Am I first?

Moja

I guess we may have another day of short covering ahead of us. This post is on leverage/deleveraging and increased volatility, how did they start, when will they end.Low volatility in 2003-2007 induced extreme leverage. Then, when economic uncertainty around the time subprime became public knowledge the summer of 2007 induced greater volatility it was the extreme leverage in the market that really magnified the volatility. Leveraged institutions were caught with their pants down. The deleveraging of financial institutions has generated a very nasty feedback loop which has taken volatility to extremes never seen before in the history of WW financial markets.The current extreme volatility in the financial markets is inducing hedge funds and other firms to reduce leverage which in turn increases volatility; but deleveraging will eventually run its course and volatility will come down to more “normal” levels.It can be easily shown that given the increased volatility environment we are in, a long-short hedge fund that is leveraged 10:1, possibly as low as 5:1, will face huge losses that will make it close its doors. And the problem is that even if they deleverage, the losses in the deleveraging process will be so step that the best strategy for the hedge fund manager will be to close shop. This is because their huge fees (20% of earnings) usually kick in only after past losses are recovered. Thus, losses as low as 30% will make most hedge funds close shop.Forget the third quarter; the fourth quarter is going to be the WORST in the history of hedge funds. During the third quarter volatility was pretty bad around the GSEs bailout in July; then it got really ugly starting in the second half of September, around the 700 bailout plan announcement; but it wasn’t half as bad as it is now. Volatility really went through the roof starting in October. Extreme volatility will slowly die-off but it will take a lot of bodies with it.Keep an eye on http://hf-implode.com/Justin Owings and Aaron Krowne are gonna have to work 24/7 to keep up with the numbers:-)

“Everyone is a Keynesian now”.. Would be interesting to see how Roubini comes up with the numbers – 300 billion vs. 500 billion..

I warn you, Professor, nowadays, what you say has a huge impact on the decision making of those clueless politicians, what you suggested is better than tax cut, but nevertheless, only delays the inevitable.

New Roubini video up on Bloomberg. In it he says the recession started in Jan 2008 and will likely end at the end of 2009. That sounds downright optimistic to me compared with his recent comments about the possibility of an L shaped, Japan like scenario.If his prediction is right the stock market will probably bottom in the Spring or Summer at the latest. That would be just six months or so from now, which is sooner than I had been thinking.The stock market decline in the GD lasted 3 years and the tech bubble bear market also lasted 2 ½ years or so. If this one ends in early summer, 2009, that would be only 20 months – not too bad for the worst financial crisis since the GD and the worst recession in decades…http://www.bloomberg.com/avp/avp.htm?N=av&T=Roubini%20Says%20S%26P%20May%20Fall%2030%25%20More%20Over%202-Year%20Recession&clipSRC=mms://media2.bloomberg.com/cache/v.8Wcra7zbSE.asf

At this point I’d like to know where the 800lbs gorilla is. What is the next macro event that sends the economy into a tailspin? Will it be the collapse of an emerging or frontier market and the certain contagion that will follow, or the blindness of fiscal policy that keeps the financial system moving but ignores the rest of the economy?

Fox Story on Obama form LA Times – wont release videohttp://elections.foxnews.com/2008/10/28/la-times-refuses-release-tape-obama-praising-controversial-activist/

Wow! Primero! Has generated four responses already. I guess this is a good way of getting your comment read:-) Check my comment on deleveraging below.

Good morning SGG – is that Fed fifty? what if seventy five or twenty five

THE GREAT SUCK-IN CONTINUES!!!

first wall st. than approx. 6 months main st.

Good Morning-I think you got your answer yesterday. My guess is the Fed told street insiders that the street was gettin gwhat it wanted-50 bps. If it is 75, panic will ensue becuase the markets will wonder what dire things the Fed is seeing they are not, if it is 25, the street will be disappointed but the great suck-in will continue. Thanks for listening!

Greenpeace has come out with a spending plan as well – it would also help the environment, not just the economy.

The FED statement will be more important as to where the market goes since it will meet market expectations at 50bps

thanks for the Cashin comments. It would have been better to fade his last call. So now this one do you follow or fade? It is a casino so flip a coin…

An important question – Apart from macro economic issues that make take some time to germinate – Things like the upcoming US election (whoever wins); a major political crisis e.g. China moves on Taiwan, Russia moves on Ukraine; a catastrophe like a major earthquake in California (USGS San Andreas Simulation (WMP video) ); more ‘surprises’ like Porche/VW; the consumer goes on strike, not likely (a one day wildcat at best) and then work to rule etc…

posted a question to you above

Good observation, but these are “some” of the same people who are asleep behind the wheel and likely do not understand what is occurring around them. As a result, instead of saving for the coming storm, they are still living it up at college football games.

War in the middle east

the BBC report on polar ice depth (I don’t have the link)Major failure of the internet

Could the next bubble be the USD? And when would it burst? And what if it bursts? Could this be the ultimate, final bubble?

you mean the Debt Super CycleAn Inflection Point in the Debt Super Cycle (BCA research)

Hey Guest, I see new lows coming. Wall Thief is still way too optimistic on earnins expectations for next year. We are moving from pricing in the credit bust to pricing in an economic bust. I still say 756 will be the bottom for the S&P early next year and if Obama does what he says he wants to, we may see a double-dip type event lasting into 2012 with the S&P bottoming around 600 or so in early 2012.

you mean a new Volkswagen or Porche

I’m mildly offended by this comment. I did not “choose” to live paycheck to paycheck. My wife and I both work full-time jobs, live in a modest ranch-style home in a small town. I have one house payment and one credit card. With two kids, and rising food and utility bills, paycheck-to-paycheck has been forced upon us, not “chosen.”My money is just as “hard earned” as yours, but my dream of one day being able to provide a larger home for my family and set aside money for my childrens’ education is quickly fading thanks to our current economy. Now the dream is to make sure they have food on the table, clothes on their backs, and a warm place to sleep.I congratulate you on your obvious financial success, but do not assume that because some of us are just getting by that this is a “choice” we made. It comes across as somewhat arrogant.

for clarity, all their people in london got made redundant.

Sorry. 1′st sentence of last post should have said … I’d expect that they DROP the rate by 50 basis points.PeteCA

You are right. The new 3 trillion stimulus is already priced into the VW shares

My local Animal Rescue League has a webpage (with photos) to list new animals received and adoptable – it’s the page I see first when I open the web each day. Each profile says why the pet is there. Numbers listing “can’t afford, owner relinquished” are climbing.I know of no sadder economic indicator, and the next person who comes in here with their heart of stone blaming this mess on those who have long been getting so little pay they are forced to live paycheck-to-paycheck, is gonna get a virtual bloody beating from me!!Shame on people who blame the poor while the billionaires who created this nightmare get a pass! WHAT are you types thinking?! Do you even have brains?!The problem with UNLIMITED-FORTUNES-CAPITALISM has ALWAYS been the strangulation of consumption via severe INEQUALITY in the distribution of wealth, and workers are being robbed of their JUST wages and their JOBS.

