The game for equities at this point is to continue to mask fundamentals and crumbling earnings for this round.Companies are hoping that by next quarter’s reporting, after lowering guidance, after the election, after some “confidence” is restored to the financial system, and there has been a significant rally, the magnitude of the downturn can begin to hit the bottom line.That’s when we’ll re-test the lows of the panicky last couple of weeks… of course if lending stays frozen all bets are off and the grind lower will continue.

You are disqualified from being first unless you first alert those on the other thread that there is a New Thread, as I just did.

A somewhat disturbing piece of news from Canada regarding Oil: DAWSON CREEK, B.C. Canada – who’s making war on the oil industry? (Oct 17)

“So we cannot rule out a systemic failure and global depression. As we have seen in recent days, it will take a big change in economic policy and very radical, coordinated action among all advanced and emerging-market economies to avoid disaster. ” @ RoubiniSorry Professor, but again – your bailout recommendations are merely a weak response to what you already describe as a “systemic failure” which means, that the structure has failed! Your recommendations should address global economic structure in both the real and secondary economies and not the banking and corporate sectors; those parasite sectors – as they have chosen to become.There are strong industrial sectors but you et al ignore them; there are the strengths of civilization building industries but you refuse to address them; there are the fruits of innovation but you refuse to acknowledge all but the cockroaches and the feral. Professor, you were right about the direction and the consequences but you are fatally wrong about the corrective measures that need to be taken, once addresses and confronted.I wrote yesterday to friends, ‘I am now more than confident that the USA will soon collapse and renig on its T Bonds (Debt) – and that the rest of the [Western] World already knows this – be ready for a massive decoupling from the US by EU (UK?) Russia China and Japan (et al) by mid 2009 er, somewhere (anytime) past now.’In essence, the failure of the ‘cockroach industries’ are responsible for the ‘stats’ to date and now it is time for the ‘stats’ of those industries upon which they feed, to enter the perceptive fundamentals of extremis and panic.Denial can last as long as the phenomena – as the superficial perceptions are always the focus of the limited and lazy mind (and mouth) whereby the core is hidden by the veils of misplaced optimism [misplaced trust in "leadership"]brought about by spin and the shill of ‘heads for sale’.The effects of the coming depression and Dark Age would be far less if “leadership” found some courage (not a common attribute in this quarter, admittedly) and laid ‘it’ on the line to the “unwashed masses” – at least they would be prepared.No, Professor, band aids are not a cure for systemic, i.e. structural death.Ho hum

I’m in agreement with you Peter. It’s systemic, it’s not fixable!Nouriel at least mentioned an “L” pattern recession. However, he seems to think that this would only happen with a crash. I don’t agree. I think that we can have an “L” without a crash. But…Without any up-trend (increase in growth agent, i.e. energy), people will ultimately see this “L” pattern and conclude that the current system cannot lift us back up, in which case the system will most likely crash (unfortunately people aren’t smart enough to understand that the growth model is dead and they’ll push for some other B.S., which won’t last very long).

Pretty animated. Not sure that it’ll take 3 to 10 years before inflation ramps up.But here is yet another plug for AG. To bad AG is so dominated by the likes of Monsanto.

Lower interest rates erode capital. Central banks haven’t figured that out yet. They will make the situation worse.

Lahde Quits Hedge Funds and Thanks Idiots for his Success – By Katherine BurtonAndrew Lahde, quit his hedge-fund after an 870 percent gain last year. In a farewell letter to his clients he thanked “stupid traders” for making him rich. These traders…

whose parents paid for prep school, Yale and then the Harvard MBA, [were] there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.”All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.”http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUE96d.HKyw&refer=home

At the end of the week Libor edged lower and TED went below 4.0 for the first time in ten days, indicating that credit is easing, albeit slightly. One significant and unintended consequence of the various actions recently taken is the increase in the 30 year fixed mortgage to 6.35. That will greatly exacerbate an already dismal housing situation. The looming $100Bn credit card default crisis along with the expected collapse in commercial real estate will test the stress fractures already in the system, both directly and indirectly.Perhaps the most significant issue is the apparent corruption that runs to the very heart of this crisis both in its origin and tragically the design and implementation of potential solutions.With myriad unfavourable and even disastrous potential outcomes versus the scant few outcomes that are neutral or positive, chaos may end up ruling the day; the unprecedented volatility in the equity markets would certainly support that notion.

I think that globalization increases the chances of a longer and deeper recession as many countries are unable to reallocate resources to compensate a weaker domestic demand. There will be competetive devaluations and protectionism in order to keep demand that will not help to solve this crisis. Due to its high level of debt, us goverment will take private role driving to higher fiscal deficits and the collapse of the dollar. The recovery will not be fast and soon, and I guess a la japanese.

We hang the petty thieves and appoint the great ones to public office. By Paul Craig RobertsJust as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the US and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.The explanations that have been given for the crisis and its bailout are opaque. The US Treasury estimates that as few as 7% of the mortgages are bad. Why then do the US, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?…It is a strange solution that does not address the problem. As the US economy sinks deeper into recession, the mortgage defaults will rise. Thus, the problem will intensify, necessitating the purchase of yet more troubled instruments…The $85 billion Treasury bailout of AIG is small compared to the $700 billion for the banks, and the emphasis has been on banks, not insurance companies. According to news reports, the sums associated with credit default swaps are far larger than the subprime mortgage derivatives. Have the swaps yet to become major players in the crisis?The behavior of the stock market does not necessarily tell us anything about the bailout. The financial crisis disrupted lending and thus comprised a threat to non-financial firms. This threat would reflect in the stock market. However, the stock market is also predicting a recession and declining earnings. Thus, people sell stocks hoping to get out before share prices adjust to the new lower earnings.The bailout package is a result of panic and threats, not of analysis and understanding… If the problem is the mortgages, why does the bailout leave the mortgages unaddressed and focus instead on pouring vast amount of public money into private financial institutions?The purpose of regulation is to restrain greed and to prevent leveraged speculation from threatening the wider society. Congress needs to restore financial regulation, not reward those who caused the crisis.http://www.vdare.com/roberts/081016_bailout.htm

Lorrie. Bonds and treasuries are dropping in price. Monay market is safer – but only really because the Gov’t guaranteed them. Otherwise, even money markets would break the buck because many also hold mortgage-backed assets. Safest money is in T-bills right now.PeteCA

Kaching!In addition to MA’s vote, I now have a vote to get into equities from the sage himself!http://www.cnbc.com/id/27240103You gotta love the title! “Warren Buffett Leads With a Bold “Buy” Call .. But Is Anyone Following?”Haha! The MSM and Bubblevision still don’t have a clue! The lemmings ain’t following for sure!I have my sights set squarely on my snowflakes and cigar butts. Now I have the sage’s endorsement of a really long hill!Adjust your eye shades for the really bright light!See you on the other side! It was a really good ride!Print First Ask Questions Later.

Prof RoubiniBy the way … I read your post to say that you expect there could be a global domino effect. Small countries with high debt ratio’s collapsing. That is exactly the same point I was making during the onset of the Iceland debacle.But I’m not sure I see a viable solution. Who exactly is going to lend several billion dollars to every one of these countries? Right now, even the Russians are having second thoughts about tossing a few billion into Iceland. Can’t say I blame them. They’ll never see the money again.I have no idea what resources the IMF has. But I wonder if it has the capability to really save multiple small countries from going into bankruptcy over a period of a few months?PeteCA

Symptoms of lemingitis:1. Blind man shooting a eagle.2. Given enough monkeys, finding one that plays Fuer EliseWindows are for lemmings, the only question is not ‘to .. or not to ..’ it is when!P1AQL.

As Peter Schiff said in his book, “Make no mistake; extremely difficult times are lie ahead. Our nation’s character will be tested like never before”.Question is if American people are going to pass this test?

That also depends on the relative position of the Great Bear and the Little Bear constellations. I need to work my models and consult my voodoo software (.vd) to give you exact time and %. All I can tell you is, watch out for the autumn.

To the ancient Greeks, Ursa Major represented Callisto, a follower of Artemis, virgin huntress and goddess of the crescent moon. Zeus, king of the gods, fell in love with Callisto and she gave birth to his child named Arcas. Some say Hera, wife of Zeus and queen of the gods, became intensely jealous and changed Callisto into a bear left to roam the forest. One day Arcas came upon the bear. Callisto stood on her hind legs to welcome her son. Thinking himself attacked, Arcas readied his bow. Zeus, who saw what was about to happen, turned Arcas into a small bear. Grabbing both bears by their tails, Zeus hurled them into the safety of the sky, where they still roam close together as Ursa Major and Ursa Minor. This action might explain why the ancient view of the Great Bear has an unusually long tail.

If you can decipher the true meaning of the story.

A question over here:How bad is the commercial paper?I saw the A2/P2 and it was about 4.5….I heard the settlement is next week for LEH and WM…Please help me if you can. Thank you.hero

Now, I want you to try and imagine a Global Financial System (GFS) without stock markets. Can you? A GFS which is structurally sound where banks and financial systems are solid and have the backing of the Central Banks as support pillars; and where the integrity and of individual economies and sectors are not held hostage by the negative swings of confidence or artificially inflated due to some forecast or mood swing.I think we are all agreed that a global recession is upon us and the duration of it runs longer than two years. Several proposals have come forward to lessen the severity and shorten the intensity of it but not to avoid it. What will become of the system as it stands today after all the structural adjustments have gone through it?

Your post piqued my interest, so I did a brief search on the subject and found a blog connected with a website. I take it with a big grain of salt, of course, but who knows what the future will hold with the way things are going these days?http://thespiritoftruth.blogspot.com/http://www.spiritoftruth.org/stockmarketcrash.htm

“… and now it is time for the ‘stats’ of those industries upon which they feed, to enter the perceptive fundamentals of extremis and panic.”@ PeterJB (me)From Mish:”Leading Indicators at 33 Year Low, Consumer Sentiment Drops Most on Record:-Sentiment Indicators SummaryUS leading indicators have biggest weekly plunge in 37 years.US leading indicators are at 33-year low.US Consumer sentiment drops most on record to 57.5 from 70.3, the biggest decline since monthly records began in 1978.US big-ticket purchase sentiment slumped to 58.9, the lowest level ever, from 75.Canada Consumer Confidence Drops to 26-Year Low.German investor expectations slumped to minus 63 from minus 41.1 in September.French manufacturing confidence slumped in September to the lowest in 15 years.In other news, economists still debate whether or not the US is in recession. By the time they figure it out, the world will be in a recession.Well, actually, it already is.”… and now something else to ponder – massive deflation and massive inflation – all at the same time.Ho hum

Thanks for your consistently high-quality analysis. The bailouts and interventions have done nothing to change the underlying, fundamental situation. Sound and fury, signifying nothing.

consumer confidence isnt that just like a poll. americans are simple sheep

Great clip, I’m now a Hugh Henry fan!

Lorrie – A bond fund is a mutual fund that holds bonds. Any bond will fluctuate in value as expectations for future interest rates over the life of the bond change. For inflation-protected bonds, such fluctuations also occur based upon the expected rate of inflation. The issue is how much you would pay for a currently-issued bond, given that bond’s higher or lower yield and the present greater or lower expectation of inflation, as compared to the bond that you bought, with its yield and the current expectations for inflation. Changes in the CPI vs. real inflation can also have an effect.

“Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore, everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.@ LvMHo hum

Thanks for posting this information. He is very right about legacy. If you can live your life doing what is meaningful to you, that is what really matters.

