1st!

tres

Dr. Roubini:Please forgive this slightly off-topic reference back to a prior thread. Some foundational material got set out that I want to both emphasize and contribute to. ===========@LB:I was…I won’t say shocked, but very surprised and delighted with your post. I didn’t think you’d push it that far. In other forums, at other times, it would be very beneficial to advance that line of discussion. In times of turmoil, there are great opportunities to change things for the better, not just for the worse. Alessandro, I think you have put your finger on the enabling technology, and maybe add in the new encryption tools that have been the only upside of the so-called "war on terror". One more idea to put on the table: what we need is a public repository of credit information. Not one owned by TRW, or Equifax, but a public utility sort of like ICANN (internet domain name registrar of record). If you credit data was actually your property, and you could register and clear all your financial transactions (credit card companies already have them, right?) through this repository, why do you need a bank to make you a loan? Why not an investor, to whom you could grant the privilege of reviewing your credit, and the investor could believe what he/she sees?That would level the hell out of the credit origination market, and it would get the financial center intermediaries out of the allocation of capital business, which they’ve screwed up in a pretty spectacular way. Craigslist for loans grafted onto a credit transaction registry, with the registry possibly operated by and policed by the State. Very narrow mission: no misrepresentation of fin txns. Put in there what you want, but if it’s in there, it better be valid or you’re in the slammer.Transaction transmission security enforced also by the State – ICC or FBI. No role for the Fed, or by association, the big banks. They have abused our trust. The key, fundamental idea is LB’s: re-establish the direct relationship. Get the middle man out of the way.Yes, you will likely get in trouble for this, LB, and it’ll be all to your credit. Thanks.— For those that didn’t see the prior posts by LB and Alessandro, FreeTibet and others, I recommend you backtrack and read them. They are mid-way-down on Dr. Roubini’s last thread. They posit fundamental trends that will re-shape the credit origination process once the wreckage of the current one clears.backchannel remarks: outerbeltway@yahoo.com

Dr. Roubini:I’d still like to know what sort of favorable — if that term is appropriate — empirical evidence has lead you to conclude consistently that this recession will not last more than 18 months and become the U.S. equivalent of the Japanese "lost decade" or the Great Depression or, as you characterize it in this video, Armageddon. One thing that comes to mind is unemployment, which does not appear to be accelerating out of control as it did in the early 1930s, and is not projected to get too much worse (at least, not on the scale of the Great Depression, or arguably, even on the scale it reached during the 1970s and 1980s, despite arguable number-fudging by the government in how the data are calculated). I’d imagine, too, that there are more governmental safeguards in place (many enacted in response to the Great Depression) which would tend to mitigate the downside potential, e.g., the existence of an FDIC, the fact of Social Security, unemployment insurance benefits, etc. If you’ve ever addressed this question before, a reference to a URL or other source on that would be appreciated.Thank you,SWK

http://www.cnbc.com/id/15840232?video=800926653&play=1No dilution; will you stake your job?, fallacy rally = FALLY. I hate being gamed. I hate power and dominion used only to further the evil design of the holder to the prostration of the poor in spirit. I hate falsehood being upheld and idol gods being worshipped. ALL my favourite histories and fictions are of evil being undone, of right finding standing as it subdues darkness. I am devoted to counteracting the repugnant gameplaying destroying good people, good companies, GOODNESS. Something smells putrid, and something is rotten in the state of Denmark.

"Financial Strip Mining for Dummies"the new book by Paulson, featuring "off the hook quotes" from "special guests", coming to a book store near you soon….

@ Nouriel Roubini: “That raises the questions: Is America ready for (true) foreign ownership of major financial institutions? And do we have a choice?"As Patrick Henry so eloquently put it in 1787: I smell a rat.Government did not make us rich. Nor can it keep us that way. There is no “choice” for me between liberty and an economic tyranny ruled by a consolidated state of bureaucrats and international bankers. I will not beg for scraps at their tables.If, as you say, “this nation under God” is faced with the necessity of a takeover by economic despots and tyrants, then let Henry’s words ring for me!“Let it come. I repeat, Sir, Let it come…Is life so dear or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!"

Re: Previous thread discussion on ARMs and deflationMany lenders offer a choice of ARM index of either LIBOR or US Prime rate. I took out a very good adjustable rate mortgage last year and indexed it to Prime on the understanding that the prime rate moves with the Fed Funds rate. My interest rate is at prime minus 1.25%.So before the credit crisis prime was 8.25% and my interest rate was 7%. Now Prime is 5% and my interest rate is 3.25%. Thanks Benny Boy.Of course, if the FED decides to put their money where their mouth is I will begin to sweat a little bit. But I still think the next rate move is more likely to be down rather than up.

I would like Dr. Roubini to tell us how big his yacht is.

One common factor I think most business models have in the current system based on is “risk and cost transfer”. And that does not involve investment banks only but almost all other industries: Slice & Dice, outsourcing, delocalization … The success of this system may be attributed to two factors: (a) cheap transaction costs (including but not limited to cheap credit, transportation, labor …) and (b) mispricing of risk (similar to the idea presented by Fama-French model which tried to explain that the reason why small-caps outperform big-caps on a risk-adjusted basis was because risk was mispriced and miscalculated and should account for additional risk origin (size)). The combination of low transaction costs and risk mispricing (usually underestimation) lead to the proliferation of Risk/Cost transfer business models. The cheap transaction costs benefited from generational downward pushing forces that can be summarized in the availability of production capital: cheap and abundant labor, energy, credit … On the other hand, risk mispricing was a product of the illusion that the break down of an income-generating asset to several others reduced the total risk. ABS and MBS’s seemed to present better return with a perceived lower risk than the original mortgage contract and the outsourcing/ delocalization of production/manufacturing process into several independent centers/regions seemed to be much less risky/costly than an integrated stream-to-stream organization. The mispricing of risks comes from the underestimation of future related costs (especially due to flawed risk assessment matrices) and also from abnormally low transaction costs. The problem with this kind of business model is that as long as we do not have a universal theory/approach, we cannot just apply relativity theory to mechanics … err … we cannot apply macro theories (comparative advantage, specialization …) at the micro level. I mean that specialization and comparative advantage work, in my opinion, only for an integrated organization/entity/asset: integrated means it has a full income generating, decision making, common goal setting process. If we apply risk transfer to parts of an entity (household income/ consumption, R&D outsourcing, production offshoring …) instead of the entity as a whole (industry, sector, business cycle …), the total risks of individual parts is higher than the risk of the entity if it is integrated (This also joins the classic investment theory states that diversification reduces portfolio’s overall risk)This model is not bad per se. However, when an idea gets institutionalized, it suddenly becomes ideology. This is one of the disadvantages of the capitalist economy: when a business model is proven to be more productive/ profitable more resources and more competition follows to constitute an industry. If the competition/industry lives long enough it creates high barriers to exit, huge sunk costs and rigid legacy systems. The adaptation to a new business model becomes almost impractical, even if the new model is theoretically better, because the cost to shift from the old to the new is probably higher than the willingness of market participants to change. Cheap transaction costs also leads to overproduction, while risk underestimation leads to more (involuntary) risk taking, both resulting in lack of (arbitrage) investment discipline and excessive production. The excess in turn causes waste which ultimately leads to higher future prices (since current resources are limited). So to go back to what the future may hold. I think future capital formation and innovations should focus on either or both these areas: “Material” decrease of transaction costs and/or reduction of risk through risk/costs integration and assumption. I say Material ideas/models to create a significant decrease in transaction costs. The mitigation of risks through risk integration (not transfer) forces investment discipline: that consists of aligning risks for a common objective, the weighting of investment decisions (with resource constraints) permits choosing the best alternative. More specifically, material reduction in transaction costs and Risk integration and assumption involve the mitigation of overall risk by risk weighting and can take many forms. This includes what LB, Alessandro and Outerbeltway already proposed: personal investments, internet, forums … But not only. You can take any type of transaction cost and try to find ways to reduce it: e.g. for energy, we may think of either cheaper alternative energy development and/or more local commerce that significantly cuts on transportation costs, for credit, it may be time to see more venture capitalists and more business angels who provide “cheaper” capital …back to streamlined companies, not Holdings like but rather the disappearance of frontiers between what we call now cost centers.This may also hold true for banks. Once their current business model is broken, they may need to be more involved in new venture financing and take more (but fully priced) business risks …

SWK,hahahahhaha oil 200 per barrel by the end of the yearhahahahahaUSD to the dumpsterMiss Americe, your latest prediction is fast coming trueSnP 1000 Dow 8000HERE WE COME

The banking system is heading into insolvency and collapse because of trillions of dollars of leverage outside of housing markets, in other firms, in other countries – it’s a mega-catastrophe ready to blow. “No oversight” allowed the shadow banking system to venture into this incredible endangerment.That’s the reason for Paulson’s performance; he’s going for police power, co-opting officials such as Cox – to cover up the depths of the chaos. I see the catastrophic power these financial currents carry. But attempting to put this incredible burden on the shoulders of the American people is transferring that bankruptcy to the people, nationalizing poverty. It’s time for someone to find a better route back to America’s financial stability, one that bypasses the old route of “U.S. financial giants like JPMorgan, Citigroup, and Bank of America dealing with internal issues.” As far as foreign ownership of America’s major financial institutions, you do not understand Americans. There is no way this could get through Congress. People already are smarting over the fact that they are going to have to help out other people with their bad mortgages. They are grousing over the bailout of Fannie and Freddie.I believe you are mistaken on where this crisis is going to lead. You are correct that its depths are great and that the banks are tied in with Fannie and Freddie where’ve they put their junk stuff. That’s why Paulson is pressing so hard for “unlimited authority.” But the minute Congress smells the depth of this financial mess it is going to freeze up. It’s an election year: Ultimately, Congress will let the banks collapse.

@Medic on 2008-07-22 22:19:49,No more ‘idealistic’ than the reestablishing of community which for decades now has been progressively financialized and gadgetized into a war of ‘all against all’.

with this kind of news Oil is down,man, im batteredhttp://news.yahoo.com/s/ap/20080723/ap_on_re_us/tropical_weatherIn the Gulf of Mexico, Shell Oil evacuated workers from oil rigs, but said it didn’t expect production to be affected. It also secured wells and shut down production in the Rio Grande Valley, where it primarily deals in natural gas. Mexico’s state-run oil company, Petroleos Mexicanos, said it had evacuated 66 workers from an oil platform off the coast of the port city of Tampico. Pemex said in a statement that it had readied a team and the resources needed in case of damage to oil installations in the region. Residents of northern Mexico were taking the impending storm in stride. Blas Garica, a 62-year-old builder in Reynosa, was taping up his windows and putting sandbags in front of his porch to prepare. "I’m not afraid because we flood frequently around here," he said. "If my house floods, we’ll just run to the roof."

