Fiat?

3rd

On a more serious note:Disposable paper towels have been replaced by washable rags.http://online.wsj.com/article/SB123120525879656021.htmlBen, easy does it.’cause the folks are moving from ‘don’t have credit’ to ‘don’t need credit’. Forgive them for they know not what they do.P1AQL

From Barry Ritholtz: More manipulation right in front of us all…The major commodities indices are being rebalanced, and I am forced once again to question their timing.Recall the last major rebalance: At the time, I had been challenged by Larry Kudlow to find a smoking gun for the sudden 2006 collapse of Oil prices a month or two before the mid-term election.That challenge led us to discover the actual mechanism — the GSCI rebalancing. Just 3 months prior to the election, GS decided to significantly lower the weight of Oil and Natural Gas, effective a month prior to the election. Prices plummeted, albeit temporarily.There was a cost to this: Subsequent performance of the index, reweighted with less energy, was negatively impacted, as energy prices for the following 2 years boomed, until Oil peaked at $147. The reweighted indices performed much wore than they would have had they not been changed in ‘06.Bill King noted yesterday:The weightings for both indices are released ahead of time, but begin to kick in the first few working days of the new year. In the case of the DJ-AIGCI — which JP Morgan estimates has $25bn in funds tracking it — the new weightings come into force during the roll period that begins January 9th. The S&P GSCI index weightings kick-in after its January roll which commences January 8th. JP Morgan estimates about $50 bn of investment into that index… Accordingly, JP Morgan sees the most significant change coming in the DJ-AIGCI rebalance. Here the market weight of crude oil is expected to increase from 9.6 per cent to 13.8 per cent, gold from 10.8 per cent to 7.9 per cent, copper (COMEX) from 4.5 per cent to 7.3 per cent, live cattle from 6.4 per cent to 4.3 per cent and sugar from 4.7 per cent to 3.0 per cent. Meanwhile, S&P GSCI crude oil weight will go from 32 per cent to 33.8 per cent…Nevertheless, gold tanked on Monday on expectation of a weighting reduction of gold in the DJ-AIGCI Index …This harkens memories of July 2006 when Goldman greatly reduced the weighting of gasoline, which precipitated a huge collapse in gasoline prices ahead of the 2006 midterm elections.I have no idea why the managers of these indices made these changes, but they are certainly curious.I consider these contra-indicated: In a time of massive Fed credit creation and Treasury money printing, they oddly want less exposure to Gold. And with the worldwide recession getting worse, they want more exposure to Oil. Both of these are poorly timed macro-trades.There are two things I can tell you about the index rebalancing: First, the last such contra-indicated changes were steamrolled over by the market, and cost investors in these indices to miss out on a huge move in Oil via the lower weightings.Second, it won’t take long before people start to consider the political ramifications of goosing energy prices 2 weeks before the Obama administration is sworn in.I have no clue what the motivation is for these moves, nor do I knows what what they were in 2006. But they are looking increasingly curious and ill timed. Once is a coincidence. Twice makes you pay close attention. After the third such move, expect to see the index managers dragged before a Congressional panel . . .

Banks may need to raise fresh capital in ’09: Whitney

(Reuters) – U.S. banks will have to raise fresh capital in 2009, and a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses on the companies’ capital, according to prominent banking analyst Meredith Whitney.”From July 2007 to date, over $5 trillion worth of securities have been downgraded, but our concern here is that the pace of downgrades has only accelerated through 2008,” the Oppenheimer analyst wrote in a research note dated January 6.”Capital ratios will be meaningfully lower in the fourth quarter (of 2008) versus post TARP pro forma levels,” she said.Since the summer of 2007, Wall Street has been hammered by a sharp pullback in debt markets, which began with mortgage woes and escalated into a credit crisis, slowing economic activity around the world.The U.S. Treasury’s $700 billion Troubled Asset Relief Program (TARP) was established in October 2008 primarily as a means to recapitalize banks and take bad assets off their books to help support creaking credit markets.Apart from the more than $40 billion in fourth-quarter write-downs and loss provisions the analyst expects from the group of bank stocks under her coverage, Whitney also anticipates “capital strains to become apparent from ratings change pressures.”JPMorgan Chase (JPM.N) will have the largest increase in fourth-quarter 2008 loss provisions at $6.2 billion, compared with $2.5 billion in the year-earlier period, the analyst said.Whitney, who maintained a cautious stance on the U.S. banking sector, expects Bank of America Corp’s (BAC.N) fourth-quarter loss provision will be $6.7 billion, compared with $3.3 billion a year earlier.Citigroup Inc’s (C.N) provision for the period will be $7.9 billion, while Wells Fargo & Co’s WFC. will be $4.4 billion, the analyst said.