As I’ve written in the other thread (minutes before the new opened):For any bank which has less then 8% equity, demand that the shareholders cough up the difference. Those who do, get to keep their share. The others lose part (e.g. 3/4 if the equity is 2%) or all of their shares (if the equity is zero). Those shares are transfered to the bondholders in a forced debt/equity swap whereby the principal of the outstanding bonds is reduced accordingly such that 8% equity is regained. This can be recursively applied for debt of different seniorage from the lowest to the highest (with FDIC insured deposits would be considered highest to protect the taxpayer).In a free market economy, the above solution should be a matter of course. Strangely enough, I hardly see it discussed anywhere. Although it would be fair, cheap and punish those responsible for the mess (the shareholders which hired the management and approved corporate policies).I’m glad that you argue along the same lines – I also think that it is the only viable solution to bring us out of this mess.

Bill Gross discusses Pimco’s participation in various government bailout programs and the potenital conflicts of interest. He also discusses Libor, which he expects to decline (Bloomberg radio 10 minutes).

Bill Gross is a pig! who gives orders to the treasury.

The arrogance of the finance system is unbelievable, the workers support the finance industry not the other way around, but you would never know that if you listened to all the talking heads in the media. People literally believe finance runs the show when in actuality it sits on top of the economy like a parasite sucking off productivity.

I believe confidence is being affected in many ways by this crisis. Investory in the market, banks in eachother, and the world in the USA. There are some serious doubts in the world about American-style capitalism now. In our stock exchange, markets and our currency. We have rocked the world’s confidence. Now the IMF is conducting a full assessment, the next president of the World Bank will not be American, and the EU wishes to re-examine Bretton Woods. The implications for the dollar are obvious. The bond market will tell the tale.

Professor, what does it mean on a day-to-day basis to live in a country where the financial system has collapsed?

Just in terms of equities, and, this is just my opinion, I think most of the credit crisis stuff is already priced in, discounted, whatever. The stock market is forward looking. The market however has not priced in the severe global recession which until recently was being denied by almost everyone. I really think the level to watch for the SPX is the 2003 low. If that low is taken out, and, it seems like a good chance, then we are looking at a much deeper, longer rout. I think Roubini is right, best case scenario, a couple of years of pain, worst case is a very deep and long depression and you still can’t rule that out.

The U. of Michigan confidence survey has been running for many years. Like most polls, it’s not perfect. But the really important thing is the trend in the data. There was a tremendous drop in October, and that was on top of an already declining trend. People in the USA are NOT feeling good about the present economic situation – that’s clearly an understatement.PeteCA

Can someone tell the rest of us. Are these posts in Chinese reflecting the view of an individual. Or is this just a blanket e-mail post that is being circulated around?PeteCA

In times of crisis people, when faced with a common enemy, DO rally together. In this case the rich, who will be doing the restructuring, will see their common enemy as the poor and WILL come up with a “solution” (which, of course, is a solution for THEM; and it won’t last very long- it’s all a bubble based on decline of total world resources).

the equity market will shoot up 20%+ out of relief that- the system did not crash- the gambling (not investing): “the 800 point drop was overdoneso I’ll bet on the S & P index”- LIBOR looking better———————if you like to bet, it’s a casinopersonally, the name of the game for me is: keep from losing money (I don’t bet)

if the consumers worldwide refuse consumethen our govts will create Product Rebate Checksi.e. buy and the govt will instantly send you a rebate check—-pay $20,000 for a car and be rebated 5,000 = real cost $15,000+ zero down and interest free for the first two years…get the idea

take soap and toilet paper – and tent over the gold in your backyard

KONDRATIEFF WINTERSome time ago on this blog I mentioned the possibility that the USA (and perhaps the world) could be going into a “Kondratieff Winter Cycle”. Mike Shedlock has also spoken about it on hias blog – but not recently. This idea seems to be catching on, and more mainstream financial commentators are also picking it up.The important thing to understand is that the Kondratieff cycles are NOT like the cycles you see with Elliot Wave analysis. This is NOT about Wave 1, Wave 2, Wave 3 etc. The Kondratieff Cycles are very long-term economic cycles that track the changes in activity and credit. It’s ironic that theman who figured out these cycles lived in Russia and studied the behavior of western economies. He was eventually executed by Stalin.You can read about Nikolai Kondratieff and his ideas about economic cycles here. If we do go into a major Kondratieff Winter, we would effectively enter a new Great Depression in the USA. But the actual form of the outcome is still not possible to predict. Most likely … some form of inflationary depression.http://www.kwaves.com/kond_overview.htmPeteCA

Transalation:I heard the completion of the hearts of fit:- I buy the stock price is not cheap, you go to buy more shares so that the price rise.- I am very worried. However, please do not worry, we will have died.

http://en.wikipedia.org/wiki/Clathrate_gun_hypothesismetane start to budble from sea flore in Arktic – Sept 2008.Bubble will kill us!

All you have to do is make sure you don’t have to clean up the mess afterwards. That’s what future generations are for…

Probably not.Cancer seems to be one of the best analogies for this whole crisis, and like cancer we don’t seem to have any really good, realistic treatments for it.

some sort of inflationary depression.Stagflation?

Thanks everyone for the feedback. TIAA CREF offers few alternatives but I’ll wander over to Fidelity and Vanguard and see if they offer anything in the way or T Bills. I have a little bit of silver just in case. Wish I could put all my savings in laddered insured CDs for now, but unfortunately investing in 403s is mandatory.

!!! “the USA will soon collapse and renig on its T Bonds”That would be “renege”, Peter. The Dark Ages started a long time ago and coming to full flower now.

Could you do us a favor and post in the language that’s native to this blog (English)?Thanks!

For “systemic risk” read “sellout.” As everyone knew, the banks are not going to use their government money to lend. They are going to use it to boost their capital positions. So how has that reduced “systemic risk.”And by the way, in a world in which nothing can be valued, what is the “system” Nouriel is talking about? What “system?” A den of thieves? That is a system?Wait til people find out that one of the reasons all the on-the-ground economic facts are deteriorating, is BECAUSE of the bailout Nouriel recommended. Then what are they going to make of this fraudster?Who paid this guy off, anyway? Who got to him? Any thoughts?Oh and by the way, what happened to his proposal to ban “all” home foreclosures? Notice that his interesting in preserving on-the-ground facts diminishes as his schemes are adopted to shore up the political system.Ban housing evictions, just like I said in my book The Eminent Domain Revolt.Oh and by the way, Rezko is meeting every day all day with Fitzgerald. Stay tuned for the indictment of the Syrian mafia pimp Obama. For more on this, see Evelyn Pringle’s excellent “Curtain Time” articles at opednews.Fitzgerald is a flatfooted clod–he bungled the Libby investigation. I hope he isn’t so stupid that Obama manages to slip through his grip and establish the Syrian mafia as the controlling force in the United States (you know, don’t you? Auchi, Alsammarae, General Mediterranean–you know, the whole rob ‘em kickback crowd. You know all about that, don’t you? Don’t you?)

Oh and by the way, wait til the rest of this story gets out. This house stuff is small potatoes compared to Obama’s pay to play work for Rezko and the gang. Nevertheless, the hair will stand up on your head once you read the facts about how many crimes Obama and his cronies have commited as part of their work for the Combine. Still an Obama supporter?WASHINGTON, Oct 18, 2008 /PRNewswire-USNewswire via COMTEX/ — The following is an excerpt from an article by Jerry Seper from The Washington Times, and is being released today by the Republican National Committee:(Logo: http://www.newscom.com/cgi-bin/prnh/20080519/RNCLOGO )October 18, 2008A former Illinois bank official, now claiming whistleblower status, says bank officials replaced a loan reappraisal that he prepared for a Chicago property that was purchased by the wife of now-convicted felon Tony Rezko, part of which was later sold to next-door neighbor Barack Obama.In a complaint filed Thursday in the Circuit Court of Cook County, Kenneth J. Connor said that his reappraisal of Rita Rezko’s property was replaced with a higher one and that he was fired when he questioned the document.Mr. Connor, a real estate and commercial credit analyst at the Mutual Bank Corp. in Chicago, also noted in the complaint that the bank received a grand jury subpoena in October 2006 requiring it to produce information concerning Mrs. Rezko’s purchase, including the bank’s files on the property. …”Connor’s internal whistle-blowing activity at Mutual Bank implicates Mutual Bank and the potentially guilty officers thereof to prosecution under federal and Illinois statutes,” said the complaint, filed by attorney Glenn R. Gaffney. …According to the complaint, Mr. Connor reviewed the appraisal of the Rezko property by another firm, Adams Appraisal, which had set the value at $625,000. Mr. Connor’s complaint said that he told his bosses in a report that the property had been overvalued by at least $125,000 and that a “reasonable and fair evaluation” should have been no greater than $500,000.Later, the complaint states, Mr. Connor observed that his lower appraisal was not in the Rezko file and that he notified his supervisors that it had been replaced. He said, according to the complaint, the new file had been reviewed by the FBI and “if the FBI were to ask me about such matters, I would tell them the truth. I never rescinded my original findings.” …To View The Entire Article, Please Visit: http://washingtontimes.com/news/2008/oct/18/whistleblower-hits-obama-friends- appraisal/print/ (Due to length of URL, please copy and paste into your browser.)

HELP ME UNDERSTAND? Everyone including Prof. Roubini says the G7 and EU will do whatever is necessary (unlimited money) to protect a financial meltdown. Yet, all financial experts, economists, etc have consistently told us that pumping huge amounts of money into an economy will have disastrous consequences (inflation, currency devaluation, etc). So how does any of this make sense? And if we can do this, then why not pump unlimited amounts of money into healthcare, education, crime prevention, poverty, increasing the minimum wage and saving homeowners, etc?? I just don’t get it!

Cancer(derivatives and leverages) in the body of capitalism should be excised as soon as possible. A patient’s deterorating illness cannot be prolonged by increasing dose of morphine injections forever. By feeding the cancer with pain killer, it will not save the cancer and capitalism, but it will make the patient die with more prolonged pain. Let’s take the patient to an operating room and get a radical step to remove it with no further morphine.

@apj: “O my warped little Austrian. A Roubini article doesn’r go by these days without reference to “Depression” and you try to paint him as an optimist? What is that you don’t understand? Or don’t you actually read his articles? It’s a shame the laissez faire nutters got us into into this predicament. It’s more a shame they can’t even admit it, let alone be man enough to roll up the sleeves and lend a solitary brain cell to overcoming it.”“Optimist” is not the word. In truth, Dr. Doom has turned into Dr. Hope, or Dr. Delusional — read his words below.* The simple fact is that bad actors took hold of the nation’s financial system, ran it to the moon with no foundation and when it collapsed, turned to honest people, not to save the people, but to put themselves back in position. For Professor Roubini to back the restoration of these crooks that are running not only America’s financial system but its domestic programs (such as Greenspan’s opinions on Social Security) and foreign policy as it affects their resource adventures throughout the world, is ludicrous.The bottom line is that (whisper) some are born to the purple and some have to be janitors. If you want to make the world work you have to have (shhhhh)… division of labor!*Roubini: “So, how have things changed in a week since this column was written? On the positive side the G7, the EU and other economies have committed to do whatever is necessary (not allowing any systemically important bank to fail, recapitalizing banks with public capital, providing unlimited liquidity to the financial system, providing direct credit to the corporate sector, providing guarantees to most banks’ liabilities, and any other necessary policy action) to prevent a systemic financial meltdown; most of these actions are sensible and follow closely the ones that I suggested were necessary to prevent the meltdown that the financial system neared at the end of last week. Much more needs to be done including further monetary policy easing, a large fiscal stimulus program to boost demand at the time when private aggregate demand (consumption and investment) are sharply falling; and a plan to reduce the mortgage debt burden of millions of distressed households. But at least policy is going in the right direction and the probability of a systemic meltdown – that reached a peak a week ago – is now significantly lower.”