@ MedicYou are an inspiration. We could all do with focusing on those around us. Time spent building relationships is always a safe investment.@ AllPaul Farrell on Marketwatch has a great list up: 11 Reasons America is a new socialist economy. It rips the Friedman free-marketers for destroying the basis of American prosperity and democracy.http://www.marketwatch.com/news/story/eleven-reasons-america-new-top/story.aspx?guid=%7bD23E1901-728E-4A3C-99D1-7E80F74C3AE3%7d&dist=TNMostRead&print=true&dist=printMidSection

imagine all the angst and anger of the people when they finally realized they have been mere serf/peon/pawnhow the heck can we make money when they change the rules all the time, this isnt unfair anymorethis is idiocynow my son is a slave with a debt sign marked on his forehead

Gotta love the spin. CNBC: "WaMu Posts Big Loss But Says Capital Is Sufficient"So WaMu says they "have no plan to raise additional capital" and everybody assume capital is sufficient.But what if you actually read the fine prints? Mish did it for us:http://globaleconomicanalysis.blogspot.com/2008/07/death-spiral-financing-at-wamu-merrill.html

Video Man – IMHO market likely to top out around 1305 on S&P within the next week, then we are likely in for a capitulation selloff to likely around 1080 on S%P according to technical analysis (probability based), into the end of September and October…beginning to selloff around 1-4 Aug

@Guest on 2008-07-23 06:43:04on August the 1st the BLS should publish the revised employment statistics for 2007, hopefully (but I would not bet the farm on it) reversing the absurd birth/death model contributions of the tune of 100.000 jobs per months. That could be the perfect trigger for widespread panic.

@ Flanders 02:27:01>Why no depression? This is the question I continue to ask Dr. Roubini. He seems to feel very strongly that nasty though the recession may yet become, it will end around the second quarter of next year. He consistently rejects the notion that the current troubles will rise to the level of a Great Depression, a Japanese-style "lost decade," or an "Armageddon." He expects the stock market will fall around 40% from its peak of 9 October 2007, which would be slightly less than the total drop in the 1970s following the oil shock. I am inclined to believe him, if only because of his track record of thorough analysis of economic circumstances and general accuracy in predicting the present crisis. I would, however, be interested in hearing from him as to the particulars that continue to lead him to this conclusion. There are a plethora of "doom and gloom" folks who regularly post here, and they’ve occasionally made some poignant observations about our state of affairs that would tend to support the view that things potentially could get worse than even Dr. Roubini anticipates. As Dr. Roubini has stuck to his guns on this question, however, in my quest for a balanced understanding of what’s transpiring, I’d surely like to hear some details from him as to the empirical data and circumstances that militate against concluding that the Armageddon scenario is nigh. Even a simple stream-of-consciousness list would be helpful. Still, this is his show, so I’ll respect his decision to address this question in his own good time, should he elect to address it at all.SWK

@ Guest 07:36:27>That article linked to in Nouriels article (in the sentence about "prolonged Japan-like economic malaise") mentions that a key structural weakness of the Japanese system was "an unwillingness to give an honest accounting". Interesting. I guess the US has nothing to worry, then, as accounting in that country is reliably honest…(cough, cough)Now, that is exactly the sort of "poignant observation" I referenced in my immediately preceding post. While I assume a widespread lack of transparency won’t, ipso facto, lead the U.S. into a Japanese-style "lost decade," it surely would be nice the hear from Dr. Roubini as to an empirical basis for concluding that this economic mess we’re in will at least start to be resolved by the end of the second quarter of 2009.SWK

guys:I’m beginning to have my doubts about this market crashing. TPTB have shown they will do ANYTHING with our money to keep the market from crashing. BKX is up 45% in 1 week! F&F brought back from the brink by Paulsen. All of us know the banks are just trying to buy time with their little ($2-5B) writeoffs every quarter! They move more and more assets to Level 3 so they can hide their true balance sheet. I’ve got an MBA from a top 25 school and even I don’t quite understand how they stay in business. I’m getting depressed……………….:

SWK on 2008-07-23 07:39:23 & Flanders 02:27:01 – Why NR says no depression?The impression I get is that NR sees economic events as somewhat independent from one another such as liquidity, solvency, supply shock, demand shock, oil shock, and inflation. So if one were to compartmentalize what is going on today, put relative numbers on each compartment, then, yes I could see how one could call a U-shaped hard landing.But for better or worse, I see a swirling interplay of influences, some of which seem to be impossible to quantify. Moreover, the magnitude of these influences are incalculable. For example who really can understand the influence of $1 quadrillion worth of credit derivatives on the word economy. And to invoke John Williams again, it depends on how the Fed and Treasury will play their hand through the bank crisis. If the past predicts the future (no deflation regardless of the cost), then they will inflate until the bitter end — and that is when the depression begins. I guess this scenario is too bleak even for the uber bear.

@ ptm 08:22:07Yep, a quadrillion is a heap big number! It’s a bleak scenario, all right…SWK

@AfA Re: “More specifically, material reduction in transaction costs and Risk integration and assumption involve the mitigation of overall risk by risk weighting and can take many forms. This includes what LB, Alessandro and Outerbeltway already proposed: personal investments, internet, forums … But not only.I was about to argue that the weakness of LB’s social networks financing was that his rich uncle would be unable to satisfactorily manage his risks to fund investments in start up (innovation) enterprises. I feel like that requires large pools of capital and there will still be a requirement for capital markets. The problem is (has been) the short-term horizon of that funding and I think a reluctance to even try to analyze the risk. Maybe pools can be formed that look to investors more like annuities. Anyway, innovation clearly needs to begin in the capital markets.

tsunami of bailouts are coming. system is not allowed to fail. dump bond and long stock. actually dump USA asset and long international asset.

10:07 a.m.Malaysia’s inflation soars to 26-year high in June

invisible PPT will not let anything to fall.

A glimpse at a hyper-inflation economy…A cup of coffee at a government-owned five-star hotel was 130 billion Zimbabwe dollars, or US$5.30 this week. A waitress at the hotel said she earns 100 billion Zimbabwe dollars, US$4 a month.Dereck Nhamo, who manages a warehouse, says he wants to join the teeming ranks of unemployed because he can’t afford to work any longer. Nhamo earns less than his bus fare to the warehouse in Harare but adds to his monthly income by selling firewood collected on weekends in outlying woodlands. "It doesn’t make sense to go to work any more," Nhamo said.One Internet provider has invited customers to pay their fees in gasoline coupons that hold their value.http://www.aol.com.au/news/story/Zimbabweans-battle-money-shortages-as-collectors-buy-hundred-billion-dollar-notes-on-eBay/756291/index.html

It’s a buying frenzy!!!!!!!!!!!!!!

@AfA, FreeTibetGood works, both. More rejoinder:AfA says, paraphrased, "Need to wring out transaction costs", FreeTibet says "Need to syndicate risk, too much for Rich Uncle". Yes, and yes. Wring out transaction costs by dis-intermediation (get rid of middle guys that don’t add any value), or replace interior-of-supply-chain players that do add value with automatic players that add the same value at a tiny fraction of the cost.That’s what my proposed "credit registry" is intended to do. The challenge of assessing risk is an information problem. The question of "is the person, himself, creditworthy" can be answered by the registry – if it shows, accurately, the credit history of the individual. The question of the project’s risk-reward equation can only be evaluated by a practiced eye, and believe me, the big venture capitalists have no claim to the franchise here. Remember dot-bomb? A whole lotta "smart people" got slammed. The recent debacle of the debt-fueled economy is a "big player" phenomena. This could never have occurred if the loan holders were local instead of remote from the nature of the credit risk. LB is right when he stresses the need for locality of risk assessment & risk exposure.Continuing with the narrative, we ask the question "how do you syndicate risk locally?" Why couldn’t a local investor be the syndicator? Why is that some "can only happen on wall street" business function? That’s bunk. The market will evolve a syndicator, that takes a skim on the deal, and throws off some risk to other players. Those "other players" are "local" to the syndicator – he/she knows them, has worked with them, is joined at the hip to them via prior txns, etc.There’s one more piece here we haven’t addressed, and that’s the allocation to sector issue. In addition to the greed and herd mentality screwups at the top echelons, we also have an economic policy screwup at the senior government level (e.g. steering all available capital into either defense or housing, neither of which is particularly productive, especially when both sets of investements become are virtually obsolete the day they’re built (using current designs and architectures). So, the other aspect of this question of bottom-up finance is "how does our culture direct investment toward those sectors of the economy which offer society at large, and the planet, the best return on scarce intellectual and financial capital?"I’ll leave that to the fertile imaginations to work out. So far, I have heard no requirement set out that the bottom-up solution couldn’t deliver upon, and do it cheaper, better, faster…etc. Alessandro said it well: the open-source model offers a great example of the quality and functionality that can be delivered reliably and consistently from a bottom-up model.As always, out-of-band dialogue is welcome at outerbeltway@yahoo.com

Bankrate now has the 30 year fixed mortgage at 6.50%. Usually this increase would be bad for housing, but in this demented market shouldn’t I go all in long housing stocks?

stock market need double bottom to go up. higher lower will be best.

Ahhh yes, the dreaded "Junk" rating but hey, all is well there, remember, they told us and the stock was up huge on their horrible numbers…11:35 a.m.[WM] S&P cuts Washington Mutual to ‘BBB-/A-3′

Sorry for the repost of my Star Wars Parody… …but there is relevance since I am replying to a couple of posters. (plus I hate it when I work on a post, and then the Prof goes and changes to a new blog shortly thereafter)A long time ago, in a stock market far far away…It is a period of Financial War. Rebel hedge funds, striking from unregulated markets, have won their first victory against the TPTB. During the battle, Rebel PE’s managed to steal secret plans to the TPTB’s ultimate weapon, the Death Stock, an armored financial institution with enough power to destroy an entire financial system. Pursued by the TPTB’s sinister agents, Miss America races home aboard her LIRR, custodian of the stolen plans that can save her people and restore freedom to the Stock Market…. There is a disturbance in the force. The Sith Lord Greenspan, has dispatched his stock troopers throughout the trading world. Darth Paulson and Darth Bernake have waived their RightSabers, and dispatched Rightwing fighters at anyone attempting to take back their wealth and power. (Jar Jar Bush has unknowingly enabled the Sith Lord Greenspan to take control of the Market)With the help of London Skybanker, Aless-Solo, Chewboctovio, Lando Capone, Gloom3PO and R2PTM … we will once again bring balance to the force. …but not before a 10-15% drop that is following this sucker rally! Time to buckle up folks… cause it’s not far off. We’re about to go into WARP drive! Punch it Chewie!Help us Nori-Wan Roubini, you’re our only hope. May the force be with you. (or as P1AQL wrote: May the USD be with you) –nice alteration …but I would’ve gone with Hoth-flation instead of Defl-othRich H – Yoda “do, or do not, there is no try”Written by Miss America on 2008-07-22 16:29:09@ Alessandro – What really started the Star Wars parody was that I’ve been referring to Paulson & Bernake as “Darth Paulson” & “Darth Bernake” for the past couple of months in my office. (I was trying to find a way to use it on the RGE)…as for my RGE rep??? I’ve been a little off lately:“Short term, I have a hard time seeing us back above 13,000” – from 2008-04-12 02:40:09 We did break 13,000. (but in my defense BoA and Chev were added to the DOW, so if you take Marketwatch’s 6 month DOW and compare against the S&P, you’d see there was a slight disconnect on the high side that brought the DOW over 13,000.)Likewise, on my call for Oil:“I truly believe oil will make a rapid decent to the $96-110 range! (a 20-30% drop from peak) …and in the event of a flare up, I don’t picture oil breaking $145.” – from 2008-06-10 11:01:40Well, Oil did break $145, but in my defense again, its highest close was $145.29 on July 3rd.So to answer your question Allesandro: (“so you basically hold on your first target around SP 1100. Control is not lost in your opinion”.) …I’ll use my post from – 2008-07-11 16:16:59“As far as the whole Market view goes… not much has changed. I still see a notch down from here. I believe the S&P could still make a bump (as far as 1,270-1,320 “sucker rally” (+3%-7%), but I wouldn’t bet the farm on the rebound even getting that far before the next push down.) If control is lost, we’re talking 900!!! (the way I calculate… 897 to be exact)”I still believe control is not lost! If FNMA & FMAC went down, control would’ve been lost!!! …and I would likely have needed to revise my numbers down even further.@ LB, Don’t worry. The force is strong in me! This little princess is watching BobaFed and Goldman the Hut very closely. @ Gloomy, with regards to: (When we get to severe recession/depression how can you expect energy prices to keep rising in the face of plummeting global demand?) Prices will drop. Yes. But their profits have been reinvested in the next wave. The need for energy will only increase. EVERY YEAR! That is where the storm will be best weathered. – IMOMiss America

"how does our culture direct investment toward those sectors of the economy which offer society at large, and the planet, the best return on scarce intellectual and financial capital?"look for the word, conciencious "being applied " the end of "i needed it yesterday" attitude.when the fear side loses it’s adrenaline and all heart attacks are accounted for.

