The Failure TrifectaTrack the subprime and credit card mess back, and you will find its origins in free market policies since Reagan that deregulated banking and much of the oversight that managed for ye
ars to keep the greed-meisters on Wall Street in check. The failure of media-lionized Alan Greenspan’s Federal Reserve Bank to pay attention to predatory lenders and sub-prime schemers allowed them to prosper.Add to these failures a complicit Congress, with Democrats and Republicans alike dependent on donations from the three leaders of the FIRE economy. To assure their freedom to run their businesses their own damn way, the banks in the 1990s persuaded Congress to deregulate the practices of financial service companies. Pro-business Court decisions have allowed them to base their operations in low-tax states like South Dakota and Delaware and to end consumer protections against usury.This decade, Bush’s tax cuts and his bankruptcy “reform” bill strengthening the power of credit card companies were passed with bipartisan support, including that of Senator Dianne Feinstein. Add major media amnesia to this list and you get a trifecta of failure. The New York Times admitted that advocates warned them that a rise in predatory lending was destroying poor communities in 2001, but they sat on the story for nearly six years.Neither the politicians nor the media told us that every major brand name banking firm and investment house had its fingers in the juicy pie of pedaling mortgage-backed securities worldwide without disclosing that many of these mortgages were deliberately offloaded on people whom they knew could not afford to pay them. As with the credit card industry, these mortgage borrowers were cleverly given “teaser rates” that would soon reset upwards. The banks then resold the mortgages as “asset-backed paper” even though the assets’ value was so questionable.Meanwhile, media outlets took in hundreds of millions in ad revenues from deceptive lenders and credit card banks encouraging Americans to shop and charge till we drop. The Super Bowl broadcast ran all those cool but misleading ads by credit card companies and mortgage hustlers. It was, um, “priceless.”Notes scholar Lionel Tiger: “Those who have been operating the managerial levers of the financial system have failed embarrassingly and massively to comprehend the processes for which they are responsible. They have loaned money avidly and recklessly to people who couldn’t pay it back.“They fudged data to get loans approved and recalculated. Then they sausaged fragile figments of money reality into new ‘products’ which could be sold around the world to investors eager to enjoy the surprising returns which often accompany theft, managerial incompetence and fraud. When it comes to responsibility for all this, there appears to be no one here but us spring chickens.”Danny Schechter blogs for Mediachannel.org. His film In Debt We Trust spawned the action website StopTheSqueeze.org. He’s written a new book on the crisis called PLUNDER: An Investigation Into Our Economic Calamity. Dissector@mediachannel.org.Published: 06/25/2008
3:22[MBI] Fitch withdraws all ratings of MBIA and Ambac And stocks don’t even flinch!
3:17 Bank of America sees 7,500 job cuts after Countrywide close
Oil above $140 after-hours and stocks don’t flinch! PPT will kick into action in 4 miutes…watch their magic…thievery in plain sight….
HERE THEY COME!!!
The VIX is really a mystery now. At these market levels in March and Jan, it was approaching 30 and spiked to over 35 at each bottom. Today it is still below 24! I said earlier that this was a sign of capitulation, but I don’t really think that is right. It feels more like apathy or resignation than complacency. Who can be complacent with the markets down over 2.5% in one day, oil is at a new high, the USD is falling again, the Fed is in handcuffs, housing still falling, and so on. No, it can’t be complacency, it must be that people just aren’t interested in the market anymore. This is what happened in 1974 when the market was trading at a PE of 7, but no one wanted to buy! Another aspect of this apathy is that people have resigned themselves to the fact that the stock market is going to enter bear market territory and no longer fear it.Having said that, I still expect that if real capitulation comes, the fear level will still rise to 35 to 40 on the VIX. But it appear that it will take much lower stock averages to generate that fear.Bottom line: We ain’t seen nothin’ yet! We are either headed for panic capitulation sometime this year. Or we are going to see apathy and disinterest in stocks to the extent that the averages grind lower for months until we see a market PE below 10.
Oops, I got my “c” words mixed up in my previous post: “I said earlier that this was a sign of capitulation” should read “I said earlier that this was a sign of complacency”.Sorry.
What a nice jump in gold; look at the miner’s AEM–WOW! Even LIHR. Guess even IMF can’t dampen all of gold bug enthusiasm on bloody red market days. Come next tuesday? Probably another dumper. Can’t have replay of GD, but it will find another way out. All the king’s horses and all the king’s men…
the VIX from looking at past corrections and tends to head fake lower and below short term trend immediately before lift off. we obviously do not have lift off yet, but we do have the somewhat typical head fake to below recent trend in place from yesterday…
come on bulls, play the bounce ! go for it ! just like the other 50,000 times since 1987 ! buy the dip !
A lot of folks who post to this board have suggested, particularly when the markets move upwards for no apparent reason, that the Plunge Protection Team (PPT) intervenes in the markets, presumably by purchasing huge quantities of shares in various companies to buoy the markets. Just for fun, why doesn’t someone file a request under the Freedom of Information Act requesting copies of any and all documents reflecting any such purchases by the PPT, or advise, suggestions, discussions, or instructions by the PPT to others to purchase shares in the open market for every day of the calendar year 2008 to the date of the request?SWK
Capone on 2008-06-26 14:38:58“the VIX from looking at past corrections and tends to head fake lower and below short term trend immediately before lift off. we obviously do not have lift off yet,…”If we have capitulation, I think it will spike over 40 this time.