The simple truth is that no one knows what is going to happen! It all hinges on the amount of true debt hanging out there. The optimists like our Prof. NR (yes, he is an optimist) think the debt losses are small enough that a “bridge loan” from the taxpayer will solve the problem.The pessimists fear that there is a minimum of $65 trillion of debt losses out there. This is so much debt that the combined Western Governments cannot afford to tax their citizens with such a debt load.Well, why not just count the debt and see how bad it is? Unfortunately bank secrecy laws prevent such accounting “transparency.” Ipso facto, the fog of economic war is upon us.

Translation of above request:你能不能做我们的支持，并张贴在语言的本地本博客（英文） ？谢谢！

At the Alfred E. Smith Memorial dinner last week, Barack Obama quipped:”Given all that’s happened these past few weeks on Wall Street, it feels like an odd time to be dressed up in white tie, but I must say I got a great deal. I rented the whole outfit from the Treasury Department at a very good price. Looking around tonight at all the gourmet food and champagne, it’s clear that no expenses were spared. It’s like an executive sales meeting at AIG.”The joke about AIG was met with very little laughter, and I sensed, as much as one can sense in watching something like this on video, that the crowd was somewhat stunned by the comment. You don’t make fun of the cowards and criminals at the “rescued” AIG, which, after all, engaged in some suspicious “black” business in addition to its “above-board” fleecing. A few scattered boos were heard. How could he — how could the future president of the United States make a joke at the expense of protected criminals? It simply isn’t done.Obama remained unruffled, of course, taking it all in. The beauty is that he holds all the cards. I don’t expect he will “save” our financial system, as he is, after all, palling around with the likes of Robert Rubin. Still, I like that he made fun of AIG to its own (and owned). Good for him.Speaking of Democratic presidents, from the NYT:”As of Friday, a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.”

Interesting article on Russian market collapse. FSB takes over the remaining private companies:Read Putin’s lips carefully. Last week, he said: “We should refinance only those credits which were involved for realization of investment projects or acquisitions of shares in Russia.”"That means he intends to make a choice. Oligarchs with famously expensive houses in London or the French Riviera, English football teams, steelmills in the United States and aluminum smelters in Nigeria, need not apply. Disinvestment in Russia, job cuts, transfer pricing of profit abroad – these are criteria for passing over an applicant for bail-out finance from the state”http://atimes.com/atimes/Central_Asia/JJ17Ag02.html

Ludwig von Mises versus Nouriel Roubini”The Chimera of Contracyclical Politicies”"An essential element of the ‘unorthodox’ doctrines, advanced both by all socialists and by all interventionists, is that the recurrence of depressions is a phenomenon inherent in the very operation of the market economy. But while the socialists contend that only the substitution of socialism for capitalism can eradicate the evil, the interventionists ascribe to the government the power to correct the operation of the market economy in such a way as to bring about what they call ‘economic stability.’”These interventionists would be right if their antidepression plans were to aim at a radical abandonment of credit expansion policies. However, they reject this idea in advance. What they want is to expand credit more and more and to prevent depressions by the adoption of special ‘contracyclical’ measures.“In the context of these plans the government appears as a deity that stands and works outside the orbit of human affairs, that is independent of the actions of its subjects, and has the power to interfere with these actions from without…“The most advertised among these suggested remedies is contracyclical timing of public works and expenditure on public enterprises… But the problem is how to finance these public works. If the government taxes the citizens or borrows from them, it does not add anything to what the Keynesians call the aggregate amount of spending. It restricts the private citizen’s power to consume… If, however, the government resorts to the cherished inflationary methods of financing, it makes things worse, not better. It may delay for a short time the outbreak of the slump. But, when the unavoidable payoff comes, the crisis is the heavier the longer the government has postponed it…”All this talk about contracyclical government activities aims at one goal only, namely, to divert the public’s attention from cognizance of the real cause of the cyclical fluctuations of business. All governments are firmly committed to the policy of low interest rates, credit expansion, and inflation. When the unavoidable aftermath of these short-term policies appears they know only of one remedy – to go on in inflationary ventures.”Ludwig von Mises, “Human Action: A Treatise on Economics” (Third Revised Edition), pp 798-800.

Sorry. The original Bloomberg article is here.

Deflationary depression from what I understand. 70 year or so credit cycle, contracting of credit, some of what Kondratieff described we are seeing today in our markets and in our society. Now I have heard inflation and deflation defined in a variety of ways, so it is not clear what people are talking about when they use these terms. Deflation here I believe, and, I am no expert, is defined as money coming out of commodities and into bonds. Falling interest rates erode capital as it takes more and more to service the debt. Also the proponents will argue that the Fed will have to monetize the debt, they will print money essentially and buy their own bonds. Traders know this and buy in with the wind at their backs. This collapses the interest structure and causes a deep deflationary depression, nasty, nasty, nasty, that is then ended by the only true public works project humanity seems to be up to, warfare on a global scale. Past behavior being the best predictor of future behavior.For more please see:Prof. Antal Fekete

The problem is that we’re in a downward depressionary cycle/mode and that as soon as you downgrade something this downgrades something else, which causes the earlier downgrades to downgrade further. A pure downward spiral!The Kondratieff article that PeteCA posted above is worth a read to understand why the outcome can only be a big drop. I don’t, however, agree with Kondratieff in that there’s going to be another up-cycle; that is, I don’t believe that there will be any substantial up-tick. Mostly I project this out of the fact that we’ve never encompassed so much of the globe that we now do: total resource consumption, overpopulation etc. and then there’s climate change…There is NO investing in the existing system/infrastructure that won’t further push us away from sustainability, which can ONLY be achieved through reduction in consumption.

Thanks for the kind words.As you know, I’ve been in the deflation camp for quite some time now, reasoning that the the biggest financial crisis in the century would have contracted money supply irrespectively of how retard and corrupt the handling of the crisis would have been.The only other possibility that I consider technically possible in the western economies is hyperinflation followed by a straight currency collapse, but I always considered that a marginal scenario assuming that any people with two digit QI could see it’s an economic nuclear winter.I still think the major currencies can go into hyperinflation only after a unthinkable series of unthinkably bad mistakes by politicos and central bankers. What scares me now is that to date they are on track to make all possible mistakes and are desperately trying to prove they have single digit QI.Now I keep the collapse of the major currencies scenario, as a non-zero probability one. Especially the Euro.

Dispatches from the Apocalypse1. My friend the plastic surgeon says bookings down 70%. He’s okay, but says one of his colleagues applied unsuccessfully for a HELOC on a fully paid McMansion to float the business. Rich plastic surgeons are being denied HELOCs on fully paid homes.2. Received this catalog obviously targeted at the wealthy zip in which we rent: Posh Tots: The Most Extraordinary Children’s Furnishings in the World, featuring outrageously priced poseur crap all suitable for derision in the blog Stuff White People Like. Example: Tumble Outpost Petite Palace outdoor structure; cost $122,730.00. How can one short these companies?3. The Onion: Financial Planner Advises Shorter Life Span. “Morgan Stanley financial adviser Henry Dalton determined that Jason Hutchinson, 43, could make the best use of his portfolio by dropping dead at the age of 62. … ‘Mr. Hutchinson could significantly reduce his spending by simply living less. … He really shouldn’t live a day over 62—or 59 if he wants a funeral.’ In order to help his client plan for his financial future, Dalton presented Hutchinson with several of the company’s comprehensive suicide packages.”

Sorry! I wasn’t aware there were *rules* Excuuuuuuuuuussssssssseeeeee Me!

US goods and services?????Ohh – I see – you mean real estate agents and wall st. shystersIf they had any sense they would blow the current failed system up and thus gain maximum advantage. Luckily for the $ and the US they don’t have the balls.

Agreed. The question is who will come out on top. Will it be the current Western regime in some form? Or will it be China/Japan as a naked power, or perhaps with old Western bankers acting as a front? Or, perhaps, the Saudis or some coalition of the oil producers?If we continue to kick it old school then the war on the poor (read: not rich) continues as does a march toward consolidation of power.If Asia takes the reins expect the U.S. to be their new serfdom as they do have a grudge against us. The upside may be that China seems to have conservative banking practices.The Saudis/oil producers might work out best since they seem to simply look for the highest bidder and, having investments in the West, presumably wouldn’t consider our destruction profitable.Please share if you can think of other players/scenarios.

I wouldnt be so sure, this is deflation buddy EVERYTHING is going down for the next year at least. The whole banking system almost collapsed the other week and gold made relatively modest gains whilst the gold stocks made hardly anything also remember it only took another week for gold to start going down again and look at the stocks. Im expecting 350 to 450 gold and 6 silver by the time deflations through with it. Its a shame all you gold bugs are right about whats happening economically but unfortunately your all going to lose as much as the buy and hold index sheeple, look at your accounts and see how much youve already lost. consider this tough love.

I’ve been in agreement on most things with Mr. Roubini for a long time now but I have to break ranks now. I think one thing which is not discussed nearly enough these days is the drop in energy and metal prices. If this trend continues it’s going to be a huge fiscal stimulus to both consumers and producers. It is similar to a permanent tax cut and in most cases a significant one. If the government injects another stimulus package of their own there is a chance that things may start reversing much sooner then they would otherwise do. Mr. Roubini himself acknowledged that another stimulus package is necessary and will be helpful but I think we’re forgetting we’re getting a great unexpected (and possibly permanent at least in the near term) one already which is just starting to take effect.Just my two cents…

A couple of questions you may wish to ask: Why are commodities in decline? To what extent did higher commodities impact the economy in terms of duration and levels? And related to the second question; have there been other developments in the economy that could diminsh any apparent upside from lower commodities?Considerations: higher interest rates; increase in personal debt; reduced value of personal assets; decreased demand; availability of credit for individuals; employment / job security; companies generally do not give back price increases with the exception of energy e.g. once your cornflakes are increased Mr. kellogg is unlikely to move the price back to the lower levels; etc…The economy is deflating and with best efforts, notwithstanding systemic corruption, governments are doing everything in their power to add liquidity and thereby reflate the economy. From everything I have read the jury is still out on the risk of a serious deflation event.There are lots of articles and discussion about that on this site. I also saw a report on CNBC Europe where pundits discussed that very topic. Here are a couple of links for what it is worth: CNBC America discussion of Gold, inflation, deflation and credit markets CNBC Europe discussion

You make a very good point. How does this make any sense? The policy makers of this administration aren’t dumb. They know exactly what they are doing. And the experts are right, printing unlimited money is disasterous. Read this for more: http://www.financialsense.com/fsu/editorials/delta/2008/1016.htmlSo why are they doing what they are doing? My opinion is that they are delaying the inevitable until after the election.

That’s deflation

I just went to the gas station and paid $1.50 for a candy bar and $3.00 for a bottle of water, the cost of gas caused a lot of things to go sky high but how quickly do you think the gas station manager and grocery store managers will lower prices? Deflation is not an even process and since the wealthy will fight to maintain their stock prices and real estate prices this deflation process is erratic and uneven, the central bankers will be pumping liquidity all the while nationalizing and stimulating. The deflation of the 1930′s is not a likely scenario just look how desperate the elite were to prop up their banks and to further prop up the banks they will have to prop up the entire economy. Don’t expect prices to fall radically all over the place.

http://www.greenfaucet.com/market-neutral-interview-with-fannie-maes-former-chief-credit-officer/96045

The decline in commodities is mega investors/hedge funds deleveraging but the demand has not wildly gone away. You could say a big portion of their price was speculation. This deflation is temporary.