More socialism…WASHINGTON — Congress is considering a second economic stimulus package that could include $15 billion in infrastructure spending, a senior member of the House told Reuters on Tuesday.Rep. James Oberstar, a Minnesota Democrat who chairs the Transportation and Infrastructure Committee, said a stimulus package could include "accelerating" payouts of $9.5 billion from the federal trust fund assigned to road construction and maintenance."You can have 700,000 people working in three months. We should have done it this spring," Oberstar told Reuters in an interview.If approved, the funding would go to more than 2,600 projects, he said. States would receive full federal funding and then have a few years to pay back any matching funds.Oberstar gave a list of spending possibilities to House Speaker Nancy Pelosi last week, who "likes the idea."Democrats are considering supporting another economic stimulus measure to revive the economy after Congress approved a $152 billion measure in February, which taxpayers received in the form of checks during the spring and early summer.The timing of a second stimulus bill remains up in the air.President Bush has said he wants to see how effective the first stimulus package is before lending his support to another one.

You want an EYE OPENER, look at this for California.The graph IS scaled correctly, but I do not think it adjusted for population.http://bubbletracking.blogspot.com/2008/07/tracking-california-foreclosure.html

NR ENTERTAINS THE POSSIBILITY OF A JAPAN LIKE SITUATION AND AN L SHAPED RECESSIONAt the very end of the first segment he says "if the situation doesn’t get fixed" the recession may look like an L and may be Japan like. IMO it ain’t going to be fixed.

What if the banks are able to get away with recategorizing certain assets to Tier 3 that don’t get marked to market long enough to rebuild their balance sheets and become solvent again? How long can the dancers dance?Is it fair to assume that the quarterly results are subject to more "daring" financial maneuvering that will be unwound at year end due to Sarbox?

"long enough": Ten, twenty years?!

the think tanks of the late nineties were printing papers that the poor are just lazy and don’t know how to cook nutrious meals = dumb now the think tanks are printing that it is the seniors that are dumb and need financial literacy along with the poor children from the lazy poor who need financial literacy… "the newspapers printed with such favourable columns that said lower taxes are needed to encourage job creation and productive investment. minimum wages should be kept low and labour markets deregulated. unemployment and welfare cuts "ensure that the balance of self interest lies in working in preference to collecting state cash." The paper goes on the praise the united states for its low unemployment rates. the paper failed to mentilon that year after year the us has the highest poverty rate among all the developed nations in the world."…"the behavioural roots of poverty and behavioural dysfunction among the poorthe supply side approach to poverty and that would improve "parenting skill of poor parents and the the ultimate wisdom:"arguably the biggest obstacle to break throughs in social policy is manners. It is almost always bad manners to go to the root of things. "Part seven – war on the poor 208-226pay the rent or feed the kids 1999the tragedy and disgrace of poverty in canadamel hurtigWhy is it when the poor cry foul it is dismissed as illiteracy and now when the smart are becoming poor they cry foul and please fix it. since they are smart already which school should they be sent to?

Go to Bloomberg and watch Marc Faber’s video.

@ kaan 13:11:32I suppose, then , that it would be fair to say you fall squarely within the "gloom and doom" camp? SWK

Novice,No apologies needed. I think my earlier post was hopeful, not definite. Trust me when I tell you I see all kinds of people everyday: rich, poor, intellectual, and those I deem "differently gifted". I know lots of people though who have already accepted that their lives are going to be changing soon – and not likely for the better. People can and will do what they need to survive – or they won’t. It’s really that simple. If what’s left standing at the end are those who adapt, are resourceful and have communities around (family and friends) to help, then perhaps we will be better off.As for the rose colored glasses, well….I assure you my life’s experience has been too full of reality to succumb to delusional thought. The only "rosie" around me is my Jackson Browne cd.

UNACCOUNTED FOR FEEDBACK LOOPSIMO one of the biggest factors that has not been accounted for by most economists is the effect of negative feed back loops. Take housing, the epicenter of the current crisis. Housing prices are down 20% so far and NR forecasts they will drop by 30% by the time everything settles out. However, IMO if the economy deteriorates no further we would get to a 30% decline, because housing inventories are still mammoth and supply and demand alone would lead to such a drop. But such calculations fail to take into account that the recession is just gaining steam and will be much worse in the coming months. Recessions in and of themselves cause housing declines, and deep recessions have a marked effect on housing. So this feedback loop, housing bust causes recession causes worsening housing bust, will cause, IMO declines of more like 50%. And as the feedback loops keep cycling as the collapsing housing market will keep worsening the recession which will keep worsening the housing collapse the result will necessarily be DEPRESSION.

Better watch out Gloomy. The SEC is probably putting you on their "investigation" list.

Politically speaking, if I am right about the banking monopoly* breaking down, it would look like this. This has the look of the endIt is good news that Congress is giving Hank Paulson, Goldman Sachs cum U.S. Treasury, everything! As this economic storm wreaks havoc, he will be in for an incredible amount of criticism and complaining, all showing exactly where he and the investment bankers have landed us. Just as Bear Stearns was a reprehensible move by the Fed, this unprecedented move by the U.S. Congress to hand a self-dealing investment banker a blank check to the treasury, with no limits, will crack the public’s faith in the system. The grasping reach of these bankers into America’s monetary store had to be broken. And it could not be broken until it was exposed. Roubini points out in stark terms where we are. But it took an addled, lame duck Congress to take us where we’re going. This is part of the breakup.I believe Freddie and Fannie will go down later this month. No purse is big enough to sustain these behemoths. Freddie and Fannie are a cavernous monetary drain, the same as the raided Social Security System. The treasury can’t handle one let alone two: there isn’t enough money.Real economic growth is not sustained by paper. Only sound money and limited government can do that.*A monopoly run by a cartel of bankers using government for cover and connected to the currency that everyone has to use.

You Know The Banking System Is Unsound When….http://globaleconomicanalysis.blogspot.com/2008/07/you-know-banking-system-is-unsound-when.htmlWritten by Gloomy on 2008-07-23 12:53:43Thanks Gloomy. This looks like a great one to share with people you know who just don’t get it.

I think Prof Roubini is wise in not predicting Armageddon. The current situation certainly indicates a prolonged global recession not a crash. For the stock market to fall the same way the Japanese stock market fell in the 90′s (ie. as much as 80%), foreign investor psychology would have to change dramatically. This means that foreign investors (as a herd!) would deem that they could get better profits consistently elsewhere. Something – I believe over the very long term this will be very difficult, given the US’s competitive advantage as a knowledge and information based economy, and its open society that is uniquely able to attract investment and talent. The fact that anyone can emigrate to the US and become an American, is unique… this is not possible in China for example.

@ K in Texas Re: Alessandro: "I was just speculating on currency games that may occur …"That is exactly what I had in mind too when I said we may not be far from a "big event".

The housing bill has been approved by the House, Bush drops veto, and should expect the Senate to approve it too. So everyone got what he wanted, Bush got his "unlimited" bailout of FF and Democrats got their #300 billion bailout. Isn’t democracy wonderful?From Marketwatch: Major elements of housing bill• A backstop plan for Fannie Mae and Freddie Mac that extends an unlimited line of credit and gives the government the authority to buy the companies’ stock. • Funds to insure up to $300 billion in refinanced mortgages.• A tax break of up to $7,500 for first-time homebuyers.• A new regulator for Fannie and Freddie.An affordable housing trust fund financed by Fannie Mae and Freddie Mac.• $4 billion in emergency assistance to communities to buy and rehabilitate foreclosed homes.

Below is my take on today’s Bloomberg video, “Marc Faber Says Fannie, Freddie Should Split Up, Not Get Aid.” It says it all – you’d better take 16 minutes to watch it before it’s gone. Remember, these are just my notes and it was only a once-over.http://www.bloomberg.com/index.html?Intro=intro3Faber says the world is in recession already and that people on the street realize it. He added that Wall Street also is in recession. For the median household, he said, things are very tough at the present time.Even with some earnings reports looking stronger, Faber says a lot of earnings will start to decelerate in the next quarter or two. Oil prices are weaker, he said, because demand is down in the U.S. and Western Europe. Demand also is down for steel and other industrial commodities. Going forward, you have to be careful when looking at the market, he said. He considers the technology sector to be vulnerable because its two major supports are consumers and financials, both snuffed.Regarding the “credit crisis,” Faber said the government should close down Freddie and Fannie or split them into 6 to 10 different companies, and let them run as private companies – the same as was done a while back with Standard Oil of New Jersey and AT&T. One of the problems, he said, is that they are government sponsored entities that can borrow money at more favorable terms than others and they expanded their balance sheets 1:65 Who, he asks, would want to run a business sheet with that kind of risk? Freddie and Fannie should not get federal aid, Faber said, but should issue additional shares to boost capital — it would still be insufficient but would be a step in the right direction.Basically, he said, the government is bailing out people who have made bad investments on Wall Street with taxpayers’ money.Faber believes we are in a water torture bear market where one sector after another will get hit. Markets in the U.S. have become extremely oversold, he said. He said the S&P could hit 1350, but that the big bull is over for a long time to come. Faber noted that we can be in a trading range if Bernanke keeps the fed funds rate at 2% ,which will support equity valuation to some extent but at the same time, will cause inflation and interest rates to go up from market pressures. Mortgage rates already are higher now than when the Fed cut, he said.Faber believes the Fed is totally ineffective – lacking an understanding of simple economics. The difference between the Great Depression and today, he said, is that commodity prices had peaked in 1921. Today, he said, three billion people have joined the global economy creating an inflationary environment. If Bernanke doesn’t understand this, he said, he shouldn’t be in the Fed.In the long run, Faber says, the oil market will remain tight and geopolitical problems can cause blows, but he’s looking for a lower market in commodities in the second half and says people should do some preventive selling.If global demand is as weak as I think it is, he said, prices will come down. Credit expansion was growing since 2007 at 12%, then slowed to 4%, he said. “I have never seen such a gross credit deceleration in my life!” It had a very negative effect on the market, he said.Sovereign funds, he said, want takes in large companies and want to do joint ventures. He warned the Western World that if it doesn’t allow China to buy into its resource companies, China will take resources by force for its economic well being. The resource sector is attractive from the Asian point of view, he said. They are poor in iron ore and copper, and China is the world’s second consumer of oil.When asked to predict the global and US economy in the next 6 to 8 months, Faber said the global synchronized boom was unprecedented, and the global synchronized bust will be unprecedented.. The boom was fueled by an expansion in monetary growth, he said, and it can go into a vicious cycle on the down side. To illustrate, Faber said, go to the Middle East and see what a boomtown looks like after a bust.Asked for his worse case scenario, Faber said: A colossal bust, with inflation, in a bad economic environment brought on by the money printing institutions around the world that we call central banks.(Faber has just completed two trips around the world.)