http://www.reuters.com/article/ousiv/idUSTRE5061JE20090107

More Dow food!Jan. 7 (Bloomberg) Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business, research firm Reis Inc. said.Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since Reis began tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies, according to New York-based Reis.

Let me write out $1.2 trillion for you : $1,200,000,000,000.00

Stat of the Week from TooMuch:If the CEOs of America’s top 200 publicly traded companies make as much this year as they made in 2007, the last year with data available, they will, on average, make more in one day of 2009 labor than the average American worker will take home for the entire year. Annual top 200 CEO pay, at last count, averaged $11.7 million.

my predictions for 2009: repost from yesterday – lets get predictions…. I’m an optimistic person too, but also a realist….1. 1500 banks go away2. 200,000 store closings3. Dow at 5000 possibly 4000 -stays propped up by continued Govt purchases of shares and preferred shares- do not use as gauge of how economy is doing4. S&P at 500 possibly 4005. Mortgage rates for new homes go to 3% and resale’s/refi’s at 3.75% – pushed by Obama6. Tax credit of at least 25k for home buyers7. Chrysler is gone by March.8. GM goes under by Sept.9. GE files bankruptcy10. Calf state budget deficit hits 50 Billion11. All states and local gov’ts approach 300 billion deficits comibned12. Massive state and local gov’t layoffs nationwide13. official unemployment hits 13%, unofficial unemployment hits 25%14. Gas prices hover around 1.50 gallon unless there is major Mideast/Pakistani/Indian crisis then it goes to 5.00 quickly15. GDP shrinks at 6-8% for 200916. Deflation takes strong hold until sept 2009, at which point hyperinflation is roaring by dec 2009.17. US Dollar continues slow decline against Yen, Euro, Pound and Yuan – losses 50% by Dec 200918. 2009 Federal deficit hits 2 Trillion19. total Bailout and govt assistance programs approach 15 trillion from when it started in summer of 2008- currently at 8 trillion20. Total US liability approaches 60 Trillion by 200921. bond market collapses22. US treasuries become almost worthless23. China pulls the trigger and demands we pay back what we owe or they stop shipping goods to us or cut prices dramtically24. Housing values decline another 15-25% from Nov 2008 levels- Calf, Fla, AZ, Nevada see even steeper declines25. States and local govts raise taxes on everything, unless Federal govt gives them help… this is going to be ugly26. Obama starts giving states and companies relief on Medical insurance premiums and costs.. possible full nationalization of Health care system gets underway in 200927. Fed possibly nationalizes entire banking system28. More Madoffs and ponzi scams totaling 1 trillion may happen, unless they hide the losses29. approx 2 Trillion in more bad Res mortgages/losses to be absorbed by banks and govt30. 1 in 3or4 mortgages fail. Prime and Alt A pool problem is actually worse and larger than sub prime problem31. commercial real estate and rents fall off a cliff, 50% drop in values and 1.5 Trillion in losses.32. Obama polls on effectiveness of handling job fall to Bush levels by end of 2009 – not his fault.33. US possibly gets involved in much larger ground war somewhere to stimulate economy and jobs and deal with crisis in mid east/India/Pakistan/Russia/Korea34. Credit card Debt approaches 2 trillion in losses for banks and lenders35. the Yankees with their new 3 players they paid 1/2 billion dollars to, win the world Series, but Yankee Revenue and profit implodes and Team gets in finaiancial trouble.36. 5-10 or more major sports teams go bankrupt in 200937. something happens in later part of year to unite the country… could be good or bad..38. Govt deals with civil unrest in parts of the country…..39. people will think things are better for 1-2 months at times during the year, only to be hit over the head with more bad economic news and problems40. these problems will last until at least 2012 as Americas struggle with all the resetting going on in the economy, from wages, to housing, to buying, to energy, to living simpler…41. Entire Govt and private Corp pension system is underwater by at least 2 trillion dollars and will be huge issue for Govt to deal with in 2009

I am on it Pete but I know Nanci Pieceoshiticy mistakes 0′s for O’s.