I have always been agnostic on nuclear power. I like to hope that, if our next President gives high priority to a low-loss national electric grid, renewables will be able to take over most of the power generation load4. Wind and solar-thermal are poised to become big players. IEA’s estimate that renewables will only grow from 1% to 2% (by 2030!) can be dismissed due to IEA’s incestuous relation with fossil industries – nevertheless, one must have healthy skepticism about whether renewables can take over completely. Maybe an understatement – I’m not certain. James HansenHansen goes on to talk about 4th generation nuclear power in the Trip Report it’s on his web site. To me the reasons are simple why we may not make it. You know the survival of the human race. Profit all that money and the power the fossil fuel industry has to stop or slow any progress trying to be made. We can’t get there from here. There is a lot to be said about Nationalizing energy. On this present path it doesn’t look good. Solar-thermal will work and can be done in time the hardest part is the low-loss national electric grid. Wind and nuclear if the money that so far has been stopping by the people with the money for funding of research. Of course energy is only one part a big part but farming practices and the way we cut forests is a big one. It all comes back to the money profit the economic system. Bit of a problem but if we can’t change now we probably won’t get a second chance. In the past it was this civilization didn’t make it or that one but this time we all get a piece of the action. The damn problem is it is a little slow but the end result is to late have a nice day. In twenty years from today on this present path tuff doesn’t begin to explain it. Think of this as kind of a war.

Make an adjustment Mark and at least learn to recognize (Mandarin) Chinese.English is not a dominant language anymore and it isn’t Roubini’s “native” language anyway.

Food. Inflation will make it hard for people to eat. This is already happening in places such as Egypt, India, elsewhere.This alone could spur decoupling from the dollar and put greater pressure on the remaining participants. This is unanticipated by most people in the fantasy world of funny money.

Japan had lots and lots of savings going into their “lost decade.” Perhaps more importantly, they had national health care and a universal dole (our welfare applies only to those with minor children and the disabled).

Presumably the wealthy have assets that appreciate along with inflation. From what I have read here deflation is only preferable if you have a steady income, no large assets that may lose value, and no debt. So it would seem on the face of it that a low wage worker with no credit who rents their home would benefit provided that their job wasn’t eliminated. Not the largest group of people, but larger than the oft cited super wealthy 1%.

My understanding is that typically, you would expect equities to hit a trough about 6 months, more or less, before the end of a recession. If we take Dr. Roubini’s current estimate of a recession lasting a minimum of 18 to 24 months from the beginning of this year, then I don’t imagine we would expect a bottom to form until sometime between January and June of 2009 at the earliest.Notwithstanding the foregoing, the events of the last year have taken many very experienced and intelligent folks in the fields of economics and finance by surprise. Even Dr. Roubini has expressed being taken aback by the rapidity of the disintegration of the capital markets and so forth in the last couple of months. So…..there’s no telling what may happen in the coming months.SWK

Another interesting development is the speed at which Sarkozy is moving. Coming off his masterful Eurozone agreement from one week ago, he is operating from a position of strenght. This is a new article from Reuters and it looks to me that Sarkozy wants to set the agenda for a new financial order using the same tactics of urgency and fear that Ben & Hank used to try and force through TARP.Sarkozy: “We must make haste because we must stabilize the marketplace as swiftly as possible while coming up with answers.” … “The French leader has advocated a new form of “regulated capitalism” and last week suggested that one step could be a review of the relationships between major world currencies such as the euro and the U.S. dollar.” Bush to host financial summit Sat Oct 18, 2008 8:15pm EDT

Yeah I agree, fuuny there are no comments regarding this in the media. Either money is funneled from the real economy to the banks via the goverment by massive bond issues or the goverment simply prints the money needed for the bail outs.I would believe the US will in some way choose the later resulting in inflation while Europe due to german resisten and a more independent central bank will choose the first alternative resulting in a long depression.

This guy’s medical career is representative of the massive malinvestment caused by the housing/credit bubble. He started out doing what he really loves and was exceptionally good at: microsurgery and reattachments. But insurance, overhead, and private schools are all at a premium, and it’s T&A that pays (paid) the bills in cash with no messing around with insurance claims, same as your ophthamologist friend.What’s breathtaking to me though is his colleague’s situation: rich used to mean that you could live independently off your assets, not having to apply for a McMansion HELOC when your business falls off after years and years of fat profits.

and read the article linked from this editorial, etc…

Economist simply are desperately looking for comparisons when in fact there just aren’t any this is way worse than the Japan crisis and even a lot worse than the great depression. This is going to change society like no one could ever know. It will also be a lot better unless you’re overly attached to materials, then you will suffer.

Still pimping your book?

I suspect China will come out of this as a new force to be reckoned with, but listen the U.S. will have to slow its consumption way down and go through some hell but the U.S. is a very educated society with vast levels of natural resources. The Middle East will always have its problems few natural resources besides oil and not a very educated society, they probably won’t be the dominant society people are predicting.

At the risk of being caricatural, Sarkozy, according to the mental image I have about him, is an unsuccessful copy of Bonaparte. The type of leaders/ people who lives to leave his marks to posterity by doing pharaonic projects, no matter how or why, the only important thing is that should create a buzz and be defined as a historical turning point.Therefore, he should thought that the current crisis. I believe that he doesn’t necessarily have any ideological motives but rather personal inspirations. He should think that he is worth more than just handling profane day-to-day activities of a normal leader. He would want to be referred to by his initials, a la FDR. But I do not know if he thinks that should do that even if he or it doesn’t profit his country.To sum up, I do not like him.

Wolrd leaders are beating their own drums in order to demonstrate self-importance in this crisis. The truth is … this crisis is largely caused by their failed economic polcies. The issue is not even really finance at all. At the root cause is poor economic leadership, and a lack of courage to steer economies towards the future. Political leaders abhor real change. Few have the courage to see when it is really necessary. The Bush adminstration has failed miserably by not regulating outrageous greed and malinvestment by Wall Street. Corrective actions did not require brilliant financial knowledge. Rather a simple commitment to integrity and common sense would have worked wonders. It was completely lacking. Meanwhile, leaders in Europe have also failed miserably – by not taking the initiative to reform Bretton Woods 2 and steer their economies towards a new global relationship. It was clear for a long time that the US dollar was doomed as a reserve global currency, but they never moved towards a future vision.PeteCA

Prediction for Monday and tuesdayMonday: overnight borrowing cost come down libor drops significantly equitys rally then fade later in the day due to fear of lehman on tuseday.Tuesday: hedge funds and other instituitions with exposure to lehman cds all get paid via the taxpayers through AIG goldman sachs morgan stanley and the other banks the goverment bought into. libor drops significantly again causing equitys to rally hard.”The scam continues” and the little guy gets screwd

Welcome to the club! I’d been asking this for a LONG time now… I think that many are finally getting it!

Again more misinfo. Krugman was/is a HUGE HILLARY supporter, not Obama. He was jockeying for a cabinet post under Bill Clinton and was surely in consideration for one under Hil.

As for the initials, the acronym is already taken …

Breathtaking is right. You can’t expect to operate independently off illiquid assets you can’t leverage anymore, especially housing, which is on the cutting edge of asset classes experiencing deflation (even at the McMansion level, at least in some geographic locations). If a physician’s patient base for the past several years has been predominantly folks paying with cash and credit for truly elective cosmetic procedures, one would anticipate a dramatic drop in revenues as cash and available credit become more dear, and a consequent permanent reduction in the physician’s level of reliable income for the next several years, absent a shift of the practice back into procedures that are covered by insurance.I remember a late orthopaedic surgeon in town who had grown up during the Great Depression and while quite successful, always drove an old, beat up car, lived in a modest home, never wore flashy clothes, etc. , unlike many of his younger contemporaries, including my now 80-year-old father, who was also an orthopod. We are now wrestling with the fact that my father and mother have illiquid assets that far exceed the liquid assets they are supposed to live on. They still reside in an expensive home they built 35 years ago that they really can no longer afford to maintain, and which they may well have difficulty selling in the current environment should they come to need more money in the next few years.Of course, I note with some amusement the novelty cocktail glasses in their home bar, which carry the legend, “It’s better to live rich than to die rich.” Guess it’s more in our nature to be like the cavalier grasshopper, rather than the industrious ant of Aesop’s Fables. SWK

Some of those photos were really funny. Of course, I might find them less so her ticket were actually to win!SWK

Only if th emen allow them to…

“Bush to Host First in Series of Summits on Financial CrisisBy Roger Runningen and Gregory ViscusiOct. 19 (Bloomberg) — The leaders of the U.S., France and the European Commission will ask other world leaders to join in a series of summits on the global financial crisis beginning in the U.S. soon after the Nov. 4 presidential election.President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after meeting yesterday that they will continue pressing for coordination to address “the challenges facing the global economy.” “@ http://www.bloomberg.com/apps/news?pid=20601087&sid=atEt2ELh7cZY&refer=homeNone of these s&%t-heads are up to bringing anything to the table so as soon as the World gets used to this fact, then we can all move on towards recovery and the next structural build, in socio-economic terms; a totally different experience.And, the system is broken and as Mish says, frugality has been ‘re-born’ (my interpretation) Messrs. Benanke and Paulson, et al, will not be obeyed!It’s a free-market cow thingy… kicking the s*&T out of the milking shed…It’s all correction from here on in.Ho hum

Agree that Libor becomes front and center in the finanical media and drops to the mid 3′s – I think there will be issues with the hedgies that might alter the dynamic you describe.

You’re right…I was thinking the same.hero

As somone posted above lower oil may help the economy – This week’s Barron’s seems to think so tooBARRON’S COVER Sorry, Chicken Little (free access) It may feel as if the sky is falling, but things aren’t as bad as they seem. Our saviors: cheap oil, strong exports and inventory rebuilding.THESE ARE HARDLY THE BEST OF TIMES FOR THE U.S. ECONOMY. But they may not be as bad as you think. The credit crisis, stock-market crash and fall in home prices have raised legitimate fears of a nasty and protracted recession. Yet the economy has often proved more resilient than is commonly thought — and constructive factors that have gotten scant attention should help the U.S. skirt a deep recession. In fact, it’s possible that the downturn could prove to be one of the briefest and mildest on record….

Bologni! In 1986 while still in highschool I had half a dozen jobs making $10/hr now 22 years later the cost of everything has gone up 4 times except a $10/hr job is like some treasure. So average people the last 10 years were forced to speculate buying houses to make a profit, buying into the .com bubble but oh wait now all that’s gone too, so what’s left? You’re absolutely nuts and in your own elitist world if you think this thing is going to be mild.

No one will make money going long inflation adjusted for the next 20 years in the stock market, that ruse is up.

A new paradigm if you will of self-sustainability, economies based more on the laws of the universe as in localized economies on a smaller scale with emphasis on alternative renewable energy. Ironically what’s happening is a very good thing.

since the world despises the US for leading it to the brink of financial/trade/economic disaster-and maybe over the cliff -the world will want its pound of fleshwhen it comes time – to buy or not to buy HUGE US DEBT – what price will the world exact from the US?

In a sense the U.S. is hedged by the rest of the world being held hostage to the U.S. currency. Other countries are furious but their options are limited. China would have to be the one aligned with the Middle East and Russia to break BW2.