Difficult to call it exactly, but I think we’re actually pretty close to a top on the US dollar, and also the long-awaited reversal in bond yields. In other words, long-term trend in US treasury prices is now downwards. See $UST on http://www.stockcharts.comSure looks like it has entered a downwards trading channel.We’ll see how it goes, esp. if the US markets go through another big nosedive in the future (e.g. after the next election). But US investors must now contemplate the possibility of falling stock values AND falling bond prices.PeteCA

Today my country, Hungary got a bail out from IMF (and others) (25 billion dollars). It will definitely postpone our crises at least with one year. The country and the banking system can pay back the short term debt using this new available loan.If the economy crises will last long or will be very deep then I do not know what will happen afterwards.Our currency (Forint HUF) is 10% stronger against the EUR today as it was 3 days ago . So now is back to average. But in my view it is too strong. It will definitely not support capital inflow to Hungary.

social security is already bankrupt and to the comment above about the 900 pound Gorilla in the room – Social Security is it.And to the comments on Roubini’s $400 bn stimulus – he has been consistent on this but he has also stated that higher taxes and reduced services will be the ultimate cost.It will be the fortunate few who in their senior years will be able to refer to as home, those dank and desolate buildings where western societies house their old.

I am tired of self righteous people who think they are an island. I came up thru the system from very humble beginnings and I know not only how hard it is but realize how important my education was. There is also a certain amount of luck, a certain amount of genetics, a certain amount of who you grew up with and who you met along the way and where you grew up. I benefited from the roads and bridges and clean water and cheap resources. Everyone did. This IMO made America the greatest nation on earth.I just don’t understand the selfishness of people who don’t want to pay their fair share of this. Who want low taxes and high spending and pass the costs on to someone else. Inflation benefits those with access and or assets. It harms those who have little or none. So to spend and not tax, is just another way of transferring the burden to those who can least afford it.. This has been done for 25 or more years now and those who have benefited seem to sneer and look down their noses at those who they have used and abused.And this is a Christian Nation or even a god fearing one?

You are from Europe and your favourite currency is the USD? Great, isnt Hungary part of the EU? Dont you produce German cars in your nice little country, but you prefer USD? Now uncle Sam will help you, we send you our most famous little gift. From now on you can take pride in the words:IMF – I am fckudTake care, dont get hungry in Hungary

When the total outstanding foreign debt of the USA reaches a gazillion dollars and the country is really and truly only being maintained on life support and the forebearance of its “adversaries,” the latter call a meeting of the former Axis of Evil. Putin or someone stands up and says, “Ex-comrades, we know that without our patronage the real economy of the USA will collapse. We will make them a reasonable offer for their industrial plant in exchange for their worthless currency. If they do not accept, we will press a military challenge knowing that their industrial sinews are gutted and they will not even be able to beg let alone finance the spare parts for their fancy machines or even ready to eat meals for their troops.” And then the s… hits the fan.

SO close OR… you missed it by 22 seconds!

Rally material12:07 p.m.Crude futures jump more than 9% in afternoon trading

That’s ridiculous Russia has been a gutted impoverished bankrupt nation following the cold war but I never saw another nation challenge them millitarily. Ya ever heard of nuclear war heads, they’re bought and paid for and can mimic the destructive equivalence of a trillion man army and then some. I can assure you no one will challenge the U.S.

Hmmm…Vietnan, successfully challenged….Russia, challenges us in Georgia…can’t get that darned military victory in Iraq or Afghanistan. Wake up, Son.

When Nouriel finally does his calculations correctly, he will see what a pathetic drop in the bucket $400 billion really is. It would not increase economic activity IN THE SLIGHTEST.Ha ha! What is the value of an increase in the level of scrutiny for housing, from minimum to direct scrutiny?About $8 trillion.

positive news on GM and CerberusGM, Cerberus agree that GM CEO Rick Wagoner would lead merged automaker; final form of deal will depend on availability of financing, including government support: sources 12:29pm EDT

Sorry, I meant stimulus, not bailout.

By the way, expect a VERY negative statement out of the Fed when it uselessly lowers interest rates. The Fed has been given the job of breaking the bad news because it no longer has any power. Look for the Government to hide behind these nominally powerless institutions such as the Fed and the FDIC. Who elected Bair social mediator? Nevertheless, that’s where she is, because no one else is able to break the bad news in the political system.I’m still working on that broad. Nearly got her to the point of saying, “Any solution to the housing crisis MUST include new rights in housing.”

The FED will outsource the reconstruction bailout to offshore entities…;^(

This will be a long post. I think there is a lot of fuss about details and not to the point as to causation and cures. Here is the quote from Marriner Eccles as to how income inequality leads to Depression.This is a quote from Marriner Eccles the wealth distribution in the US is comparable to the Ivory Coast. Truly a disaster waiting to happen in a country with civil liberties and a free press. Looking athttp://seekingalpha.com/article/98769-our-coming-depression . To see what happened to private debt under Bush._Eccles Quote_______________________________As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. [Emphasis in original.]Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spend by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.This then, was my reading of what brought on the depression.Current levels of debt have risen under Bush from a little under the peak of the Great Depression to 350 x GDP. Even with lax credit standards, government support what the current crisis says is that private levels of Debt are unsustainable. Public levels are not nearly at anything like this level.____________________________________Markets do two things to deal with debt bubbles if uncontrolled Weimer Germany had hyperinflation and we had Depression. Note that people should be focusing on the aggregate levels of debt and the relatively high interest rates the public pays as compared to say Japan not the proximate misregulation which caused the immediate crisis. Robert Frank showed how a kind of trickle down leads to insatiable demand for debt amongst the people who have less money.We need to do two things, none of which is popular in the Fragmented US society which tolerates poverty well politically if you don’t interfere. First revoke the Reagan Tax cuts. Secondly, have massive government investment in productive enterprise, jobs, education, and infrastructure. Alternative energy is a good investment in the long term for sure but whether or not is best at the moment remains to be seen.——————————Should massive hyperinflation occur, a possibility. We would need to try to enforce a Bretton Woods type agreement. Such might be impossible in todays world. It might be a good idea in any case

Agreed, I don’t know what NR’s and others logic is here unless they really don’t understand the gravity of the situation and figure the govt. will just keep on spitting $400 billion lugees into the bucket until something good happens!

so… much… better.Thanks for turning the caps off. My blood pressure has returned to normal.