Did you folks know the $1,200,000,000,000 DOES NOT INCLUDE any Obamanomics stimulus package!

Tax Notes pdf by David Cay Johnston(another very informative read found by clicking links at Sam Pizzigati’s TooMuch site. Sam is a superb journalist. Johnston is Excellent capital E on little-known tax truth.)

Rally police to the rescue!

@ g Anton at 2009-01-05 20:17:59: “You’re pretty hard on Ben Bernanke (not that he doesn’t deserve it, and much more), but you leave Obama and Hank Paulson unscathed. I don’t think that this is at all fair.”Of course, nothing that Hank and Ben have done together or separately (and they have done and spent plenty) has worked. One thing that you have to admit about Ben and Hank, though–they are not in the least discouraged or deterred by failure. To the contrary, each failure is diagnosed by them as being due to not having done enough and not having spent enough, so what we end up with is a series of fiascos each one of which is much more expensive and grandiose than it’s predecessor.”Obama hasn’t done anything yet, but he’s really itching to join the club. To the best of my knowedge, there has not been a successful resuscitation of a failing economy by spending huge sums of money on infrastructure, although there have been failures (e.g. post-war Japan or the USA in the 1930′s). If Obama is not to be deterred by historical failures, I wonder if he will be deterred by his own.”In my view, none of the actions of the Fed (nor the promised actions of Obama) address the basic problem of our economy, which is that we have a non-productive, highly-consumptive, services based economy. Furthermore, the economy is characterised by the ‘creation of wealth’ with credit, leverage, smoke and mirrors, etc.. Isn’t it ironic that all the solutions for curing a problem caused to a great extent by creating wealth with credit, smoke and mirrors, etc. require the creation of wealth with credit, smoke and mirrors, etc.?”I do agree with you on another of your points. Very soon, the typical US worker will be without money, without a job, and without a future.”Let me express my appreciation for your response to my Monday Mises post (I just saw your reply this morning). Your posts are rare and valuable.Yes, perhaps it was a bit unfair of me to leave Paulson and Obama unscathed while taking Bernanke to task. In my thinking, I have come to consolidate all the incredible power held in the hands of this small elite band of bandit bankers into one power center – the Federal Reserve. Bernanke to me, is the Fed. This is particularly true after Obama’s appointment of a Goldman Sachs’ trained banker from the NY Fed, Tim Geithner, to be Secretary of the Treasury. Only a Congress that has lost its soul to the devil would have allowed such a conflict of interest. IMO, they now are all tied together, Obama included.Geithner was and is taking orders from the powerful NY Fed, and will be taking orders from the NY Fed while he’s in the U.S. Treasury, just as Paulson did, although I also believe Paulson to be a part of the ruling hierarchy. Who will protect the people’s purse and interests? If there were people before who did not think that the international bankers, who always go where the growth and prosperity are, were dictating policy for the United States, and were not the power behind the presidency, surely they must know now. For why is the NY Fed’s man, who does only its bidding, now in the U.S. Treasury? The Fed and the Treasury and the Congress and the Presidency have forged together against the people.Many informed people have said from the Fed’s inception that it was a manipulative evil that by means of interest exacts a tribute from the Nation and through the creation and destruction of money perpetuates, in secret, poverty amidst abundance for private gain and power: now they can say that both the Fed and the Treasury are manipulative evils: both are weapons in the hands of the international bankers.Again, I appreciate the eloquence and insights of your exchange. You express my thoughts exactly.