Answer. Global wage arbitrage. There’s no engine – until US workers get paid wages that are more in-line with the wages of our competition. Unfortunately, that means a significant decline in our living standards. That’s exactly what is going on now. We are experiencing major deflation of our asset classes – home values, commercial real estate, stocks and bonds. The places where Americans have held all of their wealth are now declining (rapidly) in real value.PeteCA

That story is rubbish. OPEC is already moving to cut production and push up oil prices. Also, the significant drop in oil prices has not been passed on to the US consumer. Gasoline prices at the pump have not dropped by anywhere near the same percentage as oil has dropped. As far as exports go, the US dollar is actually climbing right now. So much for making the prices of our exports attractive. The only reason the balance of trade is (temporarily) improving is because of the drop in oil costs. And I have no idea what they’re talking about with inventories. Major retail chains are starting to go under. Mervyns just filed for bankruptcy – and they were a retailer at the lower end of the pricing spectrum. We are staring ion the face at a MAJOR drop in comsumer expenditures in the USA, and a significant climb in unemployment. The future is not pretty.PeteCA

World economic leadership has been myopic. Pitiful. Countries around the world are going to have to deal with the fact of a major drop in comsumer spending by the USA. This change will be big, and more or less permanent over next decade. Europe, China, and the emerging market countries must all adapt to this change. The current financial crisis is morphing into a world economic crisis – because there are no global leaders out there who are willing to face this change, and to accept that Bretton Woods 2 (the old global currency arrangement) is dead. If they don’t move very fast, their own economies will be dead too.PeteCA

Deadly and succinctly put: the case for the prosecution in Taxpayers of the United States vs The Fed Banking Cartel and Wall Street Billionaires.

Michael:Taking your line: “The creditors who lent recklessly and the shareholders who permitted this excessive level of risk and unregulated derivatives take the hit for their excesses.”.The logical extension is that the institution that should take the brunt of the final hit … is J. P. Morgan itself. JPM should go down. After all, they were the ones who expanded the securitization process and the CDS market, through their efforts with the “Bistro” securities package. This whole effort was an elaborate deal to get non-performing or higher-risk loans off the books at the bank. That way they could continue to expand their loans and generate more profits. From that early start with Bistro, the securitization scheme expanded to the point where officers at a variety of banks parcelled all kinds of high-risk and crummy loans into packages of tranches with dubious risk ratings. So if we demand that the ultimate culprits be brought to justice – the pathway leads directly to the doorstep at JPM. But do you honestly think that the Fed and Treasury are going to let JPM go down? JPM is the epicenter of the global derivatives trades. It is also the epicenter of collaboration between the Gov’t, Fed and the PPT when they wish to conduct market interventions. The fall of JPM would mark the fall of the whole house of banking in the United States. Possible? Maybe. But only if the Grandfather of all depressions hits the USA. Otherwise the Powers-That-Be will fight this outcome to the death.PeteCA

I’d also add that the reason things are falling in value is because they will have less value in the future. McMansion, SUVs, wide-screen TVs etc etc, all will not hold up well in the future of diminished energy.If you haven’t already done so, read the above links (from me) from Orion Magazine. They come as close to painting the real picture (of the future) as I’ve run across.

I posted the Barron’s link above – Epstein’s argument and versions of it are gaining a lotof traction. The underlying comparison is that the reduction in energy costs will act as astimulus similar to the $100 bn Tax Rebate stimulus package from earlier this year. The article suggests the “energy stimulus’ will total almost $170 bn and impact Q4 and Q1(09).In an article 4 weeks ago Epstein made a similar argument , which in effect isolated the economic downturn as a direct correlation to the cost of energy; it assumed that the American consumer would emerge from the financial drunk tank ready, willing and able to borrow so that they could purchase yet another flat panel television. And if they indeed were “tapped out” he suggested that the banking system would benefit from increased deposits.In this current article he seems to have retreated from his earlier position acknowledging “declining credit and decreased wealth in homes and stocks will drain away most of the gains from energy in both quarters. In fact, the net contribution from energy will be quite small when the full debit from credit-and-wealth woes is applied.” It would seem at first blush that Epstein has joined the “consumer is tapped out” crowd that he so readily dismissed in his previous article.His new argument is based on an expected increase in wages, low unemployment numbers e.g. 6.2% and deflation as he states; “the headline consumer price index may even go negative for a few months. It should certainly be low enough to permit an increase in real wages and salaries.”In addition to higher wages he posits that a rebuild in inventory, increased capital spending and higher exports will prevent a major recession and even positive GDP after Q3 of this year. Underlying all of this is a comparison he makes to consumer behaviours post 9/11. “In October 2001, then, consumers must have viewed the change in their wealth as transitory, rather than permanent. How do they view the current decline? No one knows yet. I assume that there will be a substantial blow to consumption. But I don’t assume that it will be nearly as great as do those who believe that all large drops in wealth, however temporary, hurt consumption.”I have had great faith in the resilience of the American consumer who satiated their need to spend to the point that they would mortgage their first born but perhaps this time it isdifferent and they will emerge not with another spending binge but instead a more sobermindset. Apart from a change in mindset it may be that the bottomless pit of cheap and easy credit, a mortgage that is underwater (and still sinking) and a debt to disposable income ratio that is unsustainable will force their unwilling hand away from their credit card.In my view the American consumer has hit the wall and is tapped out.

That is… if we are not entering the Kondratiev winter… brrr!!!…

So we are already at Dr Roubini’s step 12, and stuck in a trap; and the best scenario outcome seems to be a U shaped 18/24 months severe recession, while an orderly mega-deleverage unfolds. Well, we can also be entering a Kondratiev winter, and in that case things could look scary:The geopolitical balance of power is probably going to shift, maybe radically.A number of emerging countries are facing dramatic economic challenges, with enormous social upheaval potential: witness Pakistan’s turning to China for help, or Iceland to Russia (as is the Russians didn’t have enough on their plate).On the other hand the USA is entering a deep recession, its large and increasing deficits are financed by foreigners, its military are almost overstretched by the operations in Iraq and Afghanistan.To take an extreme example, how would America respond to, say, an full-scale invasion of Taiwan by China a year from now? at a time when the federal deficit may be measured in trillions dollars a year? would Americans have the will to act?Food for thought..

Michael,You should check out the article that our friend Guest posted:”The Roosevelt administration then pushed through the Emergency Banking Act (cf. Emergency Economic Stabilization Act) that expanded the RFC’s powers to include government purchase of preferred stock from banks. Banks didn’t want to sell preferred to the RFC. It took RFC chair Jesse Jones telling the American Bankers Association that if they didn’t get with the program and start lending again, the government would go into the direct loan business itself. The banks sold preferred to the RFC. I can only imagine what Secretary Paulson told the 9 bank CEOs would happen if they didn’t sell to Treasury.”http://www.creditslips.org/creditslips/2008/10/some-curious-pa.html

“Underlying all of this is a comparison he makes to consumer behaviours post 9/11″The consumer IS tapped out, and I don’t think one can compare this economic situation to post 9/11. I vividly remember watching Pres. Bush’s speech telling the American people that if you wanted to be patriotic then to go spend money. To me it was a slap in the face. I was raised to work hard, save and help others with what I had, not what I could borrow. I watched a lot of my peers take that speech as a justification to go out and buy everything they could, if only because they were “being patriotic.” Now we’re tapped out, we’ve bought ad nauseum and have the debt to prove it. If any economist is counting on another consumer rally a la 9/11, forget it.

This might partially address this:ECB’s Nowotny Sees Global `Tri-Polar’ Currency System Evolvinghttp://www.bloomberg.com/apps/news?pid=20601087&sid=apjqJKKQvfDc&refer=home

Here is a devastating analysis of the mombo jumbo spewed by Paulson, Bernanke, et. al. last week.Lipstick on Bernanke’s Pig by Gary North – Reality Check (October 17, 2008)

On October 15, Chairman Ben Bernanke delivered a lecture to the Economic Club of New York, titled, “Stabilizing the Financial Markets and the Economy.”I am sure the title resonated to members of the Economic Club of New York, who saw the Dow Jones Industrial Average fall another 733 points before the day was over.He began his speech with these inspiring words:I will focus today on the economic and financial challenges we face and why I believe we are well positioned to move forward.I am reminded of Mort Sahl’s comedy album in 1958: “The Future Lies Ahead.” Yes, it does.I, for one, have no desire to be well positioned to move backward.

If you liked that, see the rest of Gary North’s analysis at:http://www.garynorth.com/public/4146print.cfm

Eh .. they need to buy it. They’ll just take it.

Brilliantly put PeterJB …Is the attribution of these words to you or to LvM ?Best …

Thanks – I understand your point and agree. Leadership does set the standards by example.

I would like to add that for my wife and I, middle class Americans who are not feeling very comfortable these days, we will not be shopping anytime soon. Any extra cash we have after the bills get paid is going directly into my safe. Not the bank. Not the market.This is not over by a long shot and we have an opportunity to learn from past mistakes. Will people learn? Sometimes I think they won’t – then I see polls that have Obama out in front and have some hope. Of course, there are plenty of people who still support McCain, so I am not too hopefull.I know this though – the economic recovery won’t be very easy to start up with the consumer so indebted and credit tight. Not many have cash and those who are smart enough to, won’t be parting with it unless absolutely necessary.Begin Act II……..

It’s their choice: Buying reduces dollar bubble – taking reduces people bubble…

My favorite quotes are:

As in all past crises, at the root of the problem is a loss of confidence by investors and the public in the strength of key financial institutions and markets.The crisis will [then] end when comprehensive responses by political and financial leaders restore that trust, bringing investors back into the market and allowing the normal business of extending credit to households and firms to resume.

Talk about intellectual GIGO (Garbage In, Garbage Out). And

In that regard, we are, in one respect at least, better off than those who dealt with earlier financial crises: Generally, during past crises, broad-based government engagement came late, usually at a point at which most financial institutions were insolvent or nearly so.

Talk about having a sense of humor.I do not believe that the head of the central bank of the biggest economy in the world diagnoses the root cause of a crisis as being a loss in confidence. As if loss of confidence was some kind of contagious epidemic virus. Or that investors wake up in the morning, and since they don’t find enough coffee in their machines, they say “hey, let’s lose a little bit of confident!”. Didn’t it ever cross his … (never mind) mind as to ask WHY did investors and the public lose that confidence, because it is as difficult to lose confidence as to gain it. Or does he and his friends that confidence is a enforceable right for and by the government. It doesn’t have to gain it, and it can punish those who lose it.”In that regard, we are, in one respect at least, better off than those who dealt with earlier financial crises: Generally, during past crises, broad-based government engagement came late, usually at a point at which most financial institutions were insolvent or nearly so” … Yes, we are relatively better off. As government officials, this time around, are reacting much much later, so the usual negative effects related to such interventions would be lesser.

It’s still funny though.

Barron’s: “Sorry, Chicken Little” by Gene Epstein10/20/2008″It may feel as if the sky is falling, but things aren’t as bad as they seem. Our saviors: cheap oil, strong exports and inventory rebuilding.”…”… constructive factors that have gotten scant attention should help the U.S. skirt a deep recession. In fact, it’s possible that the downturn could prove to be one of the briefest and mildest on record.”http://online.barrons.com/article/SB122428335256346205.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_topBelievable? Comments?

See comments on next article below. I doubt that Gene Epstein is putting his money where his mouth is.PeteCA

how good can it get?millions and millions of Americans running to take $ out of their banks!!!zero confidence in govt and Wall St -1/2 of the population distrusts Obama (some of it due to racism)-fearful of socialism and welfarism70% of the population distrusts McCain to handle the ecomony60% expect a DepressionGM going bankruptpeople steadily taking their money out of the stock marketwho in their right mind is buying stock in a Long Depression/Recession?THIS TIME IT IS DIFFERENT AND PEOPLE KNOW IT DEEP DOWNJoe the Plumber is rightly upset – he is being robbed

“The good news is that out of these huge problems will come the pressure to replace our old system with new political and business structures that will provide for a sustainable global economy”.I’d like to think that you are right, but people have short memories and many seem incapable of doing what is right for the common weal. What is an individual’s incentive to invest in a sustainable global economy (unless it is part of one’s ideology) when a quicker buck can be made otherwise?