How can Americans compete with low wage foreign workers? Manufacturing, IT, engineering, R & D, and anything else that isn’t nailed to floor has been offshored.Global competitiveness is nothing more than a euphemism for cheap labour and lower environmental standards in less regulated markets.Trade policies and Trade Agreements have given Corporate America license to exploit every advantage of globalization, while sucking wealth out of the US.

no one can retire and if no one can retire…YOU GOT IT! They can’t collect Social Security, if they can’t collect Social Security, there is no problem

I do not know whether I should laugh or cry but sounds so true.Besides the government could just cut the military spending for 2 years and cover most of the SS money that way…

Did anyone see the Bloomberg article today about the “easing of the credit crisis? Nestle’, teh largest food company in the world, had to agree to price its line of credit to Libor plus a bank spread PLUS it credit defualt swap spread! Their new rate on money drawn will be over 12%! Yeah, this will help everything!! Get ready for an earnings depression…

Sorry my socialist friends but you do not understand “infastructure” in government speak. Infrastucture will mean more money for the education infrastucture( read teacher’s unions), community outreach( read ACORN), the environment (government studies) etc. Very little will go to roads, bridges and sewers. What does go will be bogged down in lawsuits. A waste of money.

Based on that, get ready for massive food price inflation

Santelli Rules!!!!!

The depression era wasn’t accompanied by massive trade deficits. The GD was primarily an internal affair. Today it’s a global consideration; today’s puppet masters don’t have the clear shots that they did during the GD…

What I am about to say is not directed at you or anyone personally, but I believe it needs to be said in no uncertain terms. I take issue with the substance of your comments on Dr. Roubini’s recommendation for a second fiscal stimulus package.First, it’s not YOUR money. The fact that you earn it doesn’t make it yours. The 16th Amendment to the Constitution says the income you earn is all subject to taxation. Our democratically elected Congress decides what portion of the money you and I generate as income should go to the government for its spending needs.Second, it is Congress — not you and I –that determines what constitutes the general welfare, and how the taxes we pay are to be spent. If we don’t like the determinations they make, and we can convince a majority of the citizenry to do so, we can elect other folks to office who may make different decisions respecting how we are taxed, and by how much, and how those taxes will be spent.Third, all taxation is by its very nature redistributive. Money is taken from individuals to benefit the country as a whole. Our federal taxes are used to pay for roads and bridges and so forth that we may never have occasion to utilize ourselves. They are used to pay for military ventures that we may not support. They are used to provide supplemental income through social security to elderly people we don’t know. They are used to pay for the education of other people’s children. They are used to cover medical expenses for the old, the disabled, and the poor. In short, they are used for the GENERAL welfare, not for your welfare or my welfare per se.What Dr. Roubini is proposing is a fiscal stimulus package targeted to repairing and modernizing our dilapidated national infrastructure, which has been utterly neglected throughout the last three decades of Congressional restructuring of federal tax burdens in a manner that has favored the wealthiest of Americans while utterly neglecting the falling standards of living of middle class Americans. When, as now, aggregate demand from the private sector — consumers or businesses — is declining precipitously and threatening the health of the entire economy, it is absolutely appropriate as a matter of public welfare for the government to step in and create aggregate demand through expenditures on much-needed public works projects, which create jobs, stimulate consumer and business spending, and result in lasting roads, bridges, and other tangible benefits for the country as a whole.SWK

The infrastructure is crumbling because it has NO future! Not in an oil-deprived world: nor in an alternative-energy world, a world which will demand (as does nature) less travel and shipment of goods.NOTE: the more people spend attacking the “other” side means the more they are distracted from actually doing something, which means that I can more readily go about MY business

I’m certainly not in love with USD or in any other currency I expect rising the USD against the EUR further in a long term. That’s what I mean.

Absolutely amazing story. Talk about wild-eyed volatility causing huge losses. This takes the cake.PeteCA

I have addressed this in a few prior threads.Put simply, it is the USA itself that will make the first move.The USA will have to print money to finance the bailouts. The USA has more USD than all creditors combined (read infinite).When the US dumps trillions of dollars, that will be the trigger event for other dollar holders to sell. That not only includes China and Russia, but it also now includes banks and other institutions that have been (or are being) “recapitalized” with government gifts (errr, loans and equity purchases, excuse me. Not gifts :-/ )Anyway, it does not take a break in the dollar cartel to crack the damn. All it takes is the hubris of the US government to bring the dollar down.Mark my words, the dollar crash will be the trigger event for the reordering of the entire financial world. It will be the final bubble to burst in this economic age, and it will herald the new world order (which I don’t advocate, I merely state realistically).

What does the Wall Street see that Main Street does not?We are looking at 5-10 years of 70′s style economics and rally?

so will businesses accept cash only?Several Moscow city centre restaurants are now refusing to accept cards in a move not seen since Russia’s last financial crisis almost a decade ago.Some automated teller machines at Sberbank, the country’s biggest state-owned bank, have also stopped accepting cards from other banks.Several electronics and mobile phone stores said they no longer accepted credit card purchases.Over the weekend, Aeroflot, the biggest Russian airline, announced it had stopped taking credit cards payments for flights except from a handful of banks

and those that worked in the financial sector…

Confused: Here’s what happened in a nutshell. Some investors, including large hedge funds, have been holding SHORT positions in stocks from Germany. They are actually speculating (or hedging) based on the German DAX, which is kinda like the Dow Jones index in Germany. Under this arrangement, they will make good profits if stock values drop, but they will take big losses if stocks rise in value. So, unexpectedly the stock price of Volkswagon soared to an enormous value, catching some of these investors offguard. Volkswagon is a main stock within the DAX index. They are supposed to watch these stock prices very carefully, and to exit their trades if things go against them. But it is still possible to be caught offguard if stock movements are wild (as during a massive “short covering” move). And that’s what happened. Apparently one hede fund has lost $30 billion because they took a position where they expected Volkswagon and other German stocks to go down, but it rose to great heights and cost them a lot of money. Pretty amazing incident.PeteCA

dont ask him what he is teaching because he is spending more time being a media monger shooting star than he is teaching

Well, I understand what the term ‘infrastructure’ means in Roubini-speak, and it means roads, bridges, sewers, and so forth. If the government were to spend the money on the sort of “soft infrastructure” to which you refer, then the impact would be less substantial.SWK

tank time

Unions…ACORN…study…sounds good to me!

it would not surprise me if the last weeks downwards movement by the euro have caused by politics rather than the market.ergo therefore that some sort of parity is being attempted for some reason.