Professor, thanks again for providing me the opportunity to follow and sometimes even to contribute to this discourse. At times, I feel like a kid under an olive tree learning from the masters. @ OuterBeltway:I’m not sure I know where you’re going with this, but I think I see it differently. The problem I see is a matter of capital. Not debt. The credit registry you speak of – there already are those things – is of benefit only in identifying credit worthiness. And I would agree with you, and LB, that that’s done better locally. And I’m sure too that you can find a way to improve the registries. And I’m more sure still that any of that “data” should be kept in context and not used in a mechanical fashion as the ultimate arbitrator of who gets a loan and who doesn’t. But banks have been very willing, IMO, to loan against almost any collateral. And there are corporate bonds & junk bonds. I don’t know what all that money is used for. Perhaps some of it finds its way toward innovation. So, maybe a bottom up approach, removing intermediaries, etc., can shave a couple of points off the cost of credit. But the debt markets look OK to me.The real barrier to innovation that I see is the lack of capital. Sometimes human capital. As R&D is “outsourced” or under-funded due to competitive pressures and innovation has to come from “start-ups”, there is an enormous diversity of skills that need to be brought to bear on any given project in order to bring a good idea to fruition. Just the patent process is expensive, time consuming, and requires specialized (legal) skills that have nothing to do with technical innovation. And so many entrepreneurs wouldn’t have any idea how to find the right lawyer. I wouldn’t myself. It is so tough for start up companies to manage that complexity. And nobody wants in at that early level. Well, it is after all high risk. But therein is the failure of the financial system. To be able to finance that risk. Once the details are worked out, and there is a business plan to look at, a “sound” business plan, everybody wants in. But once you’ve gone that far any fool can contract out the production. Who needs it then? It’s the creative part that’s hard. The failure is in Rich Uncle’s inability and/or unwillingness to seek out and identify those early opportunities himself and nurse them along. I agree with you completely in that risk-reward can only be evaluated by a practiced eye. That is a rare skill. It is so much easier to trade securities. Or in the case of the modern CEO to trade a portfolio of entire companies. There may be efficiency at the margins – usually not, I think – but very little innovation or value added. Let me ask. What is created by InBev’s purchase of Budweiser? Is that innovation? Hardly. But the markets are set up, almost exclusively, to handle that kind of transaction.You are absolutely right that it doesn’t have to be a wall street function. But I just don’t see it. How do you open source capital? How do you open source the specialized skills? Actually, conceptually that’s easier, isn’t it? But we don’t have that infrastructure today. Maybe there is another way, but, I think the solution to the capital problem is probably top down.

http://globaleconomicanalysis.blogspot.com/25 reasons…

@FreeTibetThe top players have a dearth of capital, that’s why all the banks are going bust, the hedge funds are delevering (selling off assets to make debt payments). They are not real good sources of capital right now – in fact, the ones everyone turns to now are the SWF’s and, more specifically, the people that "saved" (income > expense) while we "spent" (income Any household or business that has savings, or retained earnings has capital. There are many, many individuals, households and businesses that have savings or capital that could be productively allocated toward a new venture. It’s out there, and a lot of it is stuck in things like…financial equities, and GSE bonds and the like. In a word, mis-allocated. It needs to get re-allocated, and re-allocated where it’ll do the most good. That’s small business.There are two key problems with early-stage investing, and you touched on one: it’s multidisciplinary. As an entrepreneur, you must be either really good at a lot of things, or you must be a great team-builder. You also have to be a little crazy to try to beat the odds, which are really not in your favor.The other problem is the mirror image of the entrepreneur: the entrepreneur-that-made-it now turned investor. As an early-stage investor, you must have broad and deep enough experience across the business model as to be able to accurately and quickly assess the viability of not just the idea, but the team behind the idea. The rest of the stuff (tactics) is pretty mechanical. There are hundreds of thousands of successful small-to-medium (There is a corollary problem of syndication at the local level – one angel can’t carry the load. It takes a team. This, again, is an information problem. How do you find the team? In a directory, of course. Where is it? Good question. It isn’t, in any systematic, publicly-available, quality-controlled sort of way.I won’t go on, as this isn’t the right place to fully develop these ideas, but I’m quite confident that if a billion dollars was spent to build these tools and promote them, it would result in a sonic boom of innovation and entrepreneurship. It would be a vastly better ROI than dumping another trillion dollars down the Wall Street rathole.Look at the investment alternatives for these successful entrepreneurs: invest in dead-end businesses like GM and ExxonMobil and BankOfAmerica, or invest in the next FirstSolar. Where would you rather be? Why aren’t we giving these people a viable channel to direct their capital to where it’ll do some good?Great question. Someday somebody like Bill Gates (next Generation) is going to step up and answer it, and then the U.S. is going to come out the other end of this dark economic tunnel we’re in.You out there, Bill?

no depression?? its under wayand you know what? J6Pak is waking up…theyre in snooze mode now, its cominno work, house devalued, beer/oil is expensive, kids cant get college financing,tax increasing…http://www.registerguard.com/csp/cms/sites/dt.cms.support.viewStory.cls?cid=124946&sid=1&fid=1Hynix shutting Eugene factory Hynix is closing its Eugene plant and will lay off its 1,113 employees over the next two months, the company announced Wedneday afternoon after meeting with top Oregon officials.The Hynix chairman, Jong-Kap Kim, told officials that the decision was based on the semiconductor industry’s move away from the dimension of silicon wafers used at the Eugene plant to make computer and consumer-product chips.The cost of retooling the plant would have been $4 billion, Hynix told the state.The layoffs would be phased in during August and September.Kim and Hynix officials planned to provide more detailed information about what would happen to employees during the meeting planned for Thursday.The layoffs amount to the largest job cuts by a single company in a single blow in Lane County in decades, perhaps ever.Hynix is one of the county’s biggest employers, and its demise will likely send economic waves throughout the county.The company has an annual payroll of $62 million, and pays about $4.5 million in property taxes annually.The facility opened in Eugene in 1998, following lengthy controversy about the filling in of wetlands for the factory’s construction, and the wisdom of waiving property taxes in order the lure the company here.

Point of greatest danger…http://www.nakedcapitalism.com/search/label/Doomsday%20scenarios

recession is expected for 2 years in this blog.Just keep waiting guys…

We have the Fed to make sure that there is enough money in the markets.Why you still think there’s recession??Are you serious in thinking?

@yes Mr Ben, i expect no recession toojust 10 dollar gas… thanks Mr BenWritten by Guest on 2008-07-24 01:40:4510 dollar gas is nothing wrong.No worry, the Asian guys die before us. They are still happy to put money into our markets. Strong US currency is able to make us healthy.

WOW! "strong", "US" and "currency" in the same sentence!I thought "Darth Paulson" was the last man on the planet who could keep them so close!

I know not what course others may take; but as for me, give me liberty or give me death!"Written by Guest on 2008-07-22 22:15:55I feel these are prophetic words. The US Financial system is about to be looted or should I say ; attempted to be looted. The US will be forced to decide on whether to nationalize chronicly underfunded banking instituations of sell them off to those who have the resources and are willing to commit them.Those fronting the cash will be the present holders of all that confetti US paper. Deny them the opportunity to redeem their promisory notes and watch them convert them into other things- like oil and foods?Assuage them and the US sells out its financial future and soul to foreignors, forever hostage to their whims.The path leading to this situation was paved by greedy traitors and I am astounded that the US people could be so stupid as to allow it to get this bad. But, I suspect, for not so much longer. The end game is approaching.

Perhaps the most important development of this crisis is not the feared ‘collapse of the dollar value’, or stagflation, or hyperinflation, or a change in world reserve currency…but that US housing ends up being nationalized.Since at least 9-11, the current administration has been en-route to more and more excutive power and to minimize the rights-of-the-individual. A nationalized housing will provide the government a tool to even more influence, if they choose to use it. Peculiarly all of this comes from a government that for years have claimed to support "less government" (obviously they always meant less cash payments to individuals, not less control over the lives of the individual).

@ OuterBeltway on 2008-07-23 20:51:53I absolutely agree with all of that. It’s the thing that caught my attention in your earlier post.I will add that although the top players are not real good sources of capital right now there is lots of money in the world (including SWF & domestic saved income you refer to) ready to re-capitalize those institutions when the time is right. But the part that has been miss-allocated is already gone and won’t be seen again. (Most of it. There might be more going that way.) But I would expect new SWF money not to go into preferred shares. There will be votes on the Boards. The domestic saved part of that re-capitalization portfolio will never have that influence. So, the better question is whether or not the WS business models will change. I frankly doubt it. New capital is not enough. Need also different skills. So, the real problem, as we seem to agree, is that there is no alternative infrastructure. And I have no idea how to change that.@ P1AQLI’ve read about those micro-credit programs. And like you, I’m afraid they’re not scaleable to the $2MM – $100MM level. I had forgotten about that dutch auction.

@OuterBeltway on 2008-07-23 20:51:53 wrote: In a word, mis-allocated. It needs to get re-allocated, and re-allocated where it’ll do the most good. That’s small business.Why should it be our moral duty to allocate capital to small business? We’ve been on the moral path before. See http://www.mises.org/books/bubbleworld.pdf , a link presented Lyle a while ago.In much of our lending to Europe, particularly as it ran to Germany, there was a sense of gesture. American credit was the rich prodigal returning in a grand wayfrom a far country to dazzle and reward the indigent ancestor….In buying the German bonds the bank is lending creditto the Free City of Bremen, perhaps, or to Cologne. Whatdoes the Free City of Bremen do with it? She may use itto widen the fairway of her harbor and build some newpiers. The same credit might have been used to makeship channels and piers in the Hackensack Meadows ofNew Jersey. And what does Cologne do with it? She mayuse it to build a stadium or a great bathing pavilion forthe happiness and comfort of her people. How strange!Mind you, the Europeans are still trying to sell their over-investments in "Vorsprung durch Technik" ( http://en.wikipedia.org/wiki/Vorsprung_durch_Technik ) since then. Entrepreneurs need to allocate their own capital with VERY high cost of equity (Ke) in the initial stages. This makes sure that they are indeed reinvesting in their passion with their backs to the wall or nose just above water, if you will, and that they are building a track record of earnings to generate a viable DCF model. If venture capitalists manage and take that risk that’s fine. But why, I ask, should it be our moral duty?Enjoy your own ride!P1AQL.

@ OuterBeltwayAre you familiar with a SBA program – I’m sure they have a name for it – in which business executives volunteer their time to consult with and mentor other business owners?Just thinking out loud… “open-source consultancy”.