Asia opening flat to higher – the markets appear to believe that the systemic aspect of this situation has passed. US futures similar pattern. China GDP announced at 10am HK time (for what those numbers are worth) – LIBOR will be interesting – I suspect it goes sub 4 and may even turn in a significant drop. I think the markets are poised for a major upside rally notwithstanding any surprises eg. China coming in less than 9%.

I guess that your introductory sentence scared many people off. So my answer to you does not signify I know a hair more than you do.It appeared, from the the prologue of the current financial drama, that “free market capitalism” was just one of the masks the Administration wears whenever it suits its ends. The other explanation is that the US officials made the big mistake of putting the suffix “-ism” after a decently good system (made out of a natural expression of interactions and from an idea, an ideology). Before, when it was individual and small economic agents who where penalized by the structure of the system, they were considered as a natural slack or dead-weights (as they should be, from a systematic point of view). So each time they turned to the government, it wore its happy smiling mask. It is said that one day, one of these dead-weights went to the government to complain, but it found it drunk and has its mask off and saw its ugly face. The dead-weight was so pissed off, that the government promised to give more booze to each dead-weight so it will not be bothered again. Now, it appears that booze-makers and sellers are becoming the next dead-weights. And given that the government is an alcoholic and that it consider these booze-makers as its closest friends, it broke its heart to break their hearts. Then, the government decided to take off its happy smiling mask and put a hypocrite pity and passionate mask that many mistakenly call “socialism”. This mask makes it possible for the government to never say “no” to its booze-maker friends and ensure they never become dead-weights. It also tries to convince other economic agents that if booze-makers go under, it will mean that their kegs will be empty, something she convinced them, is not what they want.I didn’t read all the piece, but at some point, both the government and the other economic agents would find out that their booze supply will dry up anyway and then … I’ll stop here. I will keep the suspense open, and don’t want to spoil your reading.

Thank you for the clarification.

For people wondering about the price of oil, this chart shows that $70/BL is pretty consistent with a bottom trading channel. i.e. a bounce higher is certainly consistent with the long-term trend. What’s the bet that the folks at OPEC are well aware of this?OIL ADJUSTED FOR INFLATIONhttp://www.chartoftheday.com:80/20081017.htm?TI have to say that those folks at “Chart of the Day” do a pretty good job with their charting of trends. Just a neutral comment – I’m not advocating any positions.PeteCA

If all the government guarantees only leads to this, then we are al in big trouble. The symptoms indicate that it is not the willingness to lend that is the problem. It is the ability to lend.

Please see my comment below at 2008-10-19 13:22:26

I see your point that Pickens’s Plan seems to be the only visible plan that recognizes that a bridge is needed, but I urge you to kick the tires and see what’s under that hood.Pickens directly solicited $billions$ to susidize his Plan from Senator Joe Lieberman and the Senate Homeland Security and Governmental Affairs Committee in July following the initiation of his television AD campaign for the Pickens Plan. An archived video of he hearing is available at this link ickens Plan Senate Hearing 7/22/2008 => Energy Security: An American ImperativeI don’t want to give anything away, but the tenor of the hearing when Pickens is testifying and then taking questions is worthy of scrutiny.imho, before any plan is considered, a competent panel of experts, who have no vested interest in the outcome, should be assembled to derive & produce a National Energy strategy/framework, that amongst other aspects would ultimately provide for a real bridge from the current to the future.A similar panel of experts (with relevant overlap) should also be directed to derive & produce a National Transportation strategy/framework.In the absence of such a framework, I am afraid that “renewable energy” will fall prey to the same business and financial structures in which we are currently entrapped.Looking forward to your thoughts about that hearing.Sincerely,

q1-q3 China 9.9% GDP vs 9.7 concensus- (as reliable as most of the US Metrics) – good for commodities and commodity currencies and the pundits that say China is immune to a global economic downturn. China Stats

@PeteCA,Late last year and early this, Mauldin was a spruiker (choir boy) for the “muddle through” version of this downturn. He, in essence, entirely underestimated the depth of this calamity, I beleive at one time putting NR in the extreme camp. I stopped reading him about May time.I read the newsletter you refer to above the other day with interest. Mauldin is now well and truly into the “shtf” camp now. It has taken him by complete surprise- the ferocity of this storm.I say this for background only. However, he does throw up decent and pertinent analysis. It’s his interpretations I’m very wary about.

All good questions Yves.At the end of the day, ALL DEBT is cleared in some way. Forgiveness, Default, Inflated away, paid from savings/earnings – whatever, it will be cleared.Those with enormously cripling debt levels will become higher and higher risks, pushing UP all levels of borrowing costs. The greater the risk you are, the more you will be obliged to pay as security for the goods and services you acquire. In the case of Sovereign Debt you will be obliged to also pay “more” because your currency is a higher risk.To improve the attractiveness of your currency , nations may raise interest rates.But, what if a hugely indebted nation is in severe economic and employment decline and must chainsaw interest rates? What if that nation has cut rates to zero? And, it’s debts still keep mounting- EXPONENTIALLY? This leaves very few options. It is into this area of extreme financial and systemic risk that the US has enetered in my book. The region of potential soverign default OR a massive (hyper)inflationary surge as its currency is shunned and its Govt decides to turbo print money in efforts to reflate what is in effect a totally bombed out consumer base.Think Hiroshima.

I’m not promoting his plan, just saying that of all the big plans that I’ve encountered his is about the most sane one. Personally I think that there needs to be a massive push for conservation (the only viable “solution”). The markets will eventually do this. And someone is going to profit, and it’s going to be those who get out of the gates early- those who already have money: this is the way it is as existing wealth capitalizes time and time again.What it does for me is stress the criticalness of the situation. But… between you and me I honestly think that the last thing that we should be doing is propping up our transportation system (which is also responsible for our horrendous farming practices- without the ability to transport such great distances we would be forced to reduce our mono-cropping and to scale farming down such that we can do it with less fossil fuels).

Yves: Yes, we are leaving the days of Pax Americana. In many ways this American dominance did add some stability to the world, and a push for democrary. Unfortunately, it was also tainted with domination by power (e.g. favorable oil prices) and towards the end of the era by a multiplication of foreign wars. America has no choice. We must reign in our commmitments and re-prioritize. That will leave a power vacuum in some parts of the world. And its certainly true that other countries are already planning to take advantage of the ebb of American influence. You could say that the choices facing the US election this year boild down to two possible options: 1) Obama: Withdrawal of US commitments and re-thinking of US strategy, ii) McCain: Continuation of present commitments in a “better to burn out than to rust” approach. We’ll see which way the electorate chooses in a few weeks.PeteCA

GSM: Appreciate the comments. I have not followed the evolution of Mauldin’s thinking. I guess we can add that as another data point that things are shifting to a bigger economic change, and not a gradual transition (or smooth recovery).PeteCA

Pete, at this point, Mc Cain is, to say the least, loosing ground. I prefer not even imagine him at the White House. 8 years of W have done great harm to the country, enough is enough! And his choice of Palin was dismal.In fact, if Obama lives through his presidency (I believe there is much racial hatred in the deeper parts of America), he will have to rewrite everything from scratch, at least on the budget front, given the severity of the events now unfolding.

Really, I have to agree, AfA. The US Bond market is set on course to look more and more like a Ponzi-bubble. There we could wery well have a crash landing, at some point a total sudden freeze of lending to the US Government, just like we are witnessing this ‘unthinkable’ credit-crunch. Then what? banana republic-like dollar printing? hyperinflation? whatever the outcome, ‘ugly’ seems like an understatement…

There has been some talk of the cartel of dollar holders/buyers that include China, Japan, Russia and Petrol-sovereigns, that are all aware that non can sell their dollar holdings without starting a dollar crash.I have never seen the USA included in a discussion of this cartel, but obviously, a trigger event that would be larger than any of the cartel members dumping their dollars, would be the US printing dollars. That’s why I have argued that hyperinflation is inevitable, and isn’t the incremental result of adding dollars through government bailouts directly. It is the indirect result of causing panic to other large dollar holders and a crash of the treasury holdings and dollar assets that will cause hyperinflation.It will happen faster than anyone can imagine, and the consequence is going to be much more severe than any official would come close to acknowledging.

My connection is a little slow for the video, but the transcript of his speech is here:http://blog.tnsatish.com/2008/10/global-imbalance-imminent-dollar-crisis.html

What’s a couple billion to have a pound of flesh and a nice new military base? I’m sure we paid more for Iraq.

Absolutely seconded. For me, the most interesting bit of this lecture was the assertion that China has in the works a plan to increase their internal consumption. The whole international economy seems to be a giant birling competition, and so long as we all anticipate each other, check, we all stay afloat. China and the US counterbalance each other, but if China no longer needs us to consume, then down we go.Next question, how to effectively communicate this information to the general public and determine what an average citizen can do to make a difference.

On the other hand… Felix Salmon makes a pretty good job of pointing out the CDS isn’t the problem at all… at least not when the institution involved in writing the contracts are not rated AAA (i.e. actually have to pledge collateral) and they’re forced to mark to market on a daily basis.

Don’t be so ethnocentric. This is a good opportunity for you to learn a new language.

WTF are you ranting about? his third bullet point in the article on which you are commenting is “‧ a rapid reduction of insolvent households’ debt burden, preceded by a temporary freeze on all foreclosures;” Did you even bother to read it?

We should have the right to vote against candidates too!

My apologies for being slow on the uptake. I’ve been trying to come up to speed over the last seven weeks or so, and I’m still connecting the dots. I agree that this is a monumental Ponzi scheme that the powers that be seem intent on keeping in place. What bothers me is that this cliche, as you term it, is the first response I get from economics professors, and read in other economics articles.When said scheme falls apart, there are severe losses on both sides correct? If so wouldn’t it be in China’s interests to move slowly out of the system, or better yet set up a third party to take the losses? Would this also give reason to the Fed’s almost deliberate devaluation of the dollar? To attempt to boost our exports and shift impending losses onto someone else?I apologise again if my comments are remedial, I really am trying to come up to speed as quickly as possible.

Libor (3 month) set at 4.06 for Monday October 20 down from 4.42 on Friday and 4.64 at the beginning of last week. Apart from the financial media that abuses this metric – most qualified observers suggest it is a critical indicator of the health of the credit markets. In a healthy credit market 3 month Libor would be in the 1.60 range. As one observer suggested last week the credit markets are still frozen but not quite as hard. This morning, Bob Doll of BlackRock suggests these are baby steps or the beginning of a healing process in the credit markets and that if things don’t melt down in the interim it is a good time to gradually re-enter the market. Doll also calls for a “U shaped” bottom or a “lazy L shaped” recovery and was clear that the lows would be tested. In the past Doll has been generally quite positive and optimistic; his motivations for taking a more circumspect point of view today are anyones guess. Of interest he was in a dialogue with John Corzine, Governor of New Jersey (and former CEO of Goldman) who asked if the market was healthy enough to absorb an offering of Municipal bonds. NO was the answer. LIBOR TED Spread

There is no rule on this site mandating English.This is a cosmopolitan site with an international focus. Original texts and translations are helpful for everyone; they should at least stimulate curiosity, not fear.On other sites, including Dutch, French, German, and Russian sites, there are often pages with three or four languages. Just as no educated English-speaker would confuse French, German, and Greek orthography, it doesn’t take too much effort to distinguish Chinese from Korean from Japanese, especially at a time when there are so many important development in Asia relevant to the US and UK.It is in the latter respect that English is no longer a hyperpower language, apart from sheer numbers, which are debatable. US (and UK) power has reached its historical limit; one of the failures of that era stem precisely from monolingualism. This kind of talk about “native”, “protocol”, and “incorrect” stinks of the past century and, as Roga aptly noted, ethnocentrism, if not worse; even British Orientalists from the 19th c. emphasized multilingualism.The future is multilingual just as it is multipolar.