Bank of America to Cut 7,500 Jobs on Countrywide Deal (Update1)By Erik HolmJune 26 (Bloomberg) — Bank of America Corp., the second- largest U.S. bank, will cut about 7,500 jobs after buying Countrywide Financial Corp.The purchase is expected to be completed July 1, Charlotte, North Carolina-based Bank of America said today in a statement. The reduction over the next two years — equal to about 2.9 percent of the combined staff — will occur where jobs overlap “throughout the country,” the bank said. Notices will be sent during the third quarter.Countrywide’s shareholders yesterday approved Bank of America’s takeover, originally valued at about $4 billion, clearing the way for a bailout of the mortgage lender that became a symbol of the subprime boom and bust. Countrywide, the biggest U.S. mortgage company, employed about 50,000 people at the end of the first quarter, according to Bloomberg data, while Bank of America’s staff was 209,000.Countrywide is based in Calabasas, California. The world’s biggest financial firms have already announced more than 82,000 job cuts after posting $400 billion in writedowns and credit losses tied to the U.S. housing slump.To contact the reporter on this story: Erik Holm in New York at firstname.lastname@example.org.
absolutely 40 to 45 or higher. who knows what the VIX would have logged in 1987 ? POT holders really really love that stock to still hold it at these heights under these conditions…
" will cut about 7,500 jobs after buying Countrywide Financial Corp."I hope they take their bloody time sorting it out. I’m a renter in a house that’s sliding into foreclosure. The landlord says she took out a "bad Countrywide Loan" in 2005.
Maybe Bernanke can do an emergency rate hike tomorrow…
"Maybe Bernanke can do an emergency rate hike tomorrow… "And undo all the great work he’s done?!
kilgores on 2008-06-26 14:56:47“… Just for fun, why doesn’t someone file a request under the Freedom of Information Act requesting copies of any and all documents reflecting any such purchases by the PPT, or advise, suggestions, discussions, or instructions by the PPT to others to purchase shares in the open market for every day of the calendar year 2008 to the date of the request?”It’s a good idea. Go for it. But perhaps the actions of the PPT are beyond the purview of the FOIA.Actually I don’t much believe in the PPT. I do think some mechanism is in place to intervene in market meltdowns, but I don’t think it activates until the market falls more than at least 5% in a day. But that’s just my guess.Also,Averages close on the LOD: another bloody Friday tomorrow or will it bounce? A bounce seems likely after a day like today, but, in my experience, Fridays tend to be continuation of selloffs rather than turnaround days. And if it sells off hard again tomorrow, then Monday will be a BIG worry over the weekend!
Well that was fun. Can we do it again. Look out Shanghai & Hang Seng. Except China will probably not allow any deep distresses. Friday looks like another bloodbath, except expect the unexpected.
After hours: PALM SHARES DOWN NEARLY 8% AS REVENUE TUMBLES
KJF, Palm shares are down today. So it’s going to be interesting tomorrow.
4:28 Red Hat shares retreat following downgrade
4:25[TIBX] Tibco Software shares down 2% at $7.22 in evening trades
4:24 Intuit to cut 575 jobs on reorganization, provides outlook
repost – hope this along with BA crack pot chart analysis was useful… ha ha ha"my short blood is all over this battlefield. I have shorted them through rapid fire reckless rate cuts, I have shorted them through ill-advised bail outs, I have shorted them in the hills and on the water. Through the annals of the markets throughout all of history, these imbalances have always corrected and the truth prevailed. So Shall the SHORTS !advance decline 2 to 1 52 week highs to lows 1 to 10 !it could not happen on the day of the Fed announcement, it has already started with this NKE, RIMM, ORCL trifecta of losers after hours. looking forward to BA being joined by the others tomorrow in the route of the century. BA down $4 plus 5 times in last 25 days. where are the 4 sigma event guys ? has BA hit this measure again and again and again and again and again ? do not pass go, do not collect $200, the GAME IS OVER LONGS !!!!!!!!!!!!!!Written by Capone on 2008-06-25 16:47:29"I can not imagine any responsible long only manager out there looking at this DOW close and doing anything other than selling. We should have at least one if not multiple massively down days from here ending easily below 10,000 (now a mere 1,500 points away) Based on how high the likes of the bulletproof defensive JNJs, MCDs and IBMs of the world are and how far they need to go, my crash target is clearly below 10,000. Financial leadership is in place – the financials are kicking, fighting and screaming at each other while leading us straight down.
A little bit of topic but I cannot no seek profit from all these bright bloggers.I have a friend investing in condos in Hong-Kong. The market is hot and he’s been right so far, plus a lot of action from the government to keep it going.Nonetheless I’m very worried. Anyone in the blog with some details of what is happening there and ideas of where it will end?Thanks to all and to the professor to let us voice also the little questionsMiss Italy
"I have a friend investing in condos in Hong-Kong. The market is hot and he’s been right so far, plus a lot of action from the government to keep it going."Use the internet, do some research, I think it may be a scam like the Costa Rica properties. Same thing for property in Mexico.
"Financial leadership is in place – the financials are kicking, fighting and screaming at each other while leading us straight down."I think that by the end of the day only a couple of towers will stand still: Goldman and JPM.I believe the first that is now well positioned for the crash scenario is betraying its mates secrets and the second want to buy any distressed bank it can have its hands on.
An Italian friend here in Venezuela I am doing business with uses Wachovia Securities LLC as his broker. I told him I don’t follow Wachovia closely but that, given their role in the subprime mess, I would not hold my money/securities there. Could anyone following Wachovia closer venture an opinion?
Black MondayThe cataclysm struck in full fury as soon as trading began. In the first thirty minutes of business, immense blocks of stocks–50,000 shares at a time of Chrysler, GE, International Telephone and Telegraph, and Standard Oil–were dumped on the market by wealthy individuals and institutions at prices that shocked onlookers. AT&T which had reached a peak of 310 dollars per share in the heady summer days of the bull market, smashed all the way down to 204 in a sickening slide; U.S. Steel skated past 190…180…170…and kept going down; RCA, a former favorite at 110, went begging at 26. Some brokers lost their nerve and sold out their customers needlessly, lending further momentum to the downward spiral. Other lost their minds; spectators watched in mute horror as one trader ran screaming like a lunatic from the floor of the exchange. Those who remained among the shouting, frantic mob took on the furtive, frightened look of hunted things.
ES Trader is a crashista!
BTW, love your sad refrain: "This species has amused itself to death"
@ESTraderI remember that post, a TIME archive if I recall correctly. Certainly the stage is set. But the worldly wise trader that you are, I don’t believe you believe in a full scale meltdown plunge. You might go to 10K on Dow but then go long for the little bear market rally. Didn’t the GD Bear see at least 5 nice rally rebounds?