Written by P1AQL on 2008-07-24 06:38:49“Entrepreneurs need to allocate their own capital with VERY high cost of equity (Ke) in the initial stages. This makes sure that they are indeed reinvesting in their passion with their backs to the wall or nose just above water, if you will, and that they are building a track record of earnings to generate a viable DCF model.”Well, you’re right. Moral duty has nothing to do with it. The problem is that entrepreneurs do have their backs to the wall. Venture capital comes in late after the risks are known and they and everybody but the entrepreneur is able to manage/arbitrage that risk. New US bankruptcy law makes it even worse. If an enterprise is to fail, the entrepreneur will likely not only lose everything he put into the venture, but also everything he will ever have – except possibly his house.

@P1AQL:I’m not advocating allocation to small business because it’s "your moral duty". I’m advocating it because "its where the money is".Small business is where the job growth and new products and new industries come from. MicroSoft, Dell and Apple and HP were all started in dorm rooms or garages. Small. All four benefited from fortuitous access to early angel-investor capital (which made the investors fantastically wealthy, BTW). Name me a new industry that was hatched from a DJ-list company. I can’t think of a one. It just seems like they come bottom-up. Bolt, Barenek and Newman was the small consulting company that got the contract from DoD (ARPA) to design the internet. Small. Small. Small.The only systemic exception I can make is Bell Labs. Transistor came from there, changed the world. There is no Bell Labs today.If you make it easy for entrepreneurs to find capital, and make it easy for investors to find entrepreneurs, the bottom-up process works better and faster.You advocate "leaving a working system working". If it was working, I would love to focus elsewhere, but the facts don’t support your conclusion. Wall Street just steered about $2Trillion of U.S. capital into the gutter. To recover this "working system" we have to allocate another half-to-one Trillion to bail them out. That’s the equivalent of two full Iraq wars worth of national effort they just wasted. I don’t call that a "working" system. Next, you said "it won’t scale". It will, but it doesn’t have to. [If you want the "why" it'll scale, I'll provide it next post]. The same investors that do early-stage are not the ones that finance latter-stages. That’s one of the ways the early-stage investors cash out. The company can be bought by a larger one, it can do a regional private placement, it can do a regional public offering, etc. There are many, many mechanisms for raising mid-to-late stage capital that doesn’t involve the grand-slam WS syndications. BTW, if the grand-slam was what WS was doing these days, I’d be OK with that. But it’s not. When was the last big IPO? (Visa, right? Hah!) And why is that? Because there are not enough strong business models making it in from the "farm team" to make a great "world series" team. And why, O why is that?Because the farm team system is broken. The flow at the bottom has slowed a lot. Where is tomorrow’s middle-class income stream going to come from? It’s not coming from Walmart jobs, not GM/Ford/Chrysler, not from IBM, not from Oracle, either. "Moral duty" indeed. Think "survival duty". You do want to survive, don’t you?—————Free Tibet: Service Corps of Retired Executives (SCORE) is what you’re thinking of. I’ve used them before, and they’re terrific. Another great, but underutilized resource.Commentary and flames: aim at outerbeltway@yahoo.com

“Stock ownership remains concentrated among the wealthiest households. The wealthiest 20% of households own over 90% of all stock value. For the top 1%, the average value of stock holdings was $3.3 million in 2004, down from $3.8 million in 2001.The average value of stock holdings for the middle 20% was $7,500 in 2004, down from $12,000 in 2001.“’The typical American family relies on home ownership and home equity for their financial security, not the stock market,’ said Economic Policy Institute economist Sylvia Allegretto." (August 29, 2006)Thus, the United States Congress just handed the keys to the rest of Americans’ wealth — their homes — to Goldman Sachs via Hank Paulson. Let’s see if we have anything left when the boys are through usurping our wealth to pay off their debts.http://www.epi.org/newsroom/releases/2006/08/SWApr-wealth-200608-final.pdf

"All we get is the tax bill."under coming democratic regime, we will get alots of tax bill.

and foreigner will get alot more worthless dollar, treasury, and FNM and FRE debts. personally, i will not touch these toxic waste. those stupid foreigner, go wonder.

The "foreigners" are fully aware of their position. All background chatter about the Gulf states de-pegging from the dollar are warning signals to the U.S. leadership. When the Gulf states de-peg, the fat lady has sung her song.This latest stunt – the bail-out of the GSEs – is (obviously!) perceived as a desperation move – and it’s made worse by the fact that there was no alternative save hard retrenchment. The lack of successor revenue generators in the U.S. portfolio is going to ultimately play the decisive role in whether the satellites stay within the Empire or not. For those that accurately suggest that the threat of military force is what’s keeping the dollar afloat, you’re right. But you can’t run a world-wide deployment of a huge military without a strong economy, or without spoils of war. The oil spoils are apparently politically out of reach. Maybe the Israel drumbeat will provide the rubric for a last grab, but it’ll be exceedingly expensive, politically. They probably won’t be able to stay on top of the beast during the backlash.There aren’t a lot of moves left for the "capitalists". I wish they truly were capitalists, as that would imply a basic comprehension of how to allocate capital.These are sobering days on WS, in London, and in Midland, TX. Couldn’t happen to a more deserving bunch of fools.Sorry, LB, but your guys played a big role in this, too. The sun may finally be setting, this time for good, on the British Empire.

WASINGTON MUTUAL IS ON ITS DEATHBEDDown almost 20% again today. I predict it will be the next domino to fall, and will shake up the market when it does.

Audio//Videos Reports http://www.bloomberg.com/tvradio/tv/schedule_us.htmlGlobal Insight’s Bethune Calls U.S. Economy `Very Weak’ July 24 (Bloomberg) — Brian Bethune, chief U.S. financial economist at Global Insight Inc., and Todd Colvin, vice president of MF Global Inc., talk with Bloomberg’s Betty Liu about U.S. initial jobless claims for the week ended July 19 reported today by the Labor Department and the outlook for the economy. Initial jobless claims increased by 34,000 to 406,000, the highest in almost four months.

Think WAMU is bad, look at these:Bank City State “Texas-ratio”Colorado Federal Savings BankGreenwood Village CO 244.8Eastern Savings Bank, FSB Hunt Valley MD 222.7Integrity Bank Alpharetta GA 191.6Ameribank, Inc. Welch WV 153.7First Priority Bank Bradenton FL 122.6First Security National Bank Norcross GA 112.1Magnet Bank Salt Lake City UT 110.4Security Pacific Bank Los Angeles CA 102.8First National Bank of BrookfieldBrookfield IL 102.1The State Bank of Lebo Lebo KS 100.6Source: Research Associates of AmericaWhile the Federal Deposit Insurance Corporation (FDIC) is keeping secret its official list of 90 troubled banks, ABC News has obtained other lists prepared by several research groups and financial analysts. The lists use versions of the so-called "Texas ratio" which compare a bank’s assets and reserves to its non-performing loans, based on financial data made public by the FDIC in March. Analysts say banks with a ratio over 100 per cent would be the most likely to fail, based on what happened to Texas savings and loans during the 1980′s.

I am going to save WAMU that will go up by 205 at 3:45pm.

Someone pointed me to this humorous take on the weak dollar:Lewis Black on "The End of Empire Sale" – a red, white and blue light special!http://rawstory.com//news/2008/Lewis_Black_Weak_dollar_makes_America_0723.html

I found this site linked on tickerforum.net, it tracks the TOMO and TAF credit outstanding every day, I find it very useful. Today’s highlights: a monster $185bn of collateral submitted and only $33,5bn accepted, credit outstanding grew $5bn after several day of contraction ($14bn if including TIO, but I don’t know what it is).http://www.gmtfo.com/RepoReader/OMOps.aspxAccording to Wall Street Examiner when the FED lends money the stock market goes up. Bear beware.

SUMMARY OF TODAY’S MARKET ACTION: REALITY REARS ITS UGLY HEADWall Street: "Pesky reality!! It keeps interrupting our fantasy world and just won’t go away."

Navy cancels $20b purchase of destroyersCancellation of the 14,000-ton, Zumwalt-class destroyer, called the DDG-1000, after just two ships were funded, was made public by Maine’s two Republican senators, Olympia J. Snowe and Susan M. Collins, and US Representative Thomas H. Allen, a Democrat whose district includes the Bath shipyard. The lawmakers said they were informed by top Navy officials that with costs rising 50 percent, to $3 bil lion per ship, the program has become too expensive and would make it impossible for the Navy to meet its overall goal of a 313-ship fleet. The service currently has about 280 ships.The lawmakers said they were also told that the Navy had concluded the destroyer’s design was not well suited to combating the evolving threat of long-range missiles.Just when you think the Washington money-fountain has an infinite reservoir, this happens. Proof that inflation will bite the hand that feeds it.http://www.boston.com/news/local/maine/articles/2008/07/24/navy_cancels_20b_purchase_of_destroyers/?p1=Well_MostPop_Emailed5

THE GREAT CHINESE ECONOMIC MIRACLE IS GOING TO END BADLY"Jamil goes on to quote Yi Xianrong, at the China Academy of Social Sciences, as making the very sensible observation that “If financial institutions of Freddie Mac and Fannie Mae’s calibre could get into such a bad situation, then what does that mean for Chinese financial institutions? The only reason we haven’t seen similar problems here is because property prices have continued to rise rapidly.”Needless to say I think Mr. Yi is absolutely correct, and I expect that he will have proven to be when and if ( and I really just mean “when”) we see a serious monetary or economic contraction. He elaborates: “Anyone can get a mortgage loan in China, no matter who they are. There is also a huge amount of speculation in the market and insider dealing when it comes to bank officers granting loans.”In that context I heard from a normally plugged-in friend of mine that the authorities are planning to reshuffle the top positions in the big banks after the Olympics. My friend tells me that the new leaders are likely to be more sympathetic to industrial and provincial leaders’ beliefs that slowing growth is a bigger worry than rising inflation. If true, I think we can expect to see deterioration in the credit quality of bank portfolios, even as they take on more market risk."http://www.rgemonitor.com/emergingmarkets-monitor/253092

Ron Paul on the Bailout bill. One especially important note is an item buried with in it.It comes with the requirement that ALL Credit Card Transactions will be reported to the IRS http://mrmortgage.ml-implode.com/

Don’t worry kids- you see, in 1 houra nd twenty minutes, stocks will be on the path to closing green for the day…buy the dips.

I missed a couple of words above:Like the little fat boy on the See-Saw, who wants his turn in the air, he will eventually get tired "of launching himself. (the manipulation) Eventually" Gravity Wins.MA

I have recieved no termination notification. Maybe Nouriel figures it is unecessary because the SEC will take me away in handcuffs soon for promoting short selling.

THIS IS GETTING SCARY-BIG BROTHER IS WATCHINGThe FDIC plans to pay closer attention to the blogosphere in the future."We’re very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors’ fears." http://globaleconomicanalysis.blogspot.com/2008/07/fdic-chairman-shelia-bair-is-out-of.html

In the event this blog becomes subscription only, I’ll hang out on London Banker blog. See you there (if need be).