Really nice article on the UK and US housing markets at this link. Thanks to Mr Walayat.http://www.financialsense.com/fsu/editorials/walayat/2009/0106.htmlIt's difficult to see how the UK avoids a really bad crash in their economy in 2009.Am I the only person wondering if the Eurozone will actually hold together in the next couple of years, or disintegrate due to economic pressures?? Think about it. If someone told you back in 2006 or 2007 that the Eurozone was going to disintegrate in the near future, would you have believed them? But we are now at the point where the disintegration issue is open to serious debate. Just part of the fallout from the enormous impact of the Credit Crisis. I am not making any political predictions here – just mulling some of the issues.PeteCA

“To the best of my knowedge, there has not been a successful resuscitation of a failing economy by spending huge sums of money on infrastructure”What about the parks commision?Miss America

Intel Fourth-Quarter Sales Drop 23%, Missing Forecast (Update2)Jan. 7 (Bloomberg) — Intel Corp., the world’s largest chipmaker, said fourth-quarter sales dropped 23 percent, missing a forecast that it cut by $1 billion less than two months ago and sending the stock down 6.5 percent.Revenue was $8.2 billion in the period, down from $10.7 billion in the same quarter a year earlier, the Santa Clara, California-based company said today in a statement. In November, Intel predicted that sales would be about $9 billion, compared with an earlier prediction of at least $10.1 billion.Intel, whose chips run about 80 percent of the world’s personal computers, is losing orders as PC makers curb production. Chief Executive Officer Paul Otellini, 58, has said he expects the current U.S. recession to be the worst of his lifetime.“The whole supply chain is down 20 percent to 30 percent,” said Doug Freedman, an analyst at Broadpoint AmTech in San Francisco. He had predicted that Intel would report sales of $8.27 billion for the quarter. Computer makers “didn’t build anything — they shut down their factories.”Intel fell $1 to $14.37 in Nasdaq Stock Market trading at 9:44 a.m. New York time. The stock lost 45 percent of its value last year.Intel’s sales decline surpasses the 20 percent drop it reported in the fourth quarter of 2001, after the technology bubble burst. Analysts had estimated sales of $8.8 billion and profit of $1.32 billion on average, according to a Bloomberg survey.The company said there was “further weakness” in demand for products that use its chips. Intel also wrote down the value of its investment in Clearwire Corp. by $950 million.Industry IndicatorIntel’s dominance of the processor market makes it a bellwether for technology spending, since its chips are among the first components ordered by computer manufacturers. The company will report its complete results on Jan. 15, kicking off two weeks of quarterly earnings reports by technology companies, including Microsoft Corp., International Business Machines Corp. and Google Inc.Total PC production fell 15 percent in the fourth quarter from the previous three months, according to Craig Berger, an analyst at Friedman, Billings, Ramsey & Co. in New York. PC companies made 3 percent fewer notebooks and 27 percent fewer desktop machines, he estimated…http://www.bloomberg.com/apps/news?pid=20601087&sid=aKtFOabJYQhI&refer=home

I want to see a debate between Noriel Roubini and Peter Schiff about the prospects for deflation versus inflation. Both called this crisis so clearly, but both have opposite views on what is going to happen from here. Peter Schiff thinks all the dollar printing will lead to inflation and perhaps hyper inflation. How can two people with such a clear view before have such disparate views now???

three good trades so far – but out too early on the current run and missed out on most of the ride to 27.52 but unlike the previous two days – we’ll wait for the next signal

Even Krugman isn’t very optimistic about the Obama Stimulus Plan.http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/

“And that gets us to politics. This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”Let’s hope I’ve got this wrong.”