Sorry, Klingaman and YOU on 1-07. My bad.
@ESTraderI remember that post, a TIME archive if I recall correctly. Written by Kerosene Snifter on 2008-06-26 17:16:35sorry sorryThat’s1929: The Year of the Great Crash~William Klingaman
In the three years from October 1929 the Dow Jones Industrial Average fell about 90 per cent, but it enjoyed five rallies of between 16 and 48 per cent. — John Authershttp://www.ft.com/cms/s/0/58581c58-d036-11dc-9309-0000779fd2ac.html
The usually equilibrated CR have just posted a rather alarmist article citing Fleckenstein:"Credit Markets: "It’s never been this bad."From Bill Fleckenstein’s Daily Rap today: It’s About to Blow! (Here is Fleck’s Site for the Daily Rap)…"http://calculatedrisk.blogspot.com/2008/06/credit-markets-its-never-been-this-bad.html
German Sovereign Bonds 1929. Asset backed securities — securitized mortgages 2008. Eighty years. It was a good time wasn’t it? Hey jeeves bring us another sherry and summore cucumber samwiches! That pop-pop-pop isn’t 4th of July fireworks, its investment bankers and mortgage originators cleaning their guns…just a little near their medulla oblongata. Reap and sow, harvest and plant, hunker in for a lovely winter.
How much did oil cost in 1929?
Here is a headline Gloomy would appreciate.U.S. Stocks Tumble, Sending Dow to Worst June Since Depression By Michael PattersonJune 26 (Bloomberg) — U.S. stocks tumbled, sending the Dow Jones Industrial Average to its worst June since the Great Depression, as record oil prices, credit-market writedowns and a slowing economy threatened to extend a yearlong profit slump. General Motors Corp., the largest U.S. automaker, plunged the most in three years as Goldman Sachs Group Inc. advised selling the stock and crude rose by $5 a barrel. Citigroup Inc. led the KBW Bank Index to an almost 10-year low as Goldman said the lender may report an $8.9 billion second-quarter charge and cut its dividend. Research In Motion Ltd., maker of the BlackBerry, posted its biggest drop since 2001 on concern competition with Apple Inc.’s iPhone is reducing earnings. The Standard & Poor’s 500 Index plunged 38.82, or 2.9 percent, to 1,283.15, its biggest drop in three weeks. The Dow decreased 358.41, or 3 percent, to 11,453.42, its lowest since September 2006. The Nasdaq Composite Index sank 79.89, or 3.3 percent, to 2,321.37, its worst loss since January. Almost nine stocks fell for each that rose on the New York Stock Exchange. “Most investors are going to sit on the sidelines until they’re more certain the sharks have left the waters and it’s safe to go back in,” said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which oversees about $30 billion. “The write-offs have been far worse than anyone would have imagined.” Nike Earnings …Earnings at companies in the S&P 500 slid 18 percent on average in the first quarter, the third straight retreat, according to data compiled by Bloomberg. Analysts project profits will drop 8.9 percent this quarter, according to a Bloomberg survey last week. The Dow has slumped 9.4 percent this month, its worst June since an 18 percent tumble in 1930 during the Great Depression. All 30 companies have posted losses in the month as oil surged, the unemployment rate jumped to the highest since 2004 and concern grew that global financial firms will add to $400 billion of subprime-related writedowns. …`Escalating Headwinds’ “We expect escalating headwinds from volume/mix pressures driven by gas prices, falling confidence and tightening credit,” Goldman wrote in a research note. GM and Chrysler LLC may face a cash crunch next year as U.S. sales decline on a slowing economy and rising gasoline prices that push buyers toward more fuel-efficient vehicles, Fitch Ratings said yesterday. Chrysler spokesman Dave Elshoff said in an interview today that the company has no plans to file for bankruptcy, countering speculation in financial markets. …The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed for the first time this week, gaining 13 percent to 23.93. The index, which measures the cost of using options as insurance against declines in the S&P 500, reached the highest level since June 11. The VIX is still 26 percent below its five-year closing high in March. Economy Watch …Initial jobless claims totaled 384,000 in the week ended June 21, unchanged from the previous week’s tally that was higher than previously estimated, the Labor Department said. The total number of people collecting benefits rose by 82,000 to 3.139 million in the week ended June 14, the highest since February 2004. …Treasuries rose on speculation credit-market losses will prevent the Fed from increasing borrowing costs later this year. The dollar declined to the weakest level against the euro in more than two weeks. …http://www.bloomberg.com/apps/news?pid=20601087&sid=aBzD.V1iluuA&refer=homeAlso,BTW, the maker of many great and beautiful cars, especially the muscle cars of the ‘60s and ‘70s, is toast, IMO. It will be sad to see it go. And Ford and GM may need to merge to save what is left of the US auto industry. Forty years ago very few could have imagined this day would ever come.
"the maker of many great and beautiful cars, especially the muscle cars of the ‘60s and ‘70s,"We have truly entered the age of the ugly car. Futuristic science fiction movie prop designers couldn’t do any worse.