It’s not a zero-sum game if it salvages the economy from collapse by making up for a drop in aggregate demand until the private sector can regain its ability to generate that aggregate demand. Once the economy has had time to regain normalcy, the deficit can be paid off through taxes and the people are left with new roads, bridges, etc.SWK

Fed down 50-points, and US market already dropping.Just like I said … they’d sell it on the news.By the time Wall St is done with all these penny ante games, there’s gonna’ be no-one left who wants to buy into the market.PeteCA

ok, sorry then.I gave up expecting anything in FX – but maybe some change after next Tuesday

Let me get this straight, SWK. What you’re saying is that the money that I earn because of the 16th Amendment and some other things you mention, now belongs to Henry Paulson. Just send the money and he and his lobbyist-bought Congress will decide who gets it.Succinctly, it’s essentially what Marx says: everything belongs to the state.

GOING GREEN BABY!

I think Canadian banks could potentially be in just as much difficulty if foreclosures increase in Canada. Concerned in Canada.

I didn’t write The Soprano State, dummy. Instead, I wrote The Eminent Domain Revolt. What a wonderful book that is!!!!!!!!!!!!!!

Gee and what would this do for Ambac? Oh I forgot. Ambac needs to get bailed out. Otherwise, there would be “systemic risk.” Clown! In short, the bubble is the system. So we have to keep the bubble going. The poison is sustaining us, so we have to keep taking more poison.SAN FRANCISCO (MarketWatch) — Ambac Financial (ABK:AMBAC IncNews, chart, profile, moreLast: 2.63+0.36+15.86%2:47pm 10/29/2008Delayed quote dataAdd to portfolioAnalystCreate alertInsiderDiscussFinancialsSponsored by:ABK 2.63, +0.36, +15.9%) said on Wednesday that the U.S. government should back bond insurers through a two-part program of guarantees. The Treasury should provide a guarantee to bond insurers that covers portfolio losses that exceed a certain level. This would free up capital and help to get more credit flowing in the economy, Ambac said. The second part of the program would involve the Treasury directly guaranteeing existing securities. That would help bond insurers avoid losing more of their capital and create a liquid market for some securities that have become hard to sell, Ambac explained. Such a guarantee program is more flexible that the Treasury’s current plan, which involves buying troubled assets and investing directly in banks, Ambac added. Ambac shares climbed 9% to $2.48 during afternoon trading on Wednesday. Rival MBIA (MBI:MBIA IncNews, chart, profile, moreLast: 8.38+1.22+17.03%2:47pm 10/29/2008Delayed quote dataAdd to portfolioAnalystCreate alertInsiderDiscussFinancialsSponsored by:MBI 8.38, +1.22, +17.0%) rose 10% to 7.86 and smaller bond insurer Syncora gained 19% to 56 cents.PrintDisable Live QuotesSubscribe to RSSYahoo! Buzz

boom stocks going red…

not funny

This is the crash mechanism: bailouts become institutionalized and under Pres. Obama are marketed/advertised to a desperate public. With the connivance of the G7 and new/old Treasury Secretary Rubin ‘confidence’ is restored. For one calendar quarter the downward spiral in the economy seems to lessen. The fuse is when commodities stage a brief recovery and the dollar tanks; the explosion comes when the Fed sells even more Treasury debt to soak up the bailout money. Interest rates spike, the stock market crashes. Time frame: 9 months after inauguration.

yes welcome to Jamerica

so dow to hit 26 year low soon, same as what Nikki did.

Bam

The bubble is the whole welfare/casino capitialist state. The Welfare state is not sustainable. Casino Capitialism crashed under Bush and the ghastly welfare state will crash under Obama. Poetic justice I suppose.

Bernanke’s like Willie Sutton. He steals where the value is. He represents the crooks – who just lifted trillions in the biggest taxpayer heist in history.If Bernanke were working for the people and the economy he would be restoring the principles of a contract society, property rights (fifth amendment), representative government (not ignoring voter calls yet listening to 42,000 lobbyists), hard work and saving for the future – in other words, all the values that built America. Every step Bernanke takes is a step to steal from pensioners, workers, small businessmen, savers, private property owners — the economy.Bernanke and his ilk are the enemy of the people, of a market economy based on contract and property rights. It’s so typical. America has a stock market, not run up on good news, but on press releases, timed announcements and rate cuts, in short, on bad news and hype. “Rate cuts” are a sign that the markets are in worse trouble than thought — yet the market soars.It’s like a company coming out with the news that it’s cutting 1000 employees who were producing things. The investment bankers cheer and the Dow hits the gong. And the economy sinks.

cut rate to zero and take dow back to 14,100 next month…

If anyone has Vista for an OS and is using firefox with it, be advised that your problems may be solved by using IE to view…^%$&MSFT monopoly…

are stocks commodities cause the dollar is back down and stocks are back up again…

That’s a good rap, I mean it. But when was the stock market ever anything than a tulip bulb factory? And let’s face it, those values of hard work, keeping your promises, temperance and husbandry — they’re great, but they don’t make you rich. And that’s what they people wanted. Since there can only be one at the top of a pyramid, most people got the soft soap and now, the shaft.

It’s funny given the raft of people saying what a great “buying opportunity” the last plunge was. Who’s going to step up and publicly call this little bulge a great “selling opportunity?”My God, being bullish on the market is the equivalent of Americanism. No – it’s the equivalent of being bullish on God.

All B schools teach the craft of operating at maximum efficiency while delivering maximum extracted value. All other factors are only relevant as to how they impact the numbers. Given that, did you expect there to be compassion and common sense involved?

USA!USA!USA!INVEST BABY! INVEST!IF YOU ARE NOT FOR US YOU ARE AGAINST US!

I don’t lose credibility if it’s accurate. You’re a dummy. That’s VERY credible.

Stocks tank, major reversal, down over 300 points in ten minutes. Two words:un believable.

Yes. The point is, if flooding the market with fiat money is good at this rate, then wouldn’t it be better to flood the market with fiat money every day, at a higher rate?

Regarding youtube site I mentioned, you must first select “advanced” to be able to fill in the search options I have recommended.

So much for this bear market rally, wait and catch the next one after the election is over

Actually that’s feasible: a central computer (government run) could continuously input a deflator that would be electronically sent to every scanner and cash register in every place of business…or alternately, if you prefer, an electronic market could determine the deflator from moment to moment and smooth out the prices at the point of purchase.Really no different than the current system, fairer and more transparent!

The new bubble is now floated. We used to have long term players, short term players, day traders, ultra-short term players, margin players, ultra-levered players, hedged players, etc. Now we have hyper in/out players. Not a bad way to make a living – 4% today. No need to mess with covering your shorts or expiring options etc. Seems like you’d have to know what orders are queued up in the system though.