“Time to Get Political Folks…Massive Bailouts Front and Center”July 23, 2008 — ”They are on the move guys. I have always kept my political affiliations and actions a private matter but what is going on with the Fannie/Freddie, housing, mortgage, Treasury, Fed, Wall St, Washington, rich investor and foreign Gov’t bailout plan could turn out to be nothing short of the largest fraud ever perpetrated on the taxpayers, at least in my lifetime. I feel compelled to use whatever soapbox I have here to get this message out there to as many as I can.Paulson, Frank and even Dodd are about to get their money and it will come at a great expense to you, me, our children and perhaps our grandchildren decades down the road. A retroactive bailout of Fannie Mae, Freddie Mac, Wall St, Banks, Investment Bank, Foreign Govt’s and many more by the tax payer is being voted on as early as today, the negative repercussions of which cannot be known… http://mrmortgage.ml-implode.com/My question is: Where do we go to get “political”?

let the withcing hour begin….

Been fun everybody. They’re shutting down ever’thin’ now. Even our little petty indulgence of RGEmonitor will be gone soon. I’ve posted often with the manifold aliases, probably been naught but a blatherskite anyway. My garble was of little contribution in truth. But I will miss the comaraderie and poignant posts. Off to the occasional CR and Bear’s Lair. Ultimately, though, we’re fully armed with the knowledge we now have to carry through to the bitter end of this. Just variations on themes now…WATCH FOR POLICE STATE.

I likes the Yeats. I likes the seesaw (though presently hurting from a hard fall when the fat kid launched). But mostly I likes more cowbell…far better than DJIA opening and closing, anyway. http://youtube.com/watch?v=EVbAuMr5eac

London Banker,your blog on RGE is free access, also for posting comments. For now.

It has been a great day for everyone who shorted yesterday. I wish I had not covered my WaMU shorts yesterday.

My personal blog list:Mish – http://globaleconomicanalysis.blogspot.com/CalculatedRisk – http://calculatedrisk.blogspot.com/Hellasious: Sudden Debt – http://suddendebt.blogspot.com/Brad Setser: Follow the Money – http://blogs.cfr.org/setser/Steve Randy Waldman: interfluidity – http://www.interfluidity.com/

THE WORLD IS A VAMPIRE DOOOOO DOOOOOOOOO DOOOOOOOOOOOO SECRET DESIRE LAAAAAAAAA LAAAAAAAAAA LAAAAAAAAAAAA LAAAAAAAAAAA WHAT ARE THIS MADNESS, DESPITE OR MY RAGE WASHINGTON MUTUAL IS STILL IN BUSINESS. WASHINGTON MUTUAL YOU HAVE TO GO WASHINGTON MUTUAL YOU HAVE TO GOOOOOOOO.DESPITE ALL MY RAGE, YOU ARE STILL IN BUSINESS.LETS ALL SING TOGETHER FOR DEMISE OF WASHINGTON MUTUAL

OOOPPPPSSSS!4:08 p.m. Crocs late traded shares halted last trade at $8.98

http://www.eurointelligence.com/article.581+M58e85ff0865.0.html

4:35 p.m. Crox late shares resume trade plunge 44% to $4.75

I will offer a blog and book recommendation.The blog: Russ Winter http://wallstreetexaminer.com/blogs/winter/The Book: The Shock Doctrine – The Rise of Disaster Capitalism by Naomi KleinThe book outlines the standard blueprint that the global money intersts have used for systemic looting operations conducted, under the auspices of the IMF and World Bank, in various countries including Chile, Bolivia, South Africa, Russia, etc. The end result in most of these cases has been brutal repression and the elimination of the middle class. Each society subsequently stratified into the few very rich and the many extremely poor.The basic theme is that TPTB uses a destabilizing event like a natural or economic disaster, or war or terrorist attack, to force "shock therapy" of unpopular social and economic refoms onto the populace while they are disoriented and unable to resist. These reforms almost always run counter to constitutional law and usually require the imposition of martial law and things like secret police, torture, and "disappearings" in order to be implemented.I mention this today because in reading the book I have been struck by the various parallels to our present situation. I believe it should be read as a blueprint for what is going on behind the scenes, and indeed what we in America have been experiencing in slow motion for the past thirty years.The gathering economic crisis will be used as a pretext to radically transform the United States into something far different than we have seen. Plan accordingly.

pREVIOUS iTEM: "The FDIC plans to pay closer attention to the blogosphere in the future."We’re very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors’ fears." If the FDIC wants to issue corrections, or clarify policies, then I say – good for them! All depositors would like to have a clear idea of where they stand, if their bank is affected by these problems. However, a substantial number of "rumors" that are being discussed have come from recent articles in the media about specific problems that people have faced after their bank went under. The FDIC could combat this issue simply by handling the problems better – incl. better communication with the customers.PeteCA

@Guest > “He [Marc Faber] warned the Western World that if it doesn’t allow China to buy into its resource companies, China will take resources by force for its economic well being.”The traitorous three – Banks/Corps/Congress – offshored America’s industrial heart and, now, she’s at military risk should there be physical resource war – onshore. The BCC sold out America’s intact physical plant capability for mass production of goods and excess capital and for what? –Esau’s porridge, mega billions of paper dollars for a few bankers/CEOs with a life span of but three score and ten to stuff into their pockets. As usual, the prostitutes in Congress sold themselves cheap, for a Frank Dodd marcelled hairdo and a ride to work in a limousine.At no time after 1945 was the United States capable of destroying Russia or her allies without taking on totally unacceptable risks herself,” wrote Stephen E. Ambrose in “Rise to Globalism” (seventh revised edition 1993), “at no time was the United States able to establish an imperial dominion.”And now – war with Iraq, war with Afghanistan, threatened war with Iran, and “The Coalition of the Willing” all gone home.

@Miss ItalyI’m trying my best as well to disseminate decent information. I speak to anybody willing to listen: co-workers, relatives and friends. I even gave a public talk a few days ago, the people there were extremely interested and they kept asking relevant questions until the very end of my three hours (!!) seminar. I was surprised how fast people got up to speed with financial problems if explained correctly. And the word spread fast to friends too.The FDIC and Wall Street have a very real problem with blogs. Information is spreading.

@ JLCIn fact I usually "try" to read events according to Naomi Klein’s "theory". It helps keep focused on what is going on. Case in hand today is the line inserted into the housing bailout bill: All credit card transactions should be reported to the IRS. What the heck is this clause doing in a housing bill?

Wachovia Announces Tom Wurtz Stepping Dn As CFO; Co To Conduct Immediate Search For Replacement >WBJuly 24, 2008 17:31 ET OR, It’s good to hear from you, I trust you are enjoying yourself immensely.I had my worst day in the market ever last week. It was so bad it made me re-think my concentrated and leveraged short strategy in financials and commercial real estate / REITS. But after taking about 40% off the table to get out of the way, I am now back in essentially the same positions! I am getting a little better at avoiding the rallies, but when things move that much, that fast, it is impossible to avoid all of it. I won’t say how far I fell (you would think I must be crazy or a liar for sure), but the decline was twice as great as any annual gain I ever had in the market – to say it was painful is a gross understatement. The rally in financials was just like a crash for shorts, which I am sure many others here also experienced. On the 15th I was in hog heaven with the highest portfolio market value I had ever attained, by Friday I knew how crashes can cause some people to commit suicide. Maybe I am crazy for holding such high risk positions, but I really don’t think we have seen the bottom yet, and, IMO, financials and real estate still appear to be the best places to be, short that it. I have nothing on the long side as I can’t bring myself to even hold energy or commodity stocks in a bear market – it causes me too much cognitive dissonance.Happy trails and good luck to you and everyone here.

>>>> About the FDIC blaming the blogs for the collapse of IndyMac: “War is Peace; Freedom is Slavery; Ignorance is Strength." Bravo, Alessandro. Bravo!!

I SURE HOPE WE CAN BAILOUT ALL THE BANKS QUICK AND MAKE SOME ROOM FOR THE AUTOMAKERSDEARBORN, Mich. (AP) — Bleeding cash and with its very survival uncertain, Ford Motor Co., an icon of American automaking, will try to import some of its success from across the Atlantic.http://biz.yahoo.com/ap/080724/ford_s_future.htmlDoes anyone for a moment doubt that GM and Ford will be bailed out?

Guest on 2008-07-24 16:46:45“I wish there was someone out there that could speak for those of us that have lost everything as a result of this crisis. No voice and few options for the downtrodden.July 24: A woman in Taunton, Mass., kills herself after faxing a letter to the mortgage company saying that she would be dead by the time they foreclosed on her home. WHDH-TV’s Steve Cooper reports.”Yes, this is truly a tragedy. It reminds me of the suffering caused by the government in the ‘70s and early ‘80s. Those were tough times for farmers, and many were losing money year after year. So the government helped them by giving them guaranteed loans every year to purchase seed, fertilizer, equipment, additional land – everything they needed to continue farming. The problem was the farmers became so debt laden that eventually, after several years of loan after loan after loan, they could no longer service their debt, even after loan reschedulings with amortization of the accrued interest in arrears. As a result, some, I don’t know how many, committed suicide. These farmers were people who grew up on the GD or shortly thereafter, and they were mostly country people who lived with a code of honesty, hard work, avoiding debt as much as possible, and paying back those debts they could not avoid. So when they couldn’t pay their debts, it became a terrible emotional and psychological burden that brought them much guilt and shame that led to suicide for some of them in order to stop the pain of it all. In my mind it was another example of the inherent problems of the social programs of the Great Society. Although the government’s intentions were good, the help actually ended up hurting many people in the long run – it prolonged the agony for many who ended up leaving farming eventually anyway, which is what they should have done when they first got into financial trouble.The difference now, with housing, is that the loans were made to people not out of good intentions to help them, but merely for profit; they were made without compassion or concern for the negative impact the debt might have on the person if they couldn’t keep up the payments.Thus the “socialists” (Democrats) an the free-marketeers (Republicans) both end up hurting people. The difference is the free-marketeers do it with callous disregard for the suffering it may cause families, while the socialists do it because they do not take the time to consider what really is the wisest way to help people. In other words, they don’t stop to consider if putting people further and further into debt is actually helping them or hurting them, and to consider other alternatives that might help them more, even if those alternatives themselves cause some pain – think “tough-love”.Real help for some people, hopefully, will come with the implementation of the new housing bill. Further, and probably more significantly, more help will be provided directly to people after Obama is elected president and the Democrats control both the executive and the legislative branches of government. Whether it will be wise or harmful help, a la the farmers, I don’t know; but I hope we, as a country, learned something from the failed welfare and farm lending programs of the 60’s and 70’s and will not repeat those mistakes.

@ GLOOMY on 2008-07-24 17:30:46Why wouldn’t we expect Ford and GM to get bailed out. Chrysler was bailed out years ago.

stupid guests on kudlow. if oil goes down, then it is good? my god, if oil start to trend down, then we have global recession in the card. i will watch $110, if that is taken out, then kiss of death to bull market.

Hey RH, Miss America!If only I had blindly committed my entire net worth and leveraged it twice to your market calls and spot-on turns, I’d buy myself an island and a yacht free and clear! And not a hulking metal-can destroyer that needs work like LB either. Yeah, I’d be living the good life, polynesian ladies, hammocks, pig roasts and lazy afternoons. Instead, I hearkened but a bit and can barbeque with beans and franks at abandon now. Still something much better than nothing. You shouldn’t be asking for employ from the Doctor, you should be endowing his foundation with a bil+ from your market killings! You da man.