Alessandro"This species has amused itself to death"~Roger WatersYes, I was a Crashista today. If the 8e is underneath the 36e, then I’m a Crashista!If the 8e is above the 36e, then I’m a Cramerista!Insanity laughs Under Pressure
Here comes the Fed to save the day (stock market)!Private Equity May See Rule On Bank Ties Eased by FedBy DAVID ENRICH, ROBIN SIDEL and DAMIAN PALETTAJune 27, 2008excerptThe Federal Reserve may soon make it easier for private-equity firms and others to invest in the nation’s ailing banks, according to people familiar with the matter.With bank stocks crumbling and the second quarter drawing to a close Monday, the changes could offer a lifeline to cash-strapped lenders desperate to secure capital."This would be a bit of a sea change for the Fed," said Gregory Lyons, head of the financial-services practice at law firm Goodwin Procter LLP. "A number of banks would love to access the private-equity pool. It’s a clean slug of money."The move comes as regulators grow increasingly worried about the ability of many banks to replenish capital amid the worst banking crisis in decades. Small and regional lenders are expected to have a tougher time lining up new investors, particularly since some recent capital infusions have stuck banks’ new shareholders with big losses.…Fed officials recently have met with big buyout firms — including J.C. Flowers & Co., Carlyle Group, Kohlberg Kravis Roberts & Co. and Warburg Pincus — and banking lawyers to discuss the obstacles, according to people familiar with the matter.Under federal law, to own more than 24.9% of a bank, an entity must register as a bank holding company, which is subject to heavy regulation and can be forced to serve as a "source of strength" for the bank. Ownership of more than 9.9% of a bank also subjects the entity to regulatory scrutiny to ensure that it isn’t controlling — or even influencing — the bank’s operations.The Fed can’t change those laws, but it has wiggle room in how it interprets them.For example, the Fed recently has been reluctant to approve deals involving private-equity firms’ owning more than 9.9% of a bank unless the buyers agree to limit their voting power and not have more than one seat on the bank’s board. That tends to make bank deals much less attractive to private-equity firms, which crave large positions and control over their portfolio companies but don’t want to fall under federal regulation.…Private-equity infusions are looking increasingly important because stronger banks are still averse to snapping up peers with damaged balanced sheets. Accounting rules also have inflated the price tags on many such deals….Some banks need cash quickly. When lenders report second-quarter earnings next month, many are expected to show steep declines in capital levels.…http://online.wsj.com/article/SB121450979069408179.html?mod=googlenews_wsjThey are selling more of our soul to the devil. In the bargain we get some relief now and hell later.
Hail ES Caesar Hail ES Caesar Hail ES Caesar"what we do in life, like shorting the market with caligula’s state of mind, echoes an eternity""Bulls should know when they’re conquered". "Would you, Quintus? Would I?"MAXIMUS PROFITIAN: At my signal, unleash Black Monday hell.Strength and honour.
KJ Foehr on 2008-06-26 17:59:21BTW, the maker of many great and beautiful cars, especially the muscle cars of the ‘60s and ‘70s, is toast, IMO. It will be sad to see it go. And Ford and GM may need to merge to save what is left of the US auto industry. Forty years ago very few could have imagined this day would ever come.You can thank George W. Bush for this. Forty years ago no one could have imagined that character in charge of the U.S. future.
@ KJ Foehr 15:11:46I’m pretty skeptical of hypotheses of outright market manipulation by the federal government. Sounds like a great plot for a novel, though…SWK
@ Kerosene Snifter 17:24:05>In the three years from October 1929 the Dow Jones Industrial Average fell about 90 per cent, but it enjoyed five rallies of between 16 and 48 per cent. — John Authers>http://www.ft.com/cms/s/0/58581c58-d036-11dc-9309-0000779fd2ac.htmlExcellent point. Thanks for the reference.This is the chart I keep coming back to:http://mutualfunds.about.com/library/graphics/blsp5001929_chart.htmSWK
could this be part of the reason for yesterday sell off+rise in price of oilwe are doomed..http://www.reuters.com/article/marketsNews/idUSN2631371920080626?rpc=401&Mexico Cantarell oil field output falls again in MayMEXICO CITY, June 26 (Reuters) – Crude output from Mexico’s struggling Cantarell oil field fell in May for the eighth month in a row to 1.038 million barrels per day, its lowest level in more than 12 years, Energy Ministry data showed on Thursday.The fading jewel of Mexico’s oil industry, Cantarell has declined rapidly since 2004 and is pulling down overall oil production in the world’s No. 6 oil-producing nation, threatening Mexico’s status as a top supplier to the United States.The field’s waning yields are putting pressure on the government to overcome opposition in Congress to its proposal to overhaul the oil industry by lowering barriers to private investment as a way to speed up new drilling projects.Cantarell for years produced 60 percent of Mexico’s crude oil, and production peaked at around 2 million barrels per day in 2004.But its May output fell again, from 1.074 million bpd in April, to stand at its lowest level since January 1996, according to Energy Ministry data.Cantarell, which state oil monopoly Pemex sees declining at around 15 percent annually, accounted for just 37 percent of Mexico’s May oil production, down from 39 percent in April.Pemex is battling to increase output at less productive fields, such as the offshore Ku Maloob Zaap complex and the technically tricky onshore Chicontepec field.Pemex also wants to reach potentially huge deep-sea oil deposits in the Gulf of Mexico, but says that without an easing of constitutional laws against taking on foreign partners, it could be 20 years before it is producing deepwater oil.Energy Minister Georgina Kessel says that without reform, Mexico’s oil output could shrink to half its size by 2021. (Reporting by Catherine Bremer; Editing by Walter Bagley)
@ESTrader, 8e above the 36e ? you were a crashista for real ? are you still now ?@all, if such a rare event were to occur it would be worthwhile to peak at the charts of 29 and 87 to establish levels and plan. in particular, based on highly advanced review of yahoo finance 29 chart there was a flush out 10%! day which rallied completely back, a pause for a couple of days and then equity armageddon… such a move here would certainly shake many shorts out and lure the bottom dweller buyers in before the FINAL equity nuclear winter sweeps the markets. if we are tracking 87, we go straight down from here… FYI
We are few percentage basis points from a bear market for the Dow. Should we expect a bloody battle tomorrow to stave off the bear specter?