This is a lunatic idea, and I’m getting dizzy. If this is just a slightly far-fetched picture of how the world works today, I can see how people would demand anything – any alternative that would bring stability.

A $12 trillion mortgage on Mars is peanuts.P1AQL.

to start commodities that are traded in USD e.g. in general weak dollar/strong Euro = high oil …

It’s the final stage of a melt-up

That’s an interesting term; a bose-einstein condensate flows up and out of its beaker with the appearance of dripping through the beaker. So maybe that Large Hadron Collider thing really is the root cause.

Fed announces new credit lines with foreign banksWASHINGTON (AP) — The Federal Reserve said Wednesday that it will supply new lines of credit to the central banks of Brazil, Mexico, South Korea and Singapore to help those countries deal with the global credit crisis.The Fed will provide up to $30 billion to each of the central banks. It is the latest in a series of “swap” arrangements where the Fed provides dollars in exchange for reserves of the other nations’ currencies.http://biz.yahoo.com/ap/081029/fed_credit_crisis.html

the problem is I’m not a dummy…you lose credibilty again….Most people on this site share the shame feeling, sorry to inform you….

No,it’s Geldar and Meldrop on Rigel 6 wagering their Quatloos.

if you are technical at all or not, please see the jnj and mcd charts, draw the line across the recent tops and tell me what it looks like.looks like technical SELL paradise to me…do commodities split with stocks NOW ?stocks closing… awe forget it…

Trust in our fiduciaries has been lost. It cannot be regained with rate cuts and fed currency swap mechanisms. The smoke has left the bottle…it cannot be replaced.

How is this any different than continuously supplying a heroin addict? You know they’ll become dependent on you, never pay you back and eventually die maybe taking others with him!

““The only way to increase aggregate demand is going to be through” government spending on roads, bridges and other infrastructure, Roubini said at a Bloomberg conference in New York. “We need a huge plan, $300 billion is not going to be enough. I think we’re going to need a plan of $400 billion to $500 billion.”@ RoubiniSorry Professor, this still will not cut it although you appear to be getting my message albeit slowly.I have posted here that which needs to be done… but this cute little benanke-like-stimulus will do nothing but make things worse.Ho hum

Any thoughts on substantial divergence between equity and commodity today ?One thing I do not like about sell off today is its similarity to Monday’s scary close in the last 10 minutes… Scare the heck out of longs, make shorts happy and then continue rally – shakeout? Above technical MCD and especially JNJ argues otherwise…

No it doesn’t. There is no cause and effect anymore, there is no connection between what the stock market did yesterday, what it did today, and what it’ll do tomorrow. You can no longer attribute any degree of rationality to the way it moves. If ever the stock market was a random walk, now is that time.The Dow could jump 800 points, or fall 1000 and neither outcome would surprise me.

Ken Fisher would say even if the first spend is stupid the next 4 spends will be normal. How is it not going into the economy in a constructive way if it goes to a construction worker who gets taxed and then with the $ he pays for his son’s ice cream cones, and then it gets taxed a bit at the ice cream shop and pays the rent on the ice cream shop which pays a banker and someone who holds the mortgage on the ice cream shop etc… I mean high paying technical jobs for all would be nice but you have to have the industries to produce those jobs and we aren’t going to have them right away…Not that I’m a big fan of Ken but I think he has a point there…

Dog show entries are down this year by close to 20%. In part this is due to the RV culture and those folks can’t afford gas for their big rigs to take 10 german shepherds or 50 mini poodles a couple of states away. I think you’re seeing it in people not buying SUVS and the crash of the US auto industry. Look at all the for sale signs on the houses. If you look around you’ll see it. Try asking the person at your alma mater in charge of development how many gifts they’re getting this year or how much their endowment’s shrunk or if they’re worried at state schools about students bailing because parents can’t afford tuition hikes. You’ll see it.

They can take it down to 0.25% if they want.

Sounds nice. Laid back and relaxed. Like Jamaica.Totally broke.

Here’s the Federal Government trying to stick another finger in another dike. Investors will rush to the exits once they realize that the currency race to the bottom is well under way. However, as the man said, “deleveraging will not be denied.” And because that is true, the currency race to the bottom will proceed.

Do you have a link? I could only find a plan to delay quotes for 15 minutes but nothing on closing early by 15 minutes.

Now that the Fed Funds rate is 1.0% and the discount rate is 1.25%, a tool has been lost from the Fed’s tool belt.Look for the markets to weaken as this sinks in.

Unfortunately, defense manufacturers employ a lot of people; and, they export a lot. I agree to cut here, but we should understand that it won’t come at cost as well )

NYSE = scammed if you do, scammed if you don’t.

Will we still have TV when there’s no point in advertising anything for sale anymore?

what is the reason behind minds inquiring to know this?

Ah, but you forgot the warfare state! It lives on…

It is fascinating to read Prof. Roubini’s articles and observe his predictions come true one after another. He has been correct so many times that one is inclined to give him the status of a prophet. But one question which comes to mind repeatedly is where does the war expenditure fit in all this economic mess? The three trillion dollar war can not be ignored as an event of no significance in this global crisis. Arguments of political/ethical correctness aside, the war has been a major economic project which has dominated the economic era so thoroughly analyzed by Prof. Roubini. Apart from its stated (wrongly) objective, it surely had an unstated agenda of domination over the regional material and other resources. So if the economic significance of its execution and lack of fulfillment of its objectives are ignored they make the analysis incomplete and less holistic. Considering that Prof Roubini has arrived at his profound and prophetic conclusions through holistic analysis (according to his own words), it is difficult to imagine that he has not included such a major economic misadventure in any of his commentaries. Whereas he does deserve genuine admiration for his brave assertions in face of so much adversity, it does appear that he is not frank enough with regard to a very important portion of his economic analysis.

Gross hopes simultaneous explosions of fission and fusion will cancel out. I kinda doubt the detonation of 2 different nukes will lead to a somewhat different outcome. LOL.”

The banking industry is officially nationalized. Decisions to lend or not to a certain client is now being made from the Washington. Bush has just added the title of “credit analysis and credit line approval” to the function of a president. Maybe he will have more luck than Wall Street in the risk assessment, underwriting and due diligence.

“What we’re trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money,” White House press secretary Dana Perino said. While there are limits to Washington’s power to affect banks’ behavior, the White House decided it was time to use its bully pulpit.”Taxpayers will make billions when this plan succeeds. It’s a ‘win-win can’t fail’ situation. The more money banks lend the more money banks will make. It never fails. And the beauty of the plan is taxpayers benefit. If it looks like the plan is not working it’s only because banks are not lending enough.”