The much predicted credit card crunch appears to be arriving on schedule: Delinquencies Mount for American Express WSJ Monday, October 20

Theta, just out of the presses of someone how saw things coming (Karl Denninger):”The Folly Of A Depression ThesisAs I spend more and more time pondering the actions of our Treasury and Fed, along with the last Depression and the actual steps taken by various administrations (most specifically Hoover and FDR), I come to the conclusion that those who claim to know so much about it, and how to prevent it, are in fact either talking out their ass – or worse.Yes, this means you Ben.”http://market-ticker.denninger.net/archives/616-The-Folly-Of-A-Depression-Thesis.html

I think that the trillions in US debt will end up being the price for Taiwan (regardless whether it has been planned that way or not).

80% consumption? Where are those stats?

This weeks Elliot wave analysis.SP500 is in a wave 4 triangle pattern.Wave 4 triangles will have A,B,C,D and E hits off of a contracting triangle before breaking out to resume the primary trend which is down.When this break down occurs will will start a wave 5 which completes this down cycle and have another counter trend rally stronger than last Monday’s 1000 point gain.

Hussman on valuations once again. I am taking it home to read. I doubt it but on a first glance it would appear my views in a recent post made him sharpen his pencil…

Wave 5 completion target is approx. 800 on the SP500 and 7200 DOW.

UBS China Export ratios (27 September 2007 -Jonathan Anderson – Economist

Can someone comment on if the Bear market is over?Someone commented on CNBC that Nasdaq could go much lower:http://www.cnbc.com/id/27275912

11:26 a.m. Baily: Severe recession more likely, sees GDP falling 4%11:26 a.m. Ex-Clinton economist Baily: $300 billion stimulus needed11:22 a.m. Bernanke won’t say the ‘R’ word11:08 a.m. Bernanke: U.S. in severe slowdown with serious consequences

CNBC has for the most part poor quality hosts exception Rick Santelli (smart and honest); Some of their guests are pretty good and others about as reliable as the person who packs your bags at the grocery store. I am not familiar with the character in the interview you refer to however what he says I heard earlier today from one of their very best commentators an old guy named Art Cashin who is right more often than not. Your mind will go numb if you watch CNBC too much and you have to try and filter through their built in bias (which is bullish) and the dummies and the smart ones.For your benefit I have attached a couple of links to what he had to say today – bottom line is the jury is out – things are still quite fragile and should there be another shock to the system or unintended consequence that’s all it would take – on the otherhand if the patient starts to heal we may be past the point of a freefall. In the longer term the depth of the recession will coorelate to the levels of the market. Of interest Santelli was just on 11:45 am after Paulson talked — and amazingly Santelli said that he thought Paulson was confusing his facts and information (While we all might have suspected that – for it to be said out loud by a credible commentator that is very very telling) I often will search through their video library to try and spot interesting interviews) Cashin October 20 (1) Cashin October 20 (2)

Sigh, people still aren’t getting how this all works…China MUST have resources in order to produce, whether for internal or external consumption.China has to import a lot of these resources, which means that they have to PAY for them. They cannot pay for them unless they export goods (generated revenues)!While the statement that China does not NEED the US (markets) is true, this doesn’t mean that it can be self-sustainable through internal consumption (without exports). This is the same trap (delusion?) that the US fell into.China has, however, negotiated a lot of energy contracts and has enough money to meet these contractual agreements for some time, I think. I say “I think,” because it’s possible that their ability to pay might be compromised by the US dollar (oil trading on the dollar?).

Bernanke is talking about another stimulus package. The plan would increase access to credit for “consumers, homebuyers, businesses and other borrowers”.

Roubini is also calling for a $300 bn stimulus package as are the Democratic leadership as is Krugman – Conclusion, build and extra $300 bn into whatever model you use -

TED spread way down today to 3.05 from a high of 4.65 just over a week ago. Libor remains high

I just looked at the revised earnings expectations for the S&P on a 52 week forward basis and to my disbelief, ANALysts still expect 34.18% aearnings growth! Another unfathomable fact is that now, GAAP (accounting earnings)earnings are expected to be 110% higher than “as reported” or actual earnings! To give you an idea of how sick this is, fair value today on the S&P on GAAP earnings is 942.96 while on actual earnings, 449.69!

Stock Manipulation Probe Launched as Price Spikes Suggest Ploys2008-10-19 23:01:00.40 GMTBy Edgar Ortega and Jeff KearnsOct. 20 (Bloomberg) — U.S. regulators are investigatingwhether investors manipulated end-of-day stock prices to avoidbeing forced by their brokers to sell holdings.These gaps, which caused the Dow Jones Industrial Average toswing as much as 104 points this month in the final minute oftrading, suggest investment firms faced with client redemptionsand plunging markets may be gaming the closing-auction system.The discrepancies spurred the Financial Industry RegulatoryAuthority, which oversees 5,000 brokerages, to look for evidencethat investors are improperly swaying prices.General Electric Co., McDonald’s Corp. and the 28 other Dowcompanies swung 0.6 percent on average at the close the last twoweeks, according to data compiled by Bloomberg. That’s almosteight times greater than the average three months ago. Because ofthe swings, the New York Stock Exchange plans to distributeinformation on the closing auction more often to help mitigatevolatility.“Investors don’t ever want to see manipulation because itshows that they are exposed to a different kind of risk than justthe fundamentals of companies,” said Peter Henning, a formerfederal prosecutor and Securities and Exchange Commission lawyerwho now teaches at Wayne State University Law School in Detroit.“That hurts trust in the market.”

Why is Barron’s Banned From CNBC?Posted by Barry Ritholtz on Monday, October 20, 2008 07:42 AMI give Barron’s grief whenever I think a columnist or magazine cover is wrong.But even when some thing rubs me the wrong way, the rest of the magazine is usually filled with worthwhile content: Mike Santoli’s Streetwise, Randall Forsyth’s, credit writings, Michael Kahn’s Technician, The Trader Column, the various interviews, and of course, Alan Abelson. It has been a fixture of my weekend for as long as I have been in the business. I was thrilled to publish there last month.If it wasn’t important, it wouldn’t be worth criticizing.One of the things I enjoy has been the Monday morning CNBC segment called “The Barron’s Bounce,” usually with Michael Santoli. It dawned on me that I hadn’t seen Mike on in sometime, so I started poking around. I was surprised to read via Gawker that ever since the Barron’s cover story looking into Jim Cramer’s track record (Shorting Cramer) in 2007, all Barron’s staffers have been unofficially banned from CNBC.

DOW WILL CLOSE UP 400 TODAY! BOOM!

If only I had the money to create an honest TV media outlet!If anyone in the audience does have the $ and time, we here could certainly help.hlowe

1:37 p.m. Goldman cuts Prudential, MetLife on capital concerns

What are the implications of low TED spread?None, since banks aren’t lending. Also, once Treasury floods the world with new issue, LIBOR will sink even if it is manipulated. Ted spread will widen once again. Blah blah blah.Roubini is paid by Goldman.

I’m not so sure that it’s the world that’s being punished so much as it’s the system that’s being punished.If you figure that the “growth is the object” system cannot continue, then why should there be any surprise that people are looking to radically change it?THE problem is that the same people who made this mess are concocting the “solution.” But, at some point none of us can hide from the realities of living on a finite planet.For “leaders” to come out and tell everyone the truth would likely result in total chaos, something that TPTB don’t want to see (and I agree that it’s not the right approach, but I’m not certain that they can alter the outcome any more than they can fix the current economic situation).

Here is a link that helps to explain - TED

Don’t be so ethnocentric. This is a good opportunity for you to learn a new language.Quit being so nationalistic! There! How’s that for utter unconnectedness?I didn’t come here to learn another language! And I don’t think others did either. Go ahead, pretend that bad behavior is educational.I’ll make you a deal, YOU don’t proscribe for me and I’ll refrain from doing the same for you.And before you start referring to people as ethnocentric you better be prepared to be blasted!AND… I NEVER STATED THAT _THIS_ SITE HAD A LANGUAGE POLICY. Go back and re-read my postings; if they’re not clear enough then perhaps someone can translate them into Madarin!I am NOT waving any flag for the English language. I could give a rip. I have no sensitivities, unlike others appear to have.Scan the archives and see what the predominant language used is. I doubt that there’s as much as half of one percent.It’s silly to dump a bunch of Mandarin here. It’s even sillier to be wasting a bunch of time debating about it. Cumulatively it’s much less of a waste of time if the posters do the translation themselves (rather than forcing 100s of people to do so).

I know that you believe that we’re in for a two-year recession.I know that you advocate that we do everything w e can to avert an L shaped ten-year recessionBut how much money would we have to pump into the economy to prevent a two-year recession.And do you believe that all the money in the world will not save us from the economic pain of the next two year?Gad Romanngadnews.com@gmail.com

I know that you believe that we’re in for a two-year recession.I know that you advocate that we do everything w e can to avert an L shaped ten-year recessionBut how much money would we have to pump into the economy to prevent a two-year recession.And do you believe that all the money in the world will not save us from the economic pain of the next two year?Gad Romanngadnews.com@gmail.com

SO what happens tomorrow when $360 BILLION of contracts on now defaluted derivatives on Lehman are to be settled? I guess that is what all the past couple of weeks stock volatility may be about huh? Unwinding to settle up? We shall see I guess.

no but they will issue a 401k card that requires you to transfer money from 401K to buy milk for shares of MO. ok sir that is a loaf of bread, a gallon of milk and a carton of eggs. that will be .356 shares of MO, please swipe your 401K DEBIT card.now this has been a joke of mine repeated here for a very long time… Guess what folks, what are they proposing ? tax free withdrawals from 401Ks to SPEND SPEND SPENDSPEND ! BUY STOCK or DIE !

The magical buying hour is upon us in 4 minutes….

Hell, at this pace, we will have to have another “Dow 10,000!!” party on Thrusday!

45% for me.

Superior information leads to superior performance…

Mother Nature bats last. That which cannot go on forever won’t. Finite planet holds finite future for Wall Street and Main Street…

Dow is now up 18% just since October 10th…

fairies?

Talking about Nobel Laureates:”Nope, I would always say, “Their capital theory and business-cycle theory are the best I have found.” Our current economic crisis — and the fact that Nobel laureates don’t even understand what is happening — shows that I chose wisely.”http://mises.org/story/3155Ho hum

UP 400 BABY!!! TOLD YOU HOURS AGO THIS WAS THE SCRIPT!

how about tomorrows prediction

LOLOL VIX down 23.86% today! Crisis over I guess.

4:08 p.m. [AVP] Avon Products late-traded shares halted

The low of the day was 7773.71! So…from there to today’s close of 9263.68 is a run of 19.167%

Dow close of 9728

NR:Today’s rally is Bear market rally or really rally?

Why would Treasury renege? Why wouldn’t they just print more money? I don’t follow your logic there.