@ Capone 20:27:138e? 36e? Could you explain what you all are talking about for the ignorati here, such as me? SWK
@ AfA 20:46:02Futures currently green for Dow, S&P & Nasdaq. May be one of those sorts of flat days we’ve seen recently. This whole downturn strikes me as a "death by a thousand cuts" sort of thing…slow, erratic, dull pain stretched out over months and perhaps years. But then, this is not really my area of expertise…SWK
Capone on 2008-06-26 20:27:13“… if such a rare event were to occur it would be worthwhile to peak at the charts of 29 and 87 to establish levels and plan. in particular, based on highly advanced review of yahoo finance 29 chart there was a flush out 10%! day which rallied completely back, a pause for a couple of days and then equity armageddon…”I still don’t expect a crash. Here is my take on the charts.In ’29 the market peaked in late August and crashed before the end of October – less than 8 weeks after the peak! They were still in denial; few thought the market would fall significantly and they certainly weren’t expecting a depression. The 10% drop you mention was probably seen as a buying opportunity, similar to our Jan and March lows. Therefore, IMO, there was much more potential for surprise, even shock, when the market started to drop so soon in October, thus the fear and panic selling was great. In ’87 the market also peaked in August and crashed in October, so, just like ’29, most people were not expecting a recession or bear market and certainly not a crash.By comparison, in our current situation, we peaked over 8 months ago. We have passed the denial stage, nearly everyone does expect the market to fall now, and the possibility of depression has been discussed in mainstream media many times in the last few months, so the potential for panic selling is much lower, IMO.I expect a long grind lower that will probably bottom in October, as usual. Whether that will be the cyclical bottom or an interim bottom, I don’t know.But that’s just my guess, and crash or water torture bear market, I’m ready either way.I do agree with you that now is the time to plan what to do when capitulation comes, whether it is a small one or a crash, those short gains can disappear fast like they did in January and March.Good luck to all.
stop invest in USA. it has no future.http://news.yahoo.com/s/nm/20080627/pl_nm/iraq_usa_funding_dc_1;_ylt=AnmPO.SsRzta6gXoTOwx3yYE1vAIThe U.S. Senate on Thursday approved $161.8 billion in new funds to continue fighting the wars in Iraq and Afghanistan for the next year, without timetables for withdrawing combat troops.
@KJ, i agree way too many people talking about it – as a contrarian who would take a basketball team with 4 players favored over a team of 10 players, who bought MO when the Engle verdict worth more than the company years ago, who attempted to buy MSO when the namesake of the co was found guilty (too early rally started when she actually went to jail ha ha ) however, i think the element of believing in can’t happen is in place now as it was in the past with the PPT, Bernanke and co. and all their pretty saves so far… i mean there is a Plunge Protection Team and everybody knows it – MSM included… the break out to new lows particularly in the DOW is technically super bearish and mirrors the days of the GREAT CRASHES IMHO. in addition, there has been 21 years of conditioning market participants that we will bounce back… when 21 years of conditioning reverses, there will be panic. if i had to choose, they will take the 29 route with a major tank and major come back in same day and then THE END within days. good luck to all
I think Mr. Potato Head would have better luck trading and going long in this market,..what a blood bath this pass week or so. Hindenburg Omen appears to be coming true after all.
Don’t look now,.. here come the USD index to the rescue after the arbitrage today.. If this isn’t proof of PPT, I don’t know what is. It closed around 72.48 today at market close. This is exactly how it starts,..in the evening trading with Asia, creeps up,..to upset gold every time, then miraciously, around 5-6am or 8-9am EST following day, it pops straight up..such obvious jawboning or manipulation going on here.US Dollar Index Futures Spot Pr(NYBOT: DX-Y.NYB)Index Value: 72.61 Trade Time: 11:09PM ET Change: 0.44 (0.61%) Prev Close: 72.933 Open: 72.895 Day’s Range: 72.45 – 73.08 52wk Range: N/A
Hang Seng giving up just a sterile passive little jog down and rising. No indicator of a real dumper coming. Shanghai’s shanking though, but has been all year.
OctavioHaven’t dug into all the details on Wachovia lately, but based on several recent comments you need to monitor these folks quite closely. Tell your friend to be careful – it’s smarter to keep major assets out of reach of the US banking system.PeteCA
guest i dont want to sound rudebut who give a s*** about Hang SengIt all come back to USDJIAthats the one mkt that mattersothers are just adding to the momentum
Miss ItalyI don’t follow real estate closely, but there’s certainly a general feeling that property prices in China have become overinflated. So if properties plunge in mainland China, can Hong Kong really remain immune to this correction? PeteCA
Capone on 2008-06-26 21:37:07“ i agree way too many people talking about it … when 21 years of conditioning reverses, there will be panic. if i had to choose, they will take the 29 route with a major tank and major come back in same day and then THE END within days. good luck to all”Actually, after a little more thought, I think a crash may be possible even though the possibility of it is widely known. This is because it could become a self-fulfilling prophecy. In 1987 the market broke a couple days and ended very badly on the Friday before the crash. Then over the weekend the fear built and it was widely discussed in the MSM that Monday would be a bloodbath, and voila, it happened! But there was no depression that followed, there was not even a recession: the economic fundamentals really were sound. It was “technical”, and, IMO, it was to a large extent a self-fulfilling prophecy that people brought on themselves through mass hysteria without any economic basis for the fear.So even though it seems too widely anticipated to happen now, it could still happen for that same reason: everyone comes to believe it will! And we have the lousy fundamentals to justify it!
CNN reporting Zimbabwe Crisis,.. Really who gives a Sh–.. Yet another media distraction with their political issues,. we all know what happenned to thier currency,.. just like ours is going to end some day. God knows, we have plenty of issues of our own here right int he good ol’ USA.