Yes, it’s really a misnomer to refer to it as “News.” It’s really more like a mix of infotainment and right-wing propaganda.SWK

KJ:Actually, I believe Dr. Roubini said in a number of previous posts this year that the recession had already begun at the end of the fourth quarter of last year or the beginning of the first quarter of this year. I don’t think any of this is fixed in stone, however, as there remain so many unknown variables that could tilt the economy towards recovery or collapse. At the earliest, I think Dr. Roubini feels we could bottom out at the end of the second quarter of next year, but it’s clear that on the back end, the L-shaped recession/depression scenario is not out of the picture just yet.SWK

We’re getting really close to the zero bound and a liquidity trap, that’s for sure. Deflation is right around the corner.SWK

Talk about a dilusional strategy…

Regrettably, Bush can not be prosecuted. Be better informed; read the Patriot Act.Personally, I believe that the only way confidence can be rebuilt with the public is to investigate, try, convict, imprison then claw back ill gotten gains by the chief financial leaders who imprudently put their stockholder’s welfare behind their own. (And if not claw back then TAX). Perhaps this is the intent of IRS investigations. I hope so. I am in disbelief to see so little public outcry; why we have become so complacent if not because of our lax education system. These criminal captains of industry could be prosecuted under the Patriot Act (as terrorists) or under RICO (as racketeers). I want to spit at Governor Spitzer for his stupid indiscretions because time is needed for a champion and he failed the country in our time of need. Who else is there?Finally, Professor Robini is kind and my kind of patriot (boy, I don’t use that word lightly) to allow many of us (myself included) to visit his site during this turbulent time without a subscription to gain some understanding, as guests. As an interested Stern alumna who can no longer afford the regular subscription cost, I am grateful to view and follow his thinking and the mass of information here closely. Professor R truly thinks outside the box and the RGE Monitor provides the critical thinking that is missing from every other source. I am saddened by the bad boy conduct in many strains of this blog because this poor, disrespectful behavior by other “guests” not only detracts from any argument but it puts at risk all of our complimentary status. Read back and see if this site were yours, if you wouldn’t just shut down the free trial status to we guests. I find Peter CA’s postings informative and helpful. That’s a standard I want to follow.

Your exactly right. When all fiat currencies are recognized as worthless, the US government can confiscate the gold of the IMF and the gold of the ETF GLD and we will own 1/3 of the worlds gold. Then, we can return to a gold standard currency. BRILLIANT!!!

yup, and some people thinks Fed is cutting rates to stimulate borrowing or the economy…. im sure Fed Reserves know banks wont lend..this isnt about real estate or price of commoditie or etc etcthis is about survival of US

Also there was a huge need during or after the great depression for human capital today there isn’t and to boot the population has grown.

IMO, the narrowing of spreads for government guaranteed mortgage backed securities is gonna take much longer than Mr. Gross thinks. The government guarantee is a necessary but not sufficient condition condition for the expeditious narrowing of spreads. This is because investors won’t close the gap until the housing market improves. Mortgage lending will be a declining business as long as house prices keep coming down.I would hope someone from PIMCO makes Mr. Gross aware of a view from a guy who also considers himself as having high CQ.

SWK addresses fundamentals, but unfortunately he makes basic mistakes:1) The government doesn’t own your money, your income, or your property. See the Fifth Amendment’s “takings” clause.2) The power to tax under the 16th Amendment is not plenary as you suggest. Excessive taxation and punitive taxation can be unconstitutional.3) The “general welfare” clause is in the Preamble to the Constitution, which the courts have held does not count. Congress does not have the power to tax and spend for the general welfare.4) You are using “redistributive” in a vacuous sense. Under your definition, every spending bill is redistributive. This tells us nothing. Redistribution occurs when there are transfer payments. But transfer payments are unconstitutional; as Judge Iredell famously said in Calder v. Bull, the government cannot take A’s property and give it to B.Anthony D’Amato

With all respect Dr. Roubini. I am a big fan of yours.BUT when you say stuff like this, it makes me speechless.Of all the people you should know better that “ In life we do not have such a thing called as ‘solution’, we only have compromises”.This $400B should come from somewhere and produced by someone. Who will create this money ( I mean legitimately not by printing).

PeteCA,Thanks for the explanation. That’s amazing – but I can’t say I feel sorry for the folks who got caught with their pants down.Call me old fashioned, but investing in a stock that you are hoping will go down seems a bit perverse… guess I missed the memo on that one.Again, thanks for taking the time to explain that. I appreciate your posts – substantive, but readable…

furthermore remember the Asian Crisis 1997??i guess Asian countries was growing too rapidly and needs to be “slown down”,remember the promotion of “Creative Destruction”?? with the pretension of cleaning corruption in developing countriesand how Asian hits back?as a result of the crisis, these nations kept their currency lowand promoted export.. thus producing cheap labor/goods sent to yeah USdont let this modern comfort living fooled ya’allpretty nasty thing was occuring behind the curtains

Can I plse put my hand up and state – for the record – that I would feel quite financially stimulated if they gave me half a million dollars.

Deflation is a monster that can spiral totally out of anyone’s control. 20 million unemployed could be a very conservative estimate IF deflation got going. It isn’t just that some debts could collapse, it is that most all debts could collapse taking the US standard of living flushing down a toilet into the sewer.We have just seen a glimpse of what can happen with housing. It can get real ugly and go on for years. No one really wants that. BUT then we didn’t want what we got either.

Only problem is that he is bailing out the greedy Wall Streeters and other countries, not with his money but with people’s money. He is keep raiding poor Aemericans to make poorer.

I blame the lunch. I think this calls for a more responsible attitude for these turbulent times – eating at your desk!

Small problem… you don’t need to retire to collect SS, you only needto have enough credits. People will keep working AND collect SS. Severalof my colleagues are already doing this.

Dr. Roubini, congratulations on attaining your celebrity. I believe your ego has become inversely proportional to the markets! Don’t take yourself so seriously; remember, it’s only thinking, not reality.

strength of USA is illusion. foreigner will definitely diversify them into some other asset classes. into what, that is the question.

unless you promotes a new currency or like what guess said,the US government can confiscate the gold of the IMF and the gold of the ETF GLD and we will own 1/3 of the worlds gold. Then, we can return to a gold standard currency. BRILLIANT!!!aahhh dont tell me youre bullish on USD, whats that?? all cash??