From RGE Monitor’s Newsletter today 1-7-09Dollar OutlookThe fate of the U.S. dollar in 2009 rests on the global growth outlook. After profit-taking on long USD positions ends and trading volumes pick up as investors return from their holidays, the dollar may temporarily recover its relative safe haven status in H1 2009. Since markets have yet to fully appreciate the impact of the commodity slump and financial crisis on the rest of the world, risk appetite may collapse again on signs of a deeper- or longer-than-expected recession outside the U.S.. Further de-leveraging of USD-denominated liabilities could provide an additional boost to the dollar as a funding currency. The bond yield outlook could be a further source of strength: while the Fed is already at ZIRP, other central banks will cut rates further to stimulate growth, putting downward pressure on currencies like the Euro. Alternating with these upside risks to the dollar may be downside risks from 1) a supply crunch in commodities that lifts commodity prices and producers’ economies, 2) inability of the market to absorb increased Treasury supply at low yields.Downside risks to the dollar seem more likely to outweigh upside risks in the latter half of 2009 and in 2010. Yet at the same time, similar downside risks exist for other currencies – growing fiscal deficits will weaken a range of currencies. With emerging markets continuing to have trouble attracting capital and Asian economies, hammered by export contractions, will be reluctant to allow their currencies to appreciate against or with the dollar – China allowed some depreciation of the RMB at the recent euro-dollar peak.Once crucial support from deleveraging wanes, however, the dollar may be left with only foreign central bank reserve accumulation, which has already waned on the reversal of capital flows, to finance the large U.S. current account deficit. Continued repatriation of assets and higher enforced domestic savings rates will at least reduce pressure on the dollar in the short-term.Nouriel RoubiniChairmanhlowe

From my perspective, NR wins over the next 5-10 years! His ‘U’ shaped recovery becomes an ‘L’! Schiff wins afterwards.

Add being good-looking and telegenic to the list of qualifications. Would Palin, whose IQ is reportedly 116, pretty low for a job that demands smarts, be a governor or have been selected for the VP slot if it weren’t for her physical appearance?

What I really miss from professor Roubini is some sort of reflection on the impact of globalization on the world economy and the current mess.In my view globalization is the root cause to the turmoil. DFue to the run away american trade deficit with China, the FED drowned in dollars, returning from China – and Greenspan recycled the american trade deficit into the US economy, causing multiple asset bubbles, mainly the one in housing, which prof Roubini repeatedly has pointed out as the trigger of the crisis.Please, professor, would you comment on a globalization scheme without any shared standards on monetary policy and currency policy among the participating countries …

CBO sees U.S. budget deficit of $1.2 trillion this year

I think this number must be divided per person, family, or taxpayer in order to make sense. Rarely these large sums of money are represented this way. Perhaps this can explain the lack of outrage.

Very fair article on Prudent Bearhttp://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10175I disagree with the title as I see it as ‘Intended’ rather than ‘Unintended Consequences’!

here’s the link to the Ritholtz article CM posted above on shenanigans in the commodity markets:Here Comes the Commodity Index Rebalancing

Don’t miss this cartoonist.Here’s the auto and housing bailouts explained. It’s all the same.

Life cycle cost. Determine how much money is saved by building the infrastructure now vs. future, since the life of the infrastructure is 30-100 years (depending on what it is).The economy fails – FAILS as in pre-industrialization – if infrastructure is taken out of the picture.Spending money on infrastructure might not resusitate an economy when it is bottoming out, but is sets the table for recovery and growth.PRIVATE infrastructure does not work – just ask the folks in Atlanta if they have enough water (system was privatized).

US and China Must Tame Imbalances TogetherThe two nations must coordinate fiscal and monetary policy to control the crisis they helped createMichael PettisYaleGlobal, 6 January 2009

With surging liquidity and massive trade imbalances, no one should have been surprised by the global economic crisis, because as finance professor of Peking University Michael Pettis explains, this has been the historical pattern. Pettis details the history of the crisis, starting in 1980s, when US policy encouraged securitization of mortgages, converting illiquid assets into highly liquid investments; US households shifted money into homes rather than savings accounts, and housing prices climbed; China, enjoying a trade surplus, collected US dollars and invested in US assets. A self-reinforcing cycle led US consumers to buy more, Chinese factories to produce more, banks in both countries to lend more, and the bubbles burst in late 2008. US adjustment is more rapid than China’s, which could lead to a new set of problems. Pettis warns that replacing US household consumption with US government consumption will only perpetuate the imbalances, and he urges the two nations to act responsibly, coordinating fiscal and monetary policies to ease US overconsumption and Chinese overproduction. – YaleGlobal Read more

Carpenter, U 100% on the $$$. Lots of wealth in housing, stocks, bonds and commodities has been lost and lots of liquidity in the shadow banking system has been destroyed; and more is to come. With banks refusing to lend not much can be done. Inflation short to medium term is just a big joke. Thanks for the anecdotal info on the WDC area economy.

up until the last couple of days the pattern in this market for weeks has been to go up on bad news – I wonder what new dynamic is at work – surely reality is not creeping in, so what else could it be?