Tension over Iran threatens BahrainPublished Date: June 26, 2008LONDON: International tension over Iran poses a serious threat to Bahrain’s security and the Gulf kingdom wants its allies to give it early warning of any planned escalation, its public security chief said yesterday. Major General Abdul Latif bin Rashid Al Zayani was apparently referring to the possibility of US military action against Tehran’s nuclear program. "The level of tension currently concerning Iran is a further significant threat," he said in a speech in London to the Royal United Services Institute, a security think-tank.Should the situation deteriorate, there will be a major impact in Bahrain, where a proportion of our Shiite population follow Iran’s religious leadership blindly and apparently without question." Zayani added: "In this connection and more generally, it is important to say that the actions of our allies often influence threat levels in Bahrain.As partners we ask, rather in hope than in expectation, that we are consulted or at least given early warning of major escalation or other actions" that could have an internal impact on the kingdom, he said. His comments reflected both Gulf Arab nervousness over Iran and concern at the risk of being caught off-guard by military action, an option which Washington has refused to rule out.Bahrain’s population of just over 1 million is majority Shiite, like Iran, but the US-allied kingdom is ruled by Sunni Muslims. Concerned over religious tensions, authorities this week blocked three websites they said were implicated in fuelling sectarian strife, and the prime minister set up a committee to monitor sectarianism and comments disparaging the royal family in the media, religious sermons and on the web. Zayani later told Reuters the right way to handle the Iranian crisis was "to have a diplomatic solution". He added: "In all events, whenever an action is taken, we would like to be consulted" in order to "take care of the safety of our population".He deflected a question about the security implications of sectarian tension, saying: "Bahrain has always been one population united, throughout history." In his speech, he said authorities in Saudi Arabia- separated only by a causeway from Bahrain-had sharply reduced militant attacks but "there is the evident risk of them spilling over into Bahrain as extremists or terrorists seek out what they might perceive to be a softer target".The US Fifth Fleet based in Bahrain was also a "high-profile target", he said. Among other measures, the kingdom is reviewing protection of critical infrastructure and improving coastal radar and aerial tracking of ships, said Zayani, who is responsible for the police, coastguard, fire service and civil defense. – Reuters
F—ing Talking heads are on absolute overdrive today and this evening,.anything to get your mind off the fact hat the Dow tanked 3% today, and you are that much poorer than yesterday. I smell fear in the air, just like someone posted on this blog about I qoute:". Other lost their minds; spectators watched in mute horror as one trader ran screaming like a lunatic from the floor of the exchange. Those who remained among the shouting, frantic mob took on the furtive, frightened look of hunted things."Can you feel it Mr. Andersen?,..
Thats is the sound of inevitablewe’ll see if BB fortress can withstand the current siege
Buy Financials! Catch a falling knife!By Ben Stooge, Corporate Press WeaselYears ago, I received a letter that asked a stupid question. The idiot writer asked, "I read you and you’re always telling me to buy stocks just before they go down or go down some more, and to not buy commodities before they go up some more. My portfolio is a wreck from following your advice. Why, oh why, do I listen to you?”I pinned the letter to the wall over my desk where it taunts me. This morning I finally tore it down. Enough of you! Listen up, dummy.If you read Business Week and The Wall Street Journal you’re going to get all confused. Those writers never agree with each other. It’s as if the editors give them freedom to express their own opinions. They are usually flat out wrong. Why read these writers when they are inconsistent and incorrect most of the time? Read me instead. I’m very consistent. I will always tell you to buy stocks. Buy at the top. Buy at the start of a bear market. Buy at the middle and buy at the bottom. In the long run stocks go up! So what if you may not live long enough to make up for your losses. That’s not my problem. My problem is that I’m 63 and need every dollar I can earn shilling for Wall Street today.Take financials, for example. Famous big name financial writers are down on financials.Ridiculous.They say the investment banks are early innings of attempts to de-leverage their portfolios of garbage mortgage securities. The collateral for the loans that those securities financed will continue to crater, they claim. For years Wall Street stocks and shares of financial companies will be a bad buy.Nonsense.That ill-educated youthful Wall Street Journal writer doesn’t know the first thing about how to evaluate a sector. Only a fool expects crashing stocks to never rise again.Look, home prices can’t decline forever. There is a natural limit to how many mortgages can default, somewhere between some of them and all of them. Debt can’t de-leverage forever. Sooner or later the mortgage securities owned by these banks will stop falling and so will financials. Like the proverbial falling knife, they will stop – thunk! – as they stick into the butcher block below. Should you wait for that? Not on your life. Stick your hand out now and catch a few.Won’t that hurt, you ask? Of course it will. Your brokerage account will bleed and bleed and bleed. But your pain will fade away after the mortgage market stops collapsing in ten or twenty years. Then your financial stocks will go through the roof, or maybe back to where they were when you bought them.The time to buy any stock or sector is after it’s been hammered down. The time to buy financials is when they are being slapped down by Wall Street Journal and Business Week writers and are trading at multi-year lows but before they reach the levels they hit in the 1970s.You can bet that will happen again. My correspondent doesn’t understand that the economic past predicts the economic future. It’s all about cycles. The happen again and again. Buy things when everyone hates them, but never sell them. Journalists lie about this. They tell you to sell stocks that are falling and have a long way to go. Patience is the key and the willingness to understand that investing is about your money in Wall Street’s pocket.Editor’s Note: Ben Stooge parodies a corporate media business commentator. He does not own any of the stocks or other garbage he shills. He doesn’t know what he’s talking about but that doesn’t keep him from expressing his opinions as if he did. Just like the guy he parodies, you should never take him seriously.
Oh yes,..Ron Paul does have it right,..http://www.youtube.com/watch?v=7354M1QmGYQ
ALL THE LEMMINGS OF WALL STREET GET READY FOR MASS SUICIDE.GO BABY GO GO
Oh yes,..Ron Paul does have it right,..OH NO,.. RON PAUL HAVE IT WRONG,…
@ Octavio Richetta on 2008-06-26 16:34:42“An Italian friend here in Venezuela I am doing business with uses Wachovia Securities LLC as his broker. I told him I don’t follow Wachovia closely but that, given their role in the subprime mess, I would not hold my money/securities there. Could anyone following Wachovia closer venture an opinion?”There is no way to know which bank will fail, but it does seem very likely at least one big one will, so we all should be examining the safety of the banks / brokers where we have our money.I don’t follow it closely, but I periodically hear / read bit and pieces about how WB is one of the banks in trouble. And that is worrisome to me, but who knows what really lurks inside these banks? Just like BSC, we didn’t know how bad it was until a couple days before the end; however it too was rumored to be among the most troubled I-banks since the beginning of the subprime crisis. As for the brokerage, all I know is Wachovia took over A. G. Edwards which was a successful and, apparently, a conservatively managed brokerage firm in St. Louis, Mo. But I have no idea what has happened since the WB takeover. As you know, brokerage accounts are usually covered by insurance, but the value of that in this financial situation is questionable. Personally, knowing that so many unknowns exist and in this uncertain economy, I would not have my money in Wachovia Securities. IMO, preservation of capital is the primary objective now, so risks must be minimized wherever possible. Why take a chance? For safety, I would recommend Vanguard or maybe Fidelity.