US did it before, they can do that again,anyway who in the world right now would oppose the move??as guess above us typed:”foreigner will definitely diversify them into some other asset classes. into what, that is the question.”yup into what?? anyway who have the balls to do it??Asia?? c’mon, Russia?? their economy is on thin ice.. (but they are sitting on a lot of oil/gas)anyone?

But you should swear you are not going to fake it.Financially of course.

Is the Bottom in?Bill Bonner – Wed 29 Oct, 2008By the time the final bottom comes, investors are so broke, so depressed, so fed up that they no longer care.Paris, FranceHope springs eternal… and then gets whacked.Big jump in the Dow yesterday – up 889 points. Does this mark the end of the downturn… the bottom of the bear market… the worst it’s gonna get?Everyone hopes so. But don’t count on it. There is almost always a large rally before the final bottom is in. Hope… followed by disappointment. Often several times. Over a long period of time. And by the time the final bottom comes, investors are so broke, so depressed, so fed up that they no longer care.The Japanese market hit a high over 30,000 on the Nikkei Dow in January of 1990. Stocks plunged. Investors have been waiting for a recovery ever since. This year, for example, Japanese stocks have lost 50% of their value… bringing the index down to the 8,000 range, the lowest it’s been since 1982!Compared to long-term investors in General Motors, the Japanese are lucky. GM is now trading in the $5 range – a price it last saw when your editor was born 60 years ago. But even that could get worse.“End of the road for US automakers?” asks a headline in the Los Angeles Times.Meanwhile, Detroit seems to be becoming a ghost town… or a hell-hole like Port-au-Prince, Haiti – with ice. Mansions once owned by auto industry tycoons now selling for $100,000 or less. But just wait until the auto industry shuts down completely!Where and when will the bear market in the US end? No one knows. But it could end on some sad day 20 years in the future. Between now and then however, typically, a major bear market gives you a second chance to get out. After the October crash in ’29, stocks rallied until April… then they started to slide again and did not fully recover until the 1950s – more than 20 years later.At today’s levels, US stocks are not terribly overpriced. If you look at the stock market over the last 100 years, you find stocks usually trading in a range similar to where most are now. They are, say the analysts, at “fair value” with the Dow anywhere between 6,000 and 9,000. But earnings are falling. And stock prices lead earnings. In fact, they are thought to “look ahead” and track future earnings. If the First World Depression – of FWD, for the history books – unfurls as we expect, stocks could be “fair value” at much lower prices.The other thing that is likely to happen is that stock values could become “unfair.” It was unfair to charge investors $90 a share for Micron… or $120 a share for Yahoo… or $70 a share for KB Homes. Soon, it may be similarly “unfair” to pay investors only $5 for their shares in KB Homes, or Yahoo… or only 50 cents for a share in General Motors.Typically, everybody overdoes it. Coming and going. On the upside, they get carried away and pay too much. On the downside, they panic… then lose interest…a nd won’t pay enough. The “overshoot” usually goes to about half again as much – at least on the downside. That is, stocks fall to what might be considered “fair value” by most measures… and then they fall another 50%. So, if “fair value” is 8,000 on the Dow, you should expect the Dow to hit 4,000 before the bottom is in.But here at the Daily Reckoning, we always walk on the sunny side of the street. Our optimistic guess is that that the Dow will fall to 5,000. Perhaps sooner, rather than later.Mr. Market is a strange fellow, isn’t he? When he is pushing up prices, everyone loves him. When he is knocking them down, the mob gets a rope and comes after him. Even the short sellers turn against him, because he inevitably disappoints them too – causing stocks to rally strongly even in the midst of a major bear market.Believe it or not, now the capitalists are arguing that they should be allowed to ignore Mr. Market altogether. They want to use “fair value” accounting on their financial statements. They don’t like Mr. Market’s offer. So, they hope investors will accept their idea of what their stocks and assets “should” be worth… rather than what they are really worth. “Mark to market” asset valuations are “unfair,” they say.We don’t recall them complaining when “mark to market” put their asset prices far higher than they were really worth. Besides, whoever said Mr. Market played fair?And more thoughts…*** “Downturn Clobbers Public Pension Funds,” says the Washington Post. For example, the California pension system, Calpers, has lost $67 billion over the last 12 months. Government-owned pension systems tend to put about 60% of their funds in the stock market – so they’ve taken big hits, along with everyone else. And most public pension systems were underfinanced even before the stock market turned down.Retirement financing is going to be a big issue for many, many people – even those who thought they had it in the bag.Altogether, trillions of dollars’ worth of retirement funds have been lost already. Trillions more are still at risk. After such a long period of growth and credit expansion, baby boomers came to believe that their stocks and their houses were as a good as “money in the bank.” And as recently as 2007, even counting the value of their stock portfolios and their houses, experts found that a high percentage of baby boomers were woefully ill-prepared for retirement. And now their stocks are worth, most likely, about 40% less than they were in 2007… and their houses about 20% less.Making the situation worse – possibly much worse – is increasing unemployment. Whirlpool just announced 5,000 job cuts. We typed “job cuts, October 2008” into Google. We got 3,350,000 hits.The International Herald Tribune tells us that wealthy Americans are cutting back on eating out…and household help. Our two daughters – both of whom work as waitresses, while going to school or trying to become movie stars – report that getting a job in a bar or restaurant is not as easy as it used to be.“You used to be able to walk into almost any pub in London and get a job,” said one. “They were happy to take anyone who could speak English. But now, you put your name on a list… and they never call you.”If there was one thing the baby boomers were sure of, it was that if they didn’t get their retirement financing together in time, they could always just keep working for a few more years. But already, the percentage of ‘seniors’ in the workforce – 16.4% – is higher than ever. And what if the jobs disappear?*** France’s Sarkozy is feeling pretty smug. In fact, the French are feeling pretty smug… almost a feeling of schadenfreud, if they had a word for it. They knew the war in Iraq was a waste of time and money, so they stayed out of it; they were right about that. And they knew, too, that American-style hyper-capitalism wouldn’t work. They think they were right about that too.We like almost everyone we meet… once we get to know him. We have lived among the French for more than 10 years. We have learned their language and gotten to know their curious customs.For example, while Americans pretend to work hard, the French pretend not to work. For example, the parking lots in our offices in the US are nearly empty at 5:30pm. Here in Paris, when we left the office at 7pm last night, most of the staff were still at their desks.French teenagers brag to each other about how little schoolwork they do… then, they sneak off to study until the wee hours of morning.Likewise, while Americans pretend to have a lot of money, the French pretend not to. There are few flashy cars on the streets of Paris. And when you see a top-of-the-line Mercedes, it is usually owned by a foreigner. Nobody ever made any money building McMansions for the French either. Instead, houses tend to go up slowly… are solidly constructed… and much less gaudy than their US equivalents.The French also pretend not to care about money, but they are the biggest savers in Europe. France’s public debt – at 66% of GDP – is lower than the US’s – at 72% of GDP (and soon to be at 100%). As to private debt, the French are way ahead… they have private debt of 140% of GDP… about where the US was at before it went on its Fed-fueled spending spree 2002-2007. Now, private debt in the US is 280% of GDP, twice the frogs’ level.

well then, TV can still survive, but they will have to change their business model. That would mean you will have to pay for it either directly through subscription or indirectly through taxes. In the latter case, you will have to endure 90% of news broadcasting about the activities of the Monarch.Enjoy!