Octavio Richetta on 2008-07-24 18:56:10AnonV:" ‘all credit card transactions will be reported to the IRS’.Welcome to the new Amerika! "Actually, if this goes through it would be the end of Amerika:-)What do you mean? It looks like it has already been passed. See e.g. this article:http://www.campaignforliberty.com/blog/?p=235

who can bailout the US curency?

Folks, you do not have to "subscribe" to post to the blogs. I am not a subscriber and I can access all the blogs and have limited access to other content such as spotlight articles. Contact the sales department to find out how. I shudder to think this forum would lose major contributors to this blog due to some technical glitch. Check it out.

@OR on 2008-07-24 18:56:10I stand corrected. We are currently in Amerika, but I agree, this will surely be the demise of Amerika, but not in the way we would want it to be.@Guest on 2008-07-24 20:28:31Yes, this passed the house. Our only hope is to stop it at the senate.People, we must act and not let this get thru.

Guest on 2008-07-24 05:45:14Perhaps the most important development of this crisis is not the feared ‘collapse of the dollar value’, or stagflation, or hyperinflation, or a change in world reserve currency…but that US housing ends up being nationalized.Perhaps the most important development is not specifically the nationalization of housing but all the removal of privacy that is excused on the situation (similar to 9/11). Like the requirement on the housing bill, that all mortgage brokers are being fingerprinted. What is the point of that? That when the government owns the mortgage market (after it has been nationalized), they want more control over it?By the way, on this housing bill the Treasury’s previously limited $2.5 billion line of credit to Fannie Mae / Freddie Mac has been increased to unlimited. The Treasury can now buy an unlimited amount of Fannie / Freddie housing securities and stock. (source: http://www.campaignforliberty.com/blog/?p=235)

Ron Paul makes FRONT PAGE OF DIGGhttp://digg.com/world_news/YOU_JUST_GOT_SCREWED_and_Nobody_Will_tell_you_URGENT“URGENT!” Video Housing Bill: “Today as an American you got shafted. Unlimited printed money to bail out Freddie and Fannie. Raise the National debt by $800,000,000,000. Finger printing of all MORTGAGE people, and now ALL credit card purchases over the NET reported to the IRS. All in one VOTE…IT PASSED!!”From Lew Rockwell Podcast:“While this bill is often referred to in the news as a “$25 billion” plan, the final amount will likely be much, much higher. The Treasury’s previously limited $2.5 billion line of credit to Fannie Mae / Freddie Mac…has instead been increased to unlimited. The Treasury [i.e. Paulson} can now buy an unlimited amount of Fannie / Freddie housing securities and stock… Once upon a time, our national currency was backed by gold. More recently, it has been backed by US Treasury securities. Now it will be backed – at least in part – by Fannie Mae / Freddie Mac housing securities – securities that are collapsing on the open market because no one else wants them.”There goes the $800,000,000,000 – Paulson’s spending money.

!!!!!!!!!!!!!!Congressmen (RON PAUL) make emergency landinghttp://abclocal.go.com/ktrk/story?section=news/local&id=6280419HOUSTON — A Continental Airlines flight carrying former presidential candidate Ron Paul and six other members of Congress to Washington, D.C., made an emergency landing in New Orleans on Tuesday after a loss in cabin pressure. The seven congressmen, all from Texas, were trying to get back in time for a Tuesday night vote on an aviation safety bill when the flight landed without incident, a spokesman for one of the representatives said. No injuries were reported among the 128 crew and passengers. FAA spokeswoman Lynn Tierney said Flight 458 from Houston initiated a rapid descent to bring the plane to an altitude below where adding oxygen was necessary and was given priority to land at Louis Armstrong New Orleans International Airport. Trevor Kincaid, a spokesman for passenger and Rep. Nick Lampson, said his boss told him "there was absolutely no panic on the plane." Lampson told Kincaid the plane’s oxygen masks dropped down

@ Miss America 23:02:27Perhaps he found the cut of your jib intriguing…SWK

@ptmLast week we discussed my purchase of "junk" US 90% silver quarters from Bulliondesk.com. I told you that there were 2 quarters missing and 3 Canadian quarters slipped into my order. I brought it to their attention and after about a week I received 5 replacement silver quarters as requested.I’m willing to give them the benefit of the doubt and chalk it up to an honest mistake, which they resolved quickly. I will probably buy from them again in the future.

Its been a while since I saw a post on scary fed charts anywhere. Here are two that should make your jaw drop. They’ve definitely worsened in the past few months.http://research.stlouisfed.org/fred2/series/BOGNONBRhttp://research.stlouisfed.org/fred2/series/BORROWLook at the time scales – this is historic. Its obvious that without the Fed’s alphabet soup, the banking system would’ve crashed months ago.

@GLOOMY on 2008-07-24 12:31:40 wrote: new leaders are likely to be more sympathetic to industrial and provincial leaders’ beliefs that slowing growth is a bigger worry than rising inflationAs I’ve said before, this is an economic show-down. China will maintain the peg at any cost while the US will try to kill the peg at any cost. Europe will get killed in the cross-fire. China will increasing behave like a merchantilist ‘deprived’ of her ‘rightful’ share of end user markets (much like Germany felt before the WWI). Confusionism reigns high. Confused Asians like to sacrifice for the motherland. Koreans handed over their gold after the Asian financial crisis. Likewise, the Chinese will ‘hand over’ their real-estate, stock price gains and empty bellies to inflation for higher growth. China worries about slowing growth leading to rising unemployment leading to "idle mind is devil’s workshop" leading to revolution.That leaves Hank to ‘fisc’ at will.—————————————–@Boomerang Blitzkrieg on 2008-07-24 13:56:28 wrote: Bwahahahaha!Dr HB, The Germans lost the first world war. Having already experienced humiliation after ‘defaulting’ and walking away with raised hands in the war, walking away from their debts was much easier. That’s why I say that defaulting is like a tiger tasting human blood for the first time. Once a maneater always a maneater. Once a defaulter, always a defaulter. No double jeopardy there!That is the difference! —————————————–@Guest on 2008-07-24 21:57:18 wrote: 90%!!!!!Perhaps, ratings agencies forgot to put the ’90 proof’ label along with the AAA ‘soft as silk’ label. That kind of Schnapps can burn a whole in the gullet real bad real fast leading to bloody diarrhea. Guess even NAB is asking a lot of questions for its own greed. —————————————–@JLC on 2008-07-25 00:21:34 wrote: obvious that without the Fed’s alphabet soup, the banking system would’ve crashed months ago.JLC, Guess you finally get it. We’re staring at the abyss and we can only look to Ben and Hank to pull us back. RIGHT NOW.Try NOT to cut off your own nose collectively as Paul McCulley at PIMCO might say.Best,P1AQL.

New Friday LB post up: What’s up with the covered bonds push?http://www.rgemonitor.com/financemarkets-monitor/253105/whats_up_with_the_covered_bond_pushand cross-posted over at londonbanker.blogspot.com where I’m happy to see so many of the kool kids in the komments.

U.S. banks primary borrowings from Fed biggest everThu Jul 24, 2008 5:17pm EDT http://www.reuters.com/article/ousiv/idUSN2461462320080724

Recession??? What recession???9:58 a.m. U.S. July UMich consumer sentiment 61.29:58 a.m. U.S. July UMich consumer sentiment above 56 expected9:15 a.m. Durable goods stage upside surprise in June

staycationing : movies/festivals/music in the your local park are now the driveins of yesteryear. Donations to the your local food bank are welcomed. Oh! kids, bring your chalk to help decorate the sidewalks with your creative genius.

In this week’s cartoon, “Pickles,” Earl reads in the newspaper that it costs the government almost two cents to make a one cent penny. “So,” he says, “the old phrase ‘a penny saved is a penny earned’ is a crock, because if you have a penny, you’re costing everyone else two!”Imagine what Earl could have said if instead of paper dollars each dollar was in coin. And Wall Street would be telling savers, “How dare you keep a stack of those without spending them. You’re costing us plenty.” Fortunately, Chairman Bernanke doesn’t have to slave away at the mint everyday; a telephone call and a few taps of the zero key on the electronic keyboard, and voila! he’s got it!

@ Guest on 2008-07-25 09:01:33I think you should have a closer look at the data.From Reuters/University of Michigan Surveys of Consumers :“Dead Cat Bounce” in Confidence. “Even after the small July gain, the overall levelof consumer confidence is dismal and still points toward declines in the pace of spending in late 2008 and early 2009,”according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers“It is more likely that the gains in confidence reflect a“dead cat bounce,” a phenomena has been repeatedly observed over the past fifty years: following a steep decline inconfidence a small gain is recorded before confidence resumes its downward slide,” Curtin explained.From US Census Bureau: "This (i.e new house sales) is 0.6 percent (±11.3%)* below the revised May rate."The interpretation is that the change could be anywhere between a decrease of 11.7 % to an an increase of 10.7%. It is difficult to draw any meaningful conclusions from such imprecise data.

democratic scum politician will make sure housing bill is passed to bailout speculator and lenders. wait until democrats again power in election, tsunami of bailouts will come. USA become socialists country.