it has been a while… long time visitors here have seen this many times…http://www.lope.ca/markets/1987crash/quotes.htmlInvestors had expectations before the 1987 crash that something like a 1929 crash was a possibility, and comparisons with 1929 were an integral part of the phenomenon. It would be wrong to think that the crash could be understood without reference to the expectations engendered by this historical comparison. In a sense many people were playing out an event again that they knew well." -Economist Robert Shiller"Technically, the crash of 1987 bears an uncanny resemblance to the crash of 1929. The shape and extent of the decline and even the day-to-day movements of stock prices track very closely."-George Soros in The Alchemy of Finance The borrowing has to stop. The market slide was a shot right between the eyes that had better wake us all up to simple fact that we can’t keep romping forever on borrowed money." -Lee Iacocca, Chrysler Corp Chairman, October 20, 1987"The market is sending an unequivocal message to the President and the Congress to stop the political games and agree on a Federal deficit-reduction plan." -Representatvie Dan Rostenkowski, Democrat, October 20, 1987
guys, oil just hit a new high!!! is the "smart money" moving into hard/soft commodities today??
@Guest aka ARS on 2008-06-26 12:00:58 wrote:In comparison the scale of construction activity and prices in middle east countries is mind boggling, Dubai alone would have more activity than half of India put together. Any thoughts where that will end.The GCC is the new revenue source of petro ‘taxes’ to fund the banks. And Dubai is the tax treasury center. So I think there is secular demand for Dubai real-estate. Unless of course war breaks out. Then, all bets are off and Dubai RE could also end up in the dump.———————————————@WKJ Foehr on 2008-06-26 14:29:26 wrote:Bottom line: We ain’t seen nothin’ yet! We are either headed for panic capitulation sometime this year. Or we are going to see apathy and disinterest in stocks to the extent that the averages grind lower for months until we see a market PE below 10.I think in lemmingology , apathy and disinterest always follows capitulation. I am fine as long as it’s orderly i.e. at defined rate of a few hundred lemmings jumping off the cliff rather than all at once. Thats what Ben probably wants too. ———————————————@Alessandro on 2008-06-26 17:32:30"Credit Markets: "It’s never been this bad."Uh oh. Looks like we need more printing. I did ask for an RTC II a while back. See http://rs.rgemonitor.com/blog/roubini/250488/ @2008-03-20 01:59:33While trading, please try not to cut off your nose!———————————————@Prof. Roubini,With deepest due respect and in the best traditions of American values, I think you should allow free discussions on politics since I think politics drives economics. Otherwise, we might get into an argument on whether the sun revolves around the earth or the earth revolves around the sun. For example, A pertinent politico-economical question could be: Will a war on Iran cause oil to go to $200 or will it be more palatable to make war on Iran once oil has reached $200? See the earth and the sun problem?Please allow me to be the first to thank you for your generosity, again, in the best of American traditions.Best,Print First Ask Questions Later.
professor Roubini, why can’t you get Stephen Roach on here?
Octavio;For whatever it’s worth – I closed out my accounts at AG Edwards after they were bought by Wachovia. In fact, I closed them out the day Wachovia posted a $400 million write down. Yankee;So sorry to not get back to you before now – vacation and poor timing – email me @ email@example.com and I will update you on what I can about solar. PS – We got our 5 tons of pellets delivered last night and they now sit in my garage. It was very reassuring to see the winters heat stacked up and know that I will likely only be burning 100-150 gallons of heating oil this year.Professor – Thank you for responding to the call for reeling in the religious propaganda.
KJF/Medic: Thanks for input on Wachovia. FED is in DS. It looks like we have hit the perfect storm. Execpt for some COW, I haven’t dare to touch commodities since I sold them in mid-march.Top StoriesOil Bubbles Past $142 to Record- ReutersOil leapt to a new record high above $142 a barrel on Friday, extending gains after surging nearly 4 percent in the previous session, as tumbling global stock markets helped to trigger a wider commodities rally.http://biz.yahoo.com/rb/080627/markets_oil.html
WASHINGTON (MarketWatch) – Pummeled by high gas prices, rising foreclosures and weak job growth, U.S. consumers’ mood turned even gloomier in June despite the stimulus checks they got from Uncle Sam, according to the University of Michigan and Reuters. The consumer sentiment index fell to 56.4 in June, the lowest since 1980 and the third-lowest reading in the 56-year history of the survey. The index had read 59.6 in May and 56.6 in the mid-June preliminary report.
ECRI weekly leading index pluges .9!
America is currently experiencing stagflation: stagnated (recessionary) economy with inflation
London Banker has new post. All about Rosy that charming and fickle female that leaves us hen-pecked, cuckolded, and ever unsatisfied. And LB has jumped the ship of fools in global markets and gone sailing…far from a madding crowd.
It seems unimaginable, but for the first time in recorded history the North Pole may be free of ice this summer, according to a published report Friday.If climate scientists’ predictions hold true, the "unique" prospect of sailing in open waters at the North Pole, before the region cools in September, may become a shocking reality."The issue is that, for the first time that I am aware of, the North Pole is covered with extensive first-year ice — ice that formed last autumn and winter. I’d say it’s even-odds whether the North Pole melts out," Dr. Mark Serreze, a senior research scientist at Snow and Ice Data Center in Boulder, Colo., told The Independent newspaper in London
LOK OUT BELOW!!!!!!