It’s easy to say that stocks are now fair value, or even under valued.But the two points:1. Risk is very hard to measure right nowThe business environment is far from certain. To predict what happens economically in the next 12 months is very hard – so who can say for certain their risk assumptions are correct?2. Returns expressed as earnings ratios are hard to predictExtrapolation of the last few years of earnings ratios seems like an assumption of the blind. If the recession is bad ratios have to drop. If they loose control of the financial markets, then past ratios could be almost meaningless in practical terms. If there is a recovery, then stocks might be fair value.In the absence of accurate risk and reward assumptions – who is in any position to accurately make any judgement on the value of stocks?

We already have both in Italy, the Monarch and the State/Monarch run TV.It’s just awesome! No need to worry about the credit crisis. Just watch how our fearless leader smashed his puny enemies today!

roflmao = Rolling On The Floor Loughing My A** Out.It was a joke!

Hi SWK,as to this that you are saying:

What you own is your income net of taxes, and the government can’t take that from you.

How does this work in those cases where the government “garnishes” ones income to pay for old school loan debt? Does such garnishing happen and if so, is it therefore unconstitutional?

German 10 year bond yields 3.83%Italian 10 year bond yields 5.08%I’ve never seen the spread that wide, 125 bp is quite alot.Does someone knows a link where you can follow all euro area bonds? Bloomberg only seems to indicate Germany, France and Italy.

nice article.As to this statement…

GM is now trading in the $5 range – a price it last saw when your editor was born 60 years ago. But even that could get worse.

…if the meaning is that the GM stock was literally $5 / piece 60 years ago, the issue is that $5 was a lot more money than nowadays…so currently it is valued even at less than back then.As to

Likewise, while Americans pretend to have a lot of money, the French pretend not to.

From personal experience in living in Europe I would say that this is a small part of the current problem…coupled with the fact that in the U.S.:A. many people could not have afforded much of anything if credit was not available. Partially this is because the unstable job market (“hired at will” contracts, etc) makes saving more difficult.B. lowering wages in US and outsourcing of labor worked against the needs of the businesses to expand their U.S. market share. The solution still attempted by the US government to the problem that Americans do not have enough spending money is to lower the interest rates.Anyway there are of course many more factors to the mess than just the above two…

Father,No recession, no inflation, no deflation.We just have bullish stock markets, strong US currency, increasing housing demand.

Student loans are a real racket for a lot of reasons that i won’t get into right now. That being said, however, yes, the government can and does garnish monies of student loan debtors held by third parties (e.g., the IRS or your commercial bank) if a student loan is in default. This is not really much different than what any private creditor could do if it loaned money to a debtor and the money was not repaid. It’s just an enforcement mechanism to ensure repayment of a debt. Without garnishment and similar remedies, no creditor would ever loan money to anyone because if the loan were not repaid, the creditor would just be out of luck and the debtor would receive a windfall.Again, because student loans involve debts (the student has received money from a lender and is obligated to repay it) this is somewhat different than a taxation situation, in which the government levies on income, say, to spend for the general welfare. Nobody is compelled to take out a student loan, but they are compelled to pay taxes.SWK

Dollar strength can’t last much longer, as dollar denominated deleveraging wraps up.I think what we will see is devaluation of non-essential consumer products, autos and housing. All this cheap debt moved consumption from the future to the present. The mis-allocation of resouces to housing and auto and consumer goods production will have to be worked through. Corporate earnings will fall, stock market valuations will fallEssential exchange-traded commodities (grain, oil, water(?)) will increase in value in dollar terms, which is inflationary.Unemployment will increase, as will tax levies local and national. Locally it will make up for lost revenue due to the downturn and pay for more expensive operations baded on the higer cost of commodities, and federally to pay for the incurred debt of the stimulus. Investments and pensions will be reduced in value by lower stock market valuations.This will create a negative feedback, as unemployed and impoverished pensioners move in with more fortunate friends and family. This will increase the number of houses on the market, depressing their value further. Also, as unemployment increases, lower spending and decreased demand for non-essentials will further reduce corporate profits, increasing the number of layoffs.I would think this negative feedback dynamic will become entrenched summer 2009, and continue for a decade.

After WW2 the US had 70% of the world’s gold.Where has all the gold gone?

A most profound comment. Why do economists get to ignore the parts of the equation they choose to ignore?

Iam raptured!

Data this morning show that monthly US consumer spending dropped the most in 28 years. That fact is entirely consistent with the data from a couple of days ago showing that US consumer confidence is at the lowest reading ever recorded.Well that certainly jives with the big market “recovery” going on over the last couple of days, doesn’t it? Is everyone still sure they want to buy into this yet???PeteCA

new thread

So are we done with deflation and now into reflation?

“it would be better not to have 20 million people unemployed and tons of small businesses close.”Too late for that…it’s already happening!

Actually, I heard a report on a financial program on NPR recently about sports teams, amusement parks, hotels, and casinos lowering prices because attendance was way down in many locales.$100 for a college football game – are you kidding me? Unless they are really good seats, most don’t cost over 30-40 dollars at most.many people are still maxing out credit cards to continue living the wasteful overconsumptive American life, but it clearly cannot last.

There will be no SS and no Medicare for my generation. There is already little work in my automotive dependent midwest town where age discrimination is rampant. My young adult children are already planning on taking in their parents when the time comes. We are doing everything to keep ourselves well and healthy by NOT using pharmaceuticals unless necessary, NOT using flu shots and other risky vaccines, NOT eating processed and genetically modified foods, and NOT allowing cheap and chemically processed fats in our diets. Additionally we use chinese medicine, herbs and homeopathic remedies and eat organic as much as possible. Eventually we may pool our assets in order to live together as a Christian family. Never really thought it would come to this.

The last 70 years it’s been about how much money you could make. The next 5 or 10 will be about how much money you cannot lose.The cumulative deficit in the USA will double in the next 3 to 5 years.The collapse of the U.S. $ is inevitable. Gold will soon enter the biggest bull market of all time as the world moves to real money.

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