"Why Bush’s Impeachment Is Necessary"by Ed Ciaccio"On Friday, July 25, 2008, the House Judiciary committee will finally hold a hearing about George W. Bush’s excessive abuses and unconstitutional expansion of his executive powers. But Judiciary Committee Chairman John Conyers, a Democrat heeding the proclamation of Speaker Nancy Pelosi that impeachment is "off the table," has already declared that this hearing will not lead to impeachment. Conyers, Pelosi, and all members of Congress who oppose the impeachment of George W. Bush are betraying the oath they all swore when they took office and should be condemned for this betrayal. Here is why the impeachment of George W. Bush is necessary.We now know that, in January 2001, soon after taking office, but eight months before the 9/11 terrorist attacks, Dick Cheney’s energy task force, consisting of representatives of the oil and natural gas industries, but excluding environmentalists, held meetings using maps of Iraq’s oil fields. As even Alan Greenspan finally admitted recently, the war was "about oil."We also now know that representatives of Afghanistan’s Taliban government were in the U.S. attempting to negotiate a deal with Unocal, with Bush Administration help, to build oil and natural gas pipelines from the Caspian Sea through Afghanistan to Pakistan, negotiations that failed in July 2001. That, two months prior to the 9/11 attacks, is when the Bush Administration decided to attack Afghanistan to remove the Taliban government by November 2001. The 9/11 attacks then moved up the Afghanistan attack by one month, to October.The recently-released Phase II of the Senate Intelligence Committee Report on the lead-up to the Iraq invasion makes clear that Bush, Cheney, Rumsfeld, Rice, and Wolfowitz, among many others in the Bush Administration, in lying about the threat allegedly posed by Iraq’s non-existent weapons of mass destruction, links to al-Qaeda, and connections to the 9/11/01 terrorist attacks, perpetrated fraud on the American people, which resulted in the unnecessary, avoidable deaths of over 4,100 U.S. soldiers and the maiming of tens of thousands more. From the National Intelligence Estimate (NIE) of early October 2002, the Bush Administration knew the case against Iraq was weak and circumstantial, at best. Yet they continued to beat the drums for war with exaggerated threats ("a mushroom cloud") to mislead the U.S. into war. Such deliberate fraud resulting in unnecessary, avoidable deaths and suffering to U.S. citizens is a felony capital crime punishable by life imprisonment or the death penalty. Deliberately causing the unnecessary deaths of U.S. military personnel also constitutes treason against the United States.The post-World War II Nuremberg Trials declared waging a preventive war of aggression to be "the supreme international crime." Bush’s unnecessary bombing and invasion of Iraq was such a preventive war of aggression. In its wake, U.S. forces have tortured; kidnapped for torture (extraordinary rendition); used napalm (Mark-77 firebombs), depleted uranium, white phosphorous, cluster bombs, and many other indiscriminate weapons of mass destruction that killed and maimed hundreds of thousands of Iraqi civilians; and caused over four million Iraqi refugees (ethnic cleansing). All of these are war crimes punishable by death.Kofi Annan, while Secretary General of the United Nations, declared that the U.S. attack on Iraq was a violation of the UN Charter. U.S. forces’ mistreatment and torture of prisoners is a violation of the Geneva Conventions. These violations of international law are also violations of Article VI, Clause 2 of the U.S. Constitution, the Supremacy Clause.In December 2005, Bush admitted he violated FISA many times, which is a felony punishable by five years’ imprisonment, and a violation of the Fourth Amendment of our Constitution, which all members of our government swore to uphold, protect, and defend, "against all enemies, foreign and domestic."All these clear violations of international laws and the U.S. Constitution are egregious offenses that more than constitute the "high crimes and misdemeanors" called for by our Constitution as being necessary to merit impeachment.Much more serious than Bill Clinton’s lies under oath about his extramarital consensual sexual affair with Monica Lewinsky that caused his impeachment, these lethal crimes must be punished by impeachment so that the perpetrators are held legally accountable and so that no future president ever dares to commit such crimes again.Members of Congress who oppose this necessary impeachment of George W. Bush, required by our Constitution for committing so many serious criminal offenses, are not only betraying their oath of office, but also their responsibility to the citizens of the United States.Knowing that many of them would, themselves, be exposed as complicit in contributing to and/or condoning these serious crimes, these anti-impeachment, anti-Constitution Democratic and Republican members of Congress have blocked the one prescribed remedy for the Bush Administration’s years of criminal behavior. They have clearly chosen their own reputations and political careers over what is necessary to serve, and, indeed, save, our democratic republic from even further deterioration into an authoritarian state with an excessively powerful chief executive and weakened legislative and judicial branches.In doing so, these selfish members of Congress have shamed themselves, earned condemnation from us, and endangered our future. Voting to re-elect any of these traitors to our Constitution, our country, and us, is voting against our best interests and, as such, a colossal act of folly. We must all keep this in mind come Election Day. It is the strongest argument for the dismantling of the corrupt two-party system that has led us so far from our hard-won civil liberties, our principles, and our values."http://www.buzzflash.com/articles/contributors/1700

@ The SwedeThanks for reminding everyone of what scam statistics is used by Census Bureau. If they were still in School I guess they would have failed miserably in their Introductory Course to Statistics. What a scam, 11.7% should be called unconfidence factor. And even with that crappy statistics, the total months of supply (new + existing) would be somewhere around 2 years (excluding shadow REO inventory)As of the consumer sentiment, check this out:http://research.stlouisfed.org/fred2/series/UMCSENT/

housing price will reach some bottom after housing bill is passed. buy stock now!!! gov bailouts with unlimited dollar. long stock now!!

Also,New orders of manufactured durable goods increased by 0.8%. Excluding defense, they increased by 0.1%. Where are the rebate checks? Or that means the checks are spent on guns and al.?Most of demand is driven by exports. If we only had a real manufacturing base!

IS IT AN FDIC FRIDAY?It seems like Friday would be the best day for FDIC to take over a large bank (see IndyMac), as it gives them the weekend to get organized. I wonder if today will be WAMU’s day.NEW YORK, July 25 (Reuters) – Credit protection costs on Washington Mutual Inc rose sharply on Friday, a day after an analyst said some creditors reduced their exposure to the largest U.S. savings and loan.

Nouriel, Is it time to revise your estimates downward concerning housing price declines?Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss mode … Fitch’s revisions suggest … a very bearish take on housing prices over the next five years: Fitch said in its report that it is expecting home prices to decline by an average of 25 percent in real terms [inflation adjusted] at the national level over the next five years, starting from the second quarter of 2008.And that’s the base case scenario.http://calculatedrisk.blogspot.com/

I couldn’t think of a more appropriate place to post this oped from today’s edition of the WSJ.Oh and by the way, if you consider putting panties on someone’s head torture, come by and see me some time!!!http://online.wsj.com/article/SB121694272101982825.html?mod=opinion_main_commentariesBy DAVID RANSONJuly 25, 2008; Page A15Many newspaper readers, recalling what they read at the beginning of this year, must be rubbing their eyes. How can the economy still be functioning despite the perfect storm of recession and housing collapse that was supposed to engulf it?Although markets are volatile and segments of the country are having a hard time, the national output is up, not down, this year. How has the economy pulled this off? Is there something the pessimists were missing?The answer is yes, and here’s why. People tend to anthropomorphize the world around them, and not just in economics. We look at the outside world and assume that it is governed in the same way as our own lives. For example, we’re mystified by Mother Nature’s apparent heartlessness and large-scale disregard for what we cherish: order, justice and the sanctity of life. We still resist the notion that we can’t dictate the course of the Mississippi, control the way the planet evolves, or equalize the distribution of income.The same parochial streak in human nature is rife in economic commentary. In the context of a household or a business, debt is a burden and can become a threat. But for society as a whole, debt finance is a prime means of capitalizing production and growth.It’s extraordinary, then, that in national debate the narrow view drowns out the broad. Aggregate private debt and trade deficits are widely regarded with equal suspicion and fear — even by "experts." Instead of celebrating the role that private debt has played in creating prosperity, many blame "excessive" debt when things go wrong, and cite it as a basis for pessimism.At the micro level, the failure of an institution is often a disaster to those with a personal stake. But from an overall perspective, when one institution becomes insolvent, another can be relied on to pick up its functions.Again, it’s the localized human costs that exercise the political imagination. The benefits of systemic adaptability are taken for granted. Government responds to constituencies and takes great pains to preserve the existing institutional structure, sometimes guaranteeing or bailing out failing firms. It’s widely assumed that a large enough wave of bankruptcies will bring the economy down. Little or no credit is given to the ability of the economic system to heal itself and find its way back to vitality.What’s excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits.Economists have a professional duty to transmit the more broad-minded vision of the world that their discipline reveals. But economists are parochial too.There’s an old saying that if your neighbors are losing their jobs it’s a recession; if you are losing yours it’s a depression. It’s therefore unfortunate that such a large fraction of prominent forecasters hails from the financial community. Their views are colored by the turmoil suffered in their industry. In an earlier generation, many of the best-known forecasters ran economics departments in nonfinancial companies. Today these are a dying breed, thanks to the past decades of corporate cost-cutting.We are not a nation of whiners, but we do have a lot of alarmists. It is becoming politically incorrect to suggest that the economy is basically sound.We shouldn’t expect forecasters to shrug off the depressing effects of what’s happening in their own back yards. This is human nature. We just need to keep things in perspective when we listen to them. A more objective diagnosis is especially needed during an election year, in which many unfounded fears are broadcast and amplified by the media.A natural system has built-in redundancy. It manages and heals itself. The economic system is no exception. On this page about 10 years ago, Penny Russell and I argued against the idea that the economy is a "house of cards," susceptible to collapse as soon as a few cards are dislodged. We suggested that it’s more like a beehive. The future of the hive does not depend on full employment for all the worker bees. In fact, an accident can put many bees out of action without compromising the hive as a whole.Metaphors are important. If they are off the mark, they can deceive. But good metaphors can help maintain perspective amid chaos. The community of banks, for example, can be likened to players in a game of musical chairs. As the music stops, some comfortable backsides are thrown out to be replaced with fresh ones. When the music resumes, wealth has been redistributed, and livelihoods have been turned upside down, but the game goes on.Most businesses and workers hurt by this financial chaos are as innocent as those whose farms were flooded by torrential rains in Iowa. In nature’s rough justice, short-sighted decisions by some can cause much hardship for others. Yet despite the human tragedies at the local level, the system as a whole muddles through.Failure to recognize this endangers the mental health of our society. We create a far bigger tragedy when we lose heart, change the rules of the game, or act recklessly with quick fixes.Mr. Ranson is head of research at H.C. Wainwright Economics.

Today is NO EVENT Friday!Bill Poole just said on Bloomberg that Fannie and Freedie should be privatized and compete just like everyone else without the backing of the US government. I agree.It’ll never happen in my lifetime! It may get nationalized completetly because the US Government will not allow China et al to lose $$ on their F&F investments because they might stop financing the USA!Just my thoughts! Have a great weekend!

MUSICAL CHAIRS@ Big Carbon on 2008-07-25 12:57:29"Metaphors are important. If they are off the mark, they can deceive. But good metaphors can help maintain perspective amid chaos. The community of banks, for example, can be likened to players in a game of musical chairs. As the music stops, some comfortable backsides are thrown out to be replaced with fresh ones. When the music resumes, wealth has been redistributed, and livelihoods have been turned upside down, but the game goes on."It’s musical chairs all right. Unfortunately the US taxpayer is going to be left without a chair. And concerning "When the music resumes, wealth has been redistributed, and livelihoods have been turned upside down, but the game goes on.", never has it said so well.

NAR PUBLICATIONS AND PREPUBLICATIONS"Yes, as NAR President Richard Gaylord wisely advises, home buyers should take a "long-term view" to building wealth. As opposed to the apparently shorter-term views written by (then-NAR chief economist) David Lereah: February, 2005: Why the Real Estate Boom Will Not Bust – And How You Can Profit From ItApril, 2007: All Real Estate Is Local: What You Need to Know to Profit in Real Estate – in a Buyer’s and a Seller’s MarketOther forthcoming titles in this series:2009: "Why the Phrase "Real Estate Boom" is Often Misunderstood to Mean Higher Prices and How You Can Pray for Them." 2010: "Why the Real Estate Boom Will Soon Bounce Back and How to Eventually Profit From It."2011: "Why Did I Have to Write "The Real Estate Boom Will Not Bust Through the End of the Decade" and How Did I Not Realize How Long A Decade Really Is?"2012: "Oh, Dear God, Please, Please Let the Real Estate Boom Bounce Back… and How You Can Profit From It."2013: "Please, Please, Just Let the Real Estate Boom Come Back This One Time for This One House and How You Can Break Even From It."2014: "Why I Am Willing to Accept a Small Loss of 35% On the Real Estate Boom and No Longer Care About How to Profit From It."2015: "Can I Maybe Borrow a Couple Dollars Off You Until the Real Estate Bust is Over?"http://www.minyanville.com/articles/wm-wfc-boom-depression-summer-bust/index/a/18191

Save number 2 on the market today…gotta finish green and positive before the big vote to rape the us taxpayer relentlessly…

What is the financial "system"? In the minds of our "leaders", it is identically the big banks, especially the international broker/dealers and international money-center banks.So what is a "systemic crisis"? Something that could hurt those banks.I wouldn’t mind a systemic crisis. As I say above, let the banks die.

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