Credit Card Issuers Face Bigger Losses Than Expected >DFS AXP By Aparajita Saha-Bubna and Marshall Eckblad excerptNEW YORK (Dow Jones)–Investors sold on plastic may want to reduce their balances. Credit card issuers – ranging from standalone companies such as Discover Financial Services (DFS) and American Express Co. (AXP) to those at banks like Washington Mutual Inc. (WM) and Citigroup Inc. (C) – are likely to suffer worse losses in the coming quarters than initially expected. Hit by the double-whammy of a growing reliance on credit cards by cash-strapped borrowers and a worsening economic downturn, issuers’ earnings should be dented by deeper loss reserves and higher defaults. New credit card data from Fitch Ratings indicate that losses are hovering around or have exceeded five-year averages and issuers have increased their loss expectations or withdrawn guidance in the face of rising unemployment, record-high gas prices and a housing slump that has yet to bottom. "The deterioration in credit cards is accelerating faster than many had expected," said Christopher Wolfe, an analyst at Fitch and one of the authors of the report published Friday. "The message we are trying to deliver is that things are going to get worse before they get better. Thus far, credit card businesses have been profitable but that could change." Fitch analysts are expecting an increase in prime charge-off rates – or losses from defaults on card payments as a percentage of loans outstanding – to at least 7% by the end of the year from 6.4% in May. Oppenheimer analysts say that according to data from companies covered, borrowers paid back 19.8% of their balance on average in May, down from 20.7% a year earlier. Even as payments fall, credit card debt is rising amid greater joblessness and as declining property values prevent borrowers from using their homes as a piggy bank. The total amount of credit card debt outstanding in April was about $956.9 billion compared to $887.6 billion a year ago, according to Federal Reserve data. …"There’s no place to hide," said Brian Riley, research director at the Tower Group and an industry veteran. "I have never seen real estate, consumer loans and credit cards take a hit at the same time. Credit card companies are especially vulnerable because they are the last in line to receive payments from customers." June 27, 2008 10:39 ET What a surprise… not!
@North Pole ice meltingBush and Kudlow plan to drill for oil there in order to lower gas prices. aka a plan to meke more $$$$ for all my friends!
US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero". "We’re in a nasty environment," said Tim Bond, the bank’s chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth." Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility," said Mr Bond.
"They" are refusing to let the S&P500 take out the March lows!!! Look at the VIX-it is actually FALLING while the markets are off sharply!! THIS IS GONNA GET UGLY!
No imminent recovery for US economy – ECRIFri Jun 27, 2008 10:30am EDTexcerptNEW YORK, June 27 (Reuters) – A gauge of future U.S. economic growth and its annualized growth rate fell in the latest week, erasing hopes that a recovery in the economy is close at hand, a research group said on Friday.The Economic Cycle Research Institute, a New York-based forecasting group, said its Weekly Leading Index slipped to 131.7 in the week to June 20 from 132.6 in the previous period.…The index’s annualized growth rate edged down to negative 6.0 percent from minus 5.8 percent a week earlier."The Weekly Leading Index fell for the fifth time in six weeks, while its growth rate dipped to a five-week low," Achuthan said. …http://www.reuters.com/article/economicNews/idUSNAT00416520080627
27-June-2008NEW YORK, June 27 (Reuters) – A gauge of future U.S. economic growth and its annualized growth rate fell in the latest week, erasing hopes that a recovery in the economy is close at hand, a research group said on Friday.The Economic Cycle Research Institute, a New York-based forecasting group, said its Weekly Leading Index slipped to 131.7 in the week to June 20 from 132.6 in the previous period.The fall in the index was due to weaker readings in measures of stock prices, housing activity and money supply growth, said Lakshman Achuthan, managing director at ECRI, in an instant message interview.The index’s annualized growth rate edged down to negative 6.0 percent from minus 5.8 percent a week earlier."The Weekly Leading Index fell for the fifth time in six weeks, while its growth rate dipped to a five-week low," Achuthan said. "Despite hopes for an imminent recovery, the WLI remains in recession territory."
11:07 Anheuser-Busch to cut up to 15% of salaried jobs: reports
Imagine that you are heating up a pot full of ice cubes. While the cubes are melting, the melting process will keep absorbing the heat and the average temperature will increase at a slower rate. After the cubes have finished melting, the water will absorb the heat at a faster rate. Something similar will happen with our ecosystem once the polar ice is gone (assuming that the greenhouse effect is real and not some unusual fear mongering).
@Print First Ask Questions Later,Lets add S. Korea:"Rising fuel costs combined with a deteriorating outlook for exports prompted companies to reduce investment, while record household debt is sapping consumer buying power.The near-term outlook does not seem to be too positive with the government expecting exports, which constitute 40 per cent of GDP in what is Asia’s fourth-largest economy, to slow in coming months as the global economy cools.Domestic demand, which includes private and corporate spending, rose only 0.1 per cent IN Q1 – the slowest pace since the third quarter of 2004 – with growth in private consumption slowing to 0.6 per cent and corporate investment falling 0.1 per cent. Exports increased 12.8 per cent from a year earlier, down from a 17.7 rise the pevious quarter. Real gross domestic income, a measure of purchasing power, fell 2.2 percent from the previous quarter, when it rose 0.3 percent. That’s the biggest drop since the fourth quarter of 2000.Companies are beginning to scale back spending. Investment in new facilities fell 0.1 percent, after a 2.1 percent gain in the fourth quarter. Construction investment dropped 1 percent after a 1.2 percent increase.The value of South Korea’s shipments overseas fell 1.1 percent in the quarter from the previous period as prices for semiconductors declined."(South Korea Economy Watch)And, given the linkages, most likely also Vietnam, others. Slowly but surely a globally synchronized recession is coming about.
Hard landing will reveal to be an naive euphemism, as 75% of consuming based US-economy will crumble from consumer retraction. Manufacture base being on only 5%, it will make the 1930 Great Depression look like a walk in the park.Better name it a "crash landing".Or, a "flight 93" where the hijackers are the very pilots !!!
Ah ! As for the North Pole icecap meltdown, Folks, isn’t a coincidence that those mamoth seabed oil wells – guesstimated in a plus around 25% of present world reserves – will become available right at the same time of when "weather-manipulation weapons" have been acurately developed ?Through high-frequency massive waves pointed up to the sky in a chosen area, they can control the ionosphere density and open a gigantic hole over this chosen area, so that massive solar heat can breach and reach surface, and gradually melt miles of thick icecap.It’s H.A.A.R.P., Folks. You, just google it up…..
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