A friend has been running a system that he developed just over a year ago, and commonly, it signals several orders per week. It actually trades pretty well on volatility, but in spite of that, this is the first week that there have been no orders signalled by it at all.

re: bear market rallieshttp://online.barrons.com/article/SB122428347584046237.html?mod=9_0031_b_this_weeks_magazine_columns”As always, Buffett was folksy in his explanation of what prompts his bullishness (“Be fearful when others are greedy and be greedy when others are fearful.”) He sprinkled his advice with some obvious caveats and cautioned that he hasn’t any idea what the market will do in the short term — a month or even a year from now — but he’s confident that it will turn up before sentiment or the economy does. In any case, most major companies “will be setting new profit records five, 10 and 20 years from now.”And he’s quite emphatic that the investor who has been sitting with cash and calmly watching the carnage should lose no time in piling into stocks. “If you wait for the robins,” he warns “spring will be over.”…Most of all, Buffett despite his long experience and savvy hasn’t run into a crisis quite like this one because, pure and simple, it has no true precedent. That alone anyone should give anyone with fewer resources than Buffett, intellectually and otherwise, pause. Contrary to what he’s saying, we can’t remember anything that deserves to be called a bull market that had to be caught early and it certainly wasn’t true of the last two we’ve enjoyed.As to his allusion to robins in the spring — a nice play on it’s the early bird that catches the worm — as someone has noted, it’s the second mouse that gets the cheese.”

stimulus – isn’t that code for FOOD STAMPS

Remember, too, he takes much larger positions than the average investor and cuts preferential deals. No doubt his portfolio is also hedged to the downside. I doubt he is cavalier about that. When considering his advice, it also helps to remember that he lost billions on currency bets and he is the guy who invested in Pier 1.

Talking about “losers”:From MISH: “Bush to Host Summit of Losers” – A perfect description, andColin Powell endorses Obama. SOLCan anything more be said? “Insanity laughs the loudest”.Okay then, how about – “Benanke considers new stimulus package”?All in all a fine day of applied insanity right ‘across the board’.Ho hum

Remember, too, that he is currently 78 years old, so he only needs to worry about (very) short term public opinion…

I read Hussman and listened to Faber’s comments on Bloomberg today (I had moved, also this morning, from 0% to 15% WW equities BEFORE the input from either guy – more on this later).Hussman’s key point is that the US economy will behave in the future more or less like it has in the past, and,thus, (nominal) earnings growth over the full cycle will hoover around 6%. Based on this, according to him, stocks would now be positioned to yield about 8%/year for the next 10 years assuming no PE expansion.IMO, US growth in the next 10 years will resemble more the Japan of the last 20 years than US in the last 30 so I don’t quite agree with him. But, even under this bearish view, based on the response financial markets have had after the intervention, it would appear that stocks are hoovering around fair value. Thus, a partial entry point here would not be crazy even though we could see, and I hope we will see, at the very least the 2008 lows (IMHO, this “turn around” is happening way too quickly. Despite all the panic, IMO, investors have not reached the “puke” point, the point at which just the word stocks make them feel like vomiting; the time at which the financial news channels start closing their doors due to lack of public interest).So, why did I go 15% into equities today?With stocks possibly being fairly valued here, and as Faber said, stocks being oversold, I saw this as a partial entry point that:1. May provide suitable long term returns despite a bumpy ride in between.2. An opportunity that may not come back in a while with WW stocks over 30% cheaper than last fall and thus posing much less downside risk, while the overall economic risk picture has not changed to me since I have known this was coming for a couple of years now.3. If the move forward is fast and furious, i.e., stocks get carried ahead of themselves (e.g., a 20-30% advance from today within the next year) I can treat this position as an alpha contributing move: if stocks move for example 20% within the next year and I close my position, my 15% position would provide a 3% return to my overall portfolio.4. By the same token, if the market falls 20% from here, that will mean a 3% hit to my portfolio something that won’t make me loose a single sleeping minute.Since my maximum (upper bound) WW equity exposure is about 45%, you can interpret may move today as being quite aggressive. This is definitely not the speed at which you do dollar cost averaging.What would it take for me to add to equities? i) The kind of undervaluation from real panic that may be yet to come; ii) ECRI leading indicators (LLI and WLI) flashing a turn around in the business cycle while, hopefully, most (including the market) are still calling for a prolonged recession. That entry point may be at prices that are significantly higher than today close.So my portfolio now looks like this:- 25% 10 year insured CDs yielding 5%- 25% under Gross’ management PTTRX- 15% WW equities mainly indexed (half in the US half WW according to market cap).- 35% cash (USD of course).May next move may be moving some cash into some tips as these may indeed be undervalued.

He was talking to himself.

More exactly, October 1990. Unless you intend to unwind your positions within 6 months from now.

Datz why I went in only at 15%. I don’t see it as very likely I will go beyond that unless we see signs we are coming out of recession AND stocks are undervalued at that point. I have made nice money trading in an out of EWJ in the last 10-12 years.

It’s all over the media today, Joe Biden said that there will be a major crisis facing the US by next summer (assuming that Obama wins). This is not some conspiracy thing here is the link — I bring it up as this could have significant consequences for the economy if what he says is true. (and I know he has a reputation for running off at the mouth)but I just heard a Dem commentator saying Biden is dead on. Biden on coming non-economic crisis by next summer

Alright, I too am convinced it might HAVE been a good time to get into equities in the short run. I am sure that you possess the necessary timing and stock-picking skills to handle the situation.My question was of general order, to warn other people. Many think about investing in the stock market as a O/I switch; either totally out or totally in, and only think about US equities.

Can anyone draw the line between objective analysis, political propaganda and campaign BS .. I mean PR? I cannot. So I would just dismiss all what he is saying.

By the way a friend of mine is still working trading MBS. There ARE marks for this stuff. Force them to be recognized.

Mei Kwok Yan Ching Pok Guide

The guy’s a moron and that’s comming from a bleeding heart liberal.

Capone. The PPT isd all over the market at the present time. I’ve never seen them so active. Trying to boost the Dow, push down LIBOR, and hold down gold. These guys are beating their heads against a brick wall – trying to get the US markets up again. But the big question is … if Obama wins in November, will the PPT bother to do more?PeteCA

When should we expect to reach these targets? in a few days or in 6 months?

It’s like the US is losing a big game of Monopoly.Washington state looks to be popular.

If only I hadn’t bought “Park Place”.What was I thinking?PeteCA

If stocks are rebounding because they are oversold, does it mean that the bottom has been reached and severity of recession has been priced in the stock prices? Or is it just a temporary rebound?

See Peter Navarro’s latest article. I don’t always agree with everything he says, but his points seem right on this week.Link: http://www.financialsense.com/editorials/navarro/2008/1020.htmlPeteCA

The following is the reason Nouriel’s ideas are such garbage. There never was any “systemic risk”–calling the situation that, was merely an excuse for stealing. The only thing the following article doesn’t point out is that the reason banks were not honoring letters of credit, is that they too saw declining economic activity. This issue is DECLIINING ECONOMIC ACTIVITY, as I have said on a number of occasions. The only way economic activity will ever increase again is to ban housing evictions. Now we are shifting from idiotic “bailout” schemes to equally idiotic “stimulus” schemes. The decline of the Baltic Dry points to a catastrophic decline in economic activity, which no stimulus package on earth will turn aside:Why the world’s shipping industry is grinding to a halt: KohlerTuesday, 21 October 2008Alan KohlerGlobal shipping is grinding to a halt because of the refusal of banks to issue letters of credit.I was alerted to this by TJ Marta, RBC Capital Market’s New York-based fixed income strategist, on the weekend during an interview for the ABC’s Inside Business program.In fact the Baltic Dry Index of bulk shipping rates has collapsed by 89% – from 12,000 in May to 1355 last night. In October alone it has fallen 61%. Rates for Capesize vessels used to ship grains, iron ore and coal have fallen 95%.In his column in the London Telegraph last night, Ambrose Evans-Pritchard wrote that he believed shipping was now slowing as fast as it did in late 1931.Khalid Hashim, managing director of Precious Shipping, Thailand’s second-largest shipping company, was quoted in the Taiwan News yesterday as saying: “Letters of credit and the credit lines for trade currently are frozen. Nothing is moving because the trader doesn’t want to take the risk of putting cargo on the boat and finding that nobody can pay.”Here’s another quote, from Steve Rodley, director of a London based shipping hedge fund called Global Maritime Investments: “The whole shipping market has crashed. But the biggest ships are suffering particularly.”Letters of credit are issued by banks to guarantee payment at the other end of a shipping transaction. In effect, the bank substitutes its own credit for that of the customer, so the shipper doesn’t have to hunt around in a foreign land trying to track down payment.The problem now is that not only are the letter of credit departments of some banks being closed down, the collapse of the interbank lending market has meant that many banks are refusing to accept other banks’ letters of credit.As a result, trade transactions are failing because shippers can’t arrange short term funding for their vessels.Exporters are getting caught up in the problem because their customers are saying “we can’t pay you until our customers pay us”, so there is a knock-on effect that is affecting manufacturers and bulk goods suppliers everywhere.This is now taking over from the retreat of hedge funds as the cause of the decline in commodity prices; with ships sitting idle in ports and commodities building up in stockpiles prices are inevitably falling.It means Australian mining companies may be forced to close capacity before long because there is nowhere to ship their ore to.Like many of the other clogged arteries of global finance, letters of credit and therefore global shipping could presumably unclog fairly quickly if the interbank credit market got moving again.But a big fall in shipping rates, as measured by the Baltic Dry Index, is always a harbinger of a downturn in trade and therefore economic activity.

Allesandro, your comments were fine. I really should know better than to post when I’m coming off a thirty six hour work shift. Apparently I err on the side of obsequiously apologetic. :-/Actually we haven’t owned a tv since 2003, and part of my difficulty trying to understand this mess is than none of the obvious solutions pass my ‘smell test.’ Which then leads me to question whether it’s the recommendations or my gut that are wrong. These days it seems to be a case of ‘pick the economist’ to justify whatever position you want, and this being my first recession, you can see my hesitation. Actually I’ve been lurking here because it’s the only blog I’ve found where the comments are interesting, informative and progressive.Thank you very much for the links, and for your comments. Any data is much appreciated especially since I’m trying to get my peer group more involved in dealing with this crisis. So far only one of my friends will discuss the topic, and as of two weeks ago he was still convinced that talk of recession was alarmist and doomsday naysaying.

Dude, how the hell did you manage to get a book published? Were there sub-prime book contracts avalible in the last couple of years too?

spend ur deadsave ur deadaint much of a choice eh

He talks like Werner Herzog

The U.S. already spends twice as much per capita on healthcare as any other industrialized country – go to a universal system like Europe or Canada and use the savings for social security.

To Yves, NO, I sincerely doubt Buffet is giving a true picture of what he is really doing. I have always maintained that if you want to hitch onto Buffet’s coattails then invest in BRK rather than try to replicate his success by following his folksy proclamations about buying this company or that. On the other hand, some very successful investors/traders have maintained that they could publish what they were doing and people still would lose money. I believe that to be the case.

What many columnists see as a light at the end of the tunnel is another train comming at us hell-bent-for-leather on our track.

Look at France.

I notice You are aggregating blogs here. I run a blog. But find it very frustrating sometimes that Your site demands a subscription fee in order to see a complete article.When You aggregate a blog posting, do YOU pay that Blogger a fee? I don’t think so.As John Perry Barlow has observed, when You’re selling nouns, scarcity increases value. But for ideas, Fame is Fortune.One would think if You are interested in spreading ideas, You would drop the demand for prepayment. As long as it remains, I for one will not repeat anything You post. So it will be denied that distribution channel.So, regarding Your subscription model of information distribution, Hey: Good Luck with that.fwiw,- A Blogger who will not quote RGE / Roubini