I thought we only had one president at a time: why is he usurping the authority?

My position is that most of equity (or for that matter a debt holder) represents potential wealth if there is a sale or the loan is repaid. In other words it’s funny money and the loss of a potential sale or loan repayment is not the same thing as the loss of cash. (I know, you are thinking that real money was exchanged for the loan, but the truth was that it was mostly fiat or borrowed money with, loan upon loan upon loan, leveraged by a factor of 30 and 40 to 1.) And to make things really weird, banks claim these future earnings as current “assets” on their balance sheets.So that $30 trillion loss of potential equity sales has relatively little impact on the real economy.Separate from the loss of equity or debt, is monetary policy. It’s the government’s monetary policy that effects the money supply and subsequently deflation/inflation. So if the government creates more money to cover the bank’s loss of future income, then that’s increasing the money supply and inflation.So it’s not a matter of how much money the government creates to even-out-the-losses, but rather how much money to create to keep the heat and lights turned on at the insolvent banks.Your personal position in the building industry is yet another independent variable. As you probably know, restaurants, malls, and homes were already way overbuilt for the demand before this mess started. Now only the most fit will survive in a tough Darwinian economic environment. So you need to move to a pocket area, such as college towns, where they are still building or fine a new type of contracting.

I posted the link to this article last evening and it got lost in the last thread. James Quinn is just great. Thanks for re-posting.

You have articulated very well what is fundamentally missing from the discussion.This is perhaps due to the necessary objectivity or distance that academics must maintain, and so they accept the evidential “premises” (e.g., bank ratings are ideally accurate, CDOs risk model was correct, etc.) and then draw their conclusions.However, the commentators you mentioned have their own analytical biases (in the Austrian school I suppose), which redefines the premises for them and the heat of the argument is more about assumptions of what Economics should be about.Can anyone tell me the name of a real-world thinking economist who is allied with a policy-group, ideology, or investment firm?

sorry! that should have been “who IS NOT allied…”

Funny it always seems like Rigged sympathy for the palestinian’s

Hayes, the ADP number spooked the market this a.m. because they revamped their calculations to better match the BLS data so, teh 700K number lost is a realistic expectation on Fridy and the street was only looking for 450K loss. Also, oil inventories are way up suggesting teh things globally are much slower than most anticipated. Don’t worry though, PPT will save key levels today if CM is right.

essai de traduction dans la langue de Molières pour les lecteurs francophones !Parce que les États-Unis comptent pour une grande partie de l’économie mondiale, il est à craindre qu’un virus financier américain contamine tout l’économique mondiale.” – Nouriel Roubini, Mars 2008L’an dernier, le pire des scénarios s’est réalisé. La pandémie financière mondiale contre laquelle, parmi d’autres, j’avais mis en garde,est maintenantlà. Mais nous n’en sommes encore qu’au début de cette crise. Mes prédictions pour l’année à venir, malheureusement, sont encore pessimistes. Les bulles, et il y avait beaucoup, ont seulement commencé à éclater.Selon la vision prévalente,le prix de nombreux actifs financiers à risques ont baissé à tel point que nous ne sommes pas loin des plus bas. Même s’il est vrai que ces actifs ont fortement chuté depuis leurs sommets de la fin de 2007, ils vont probablement encore baisser. Dans les prochains mois, les nouvelles macroéconomiques aux Etats-Unis et partout dans le monde seront bien pire que la plupart des attentes. Les profit warning surprendront désagréablement les analystes qui s’illusionnent en pensant que la contraction économique sera courte et douce.Demeurent d’extrêmes vulnérabilités sur les marchés financiers: le credit crunch devra s’intensifier avant de s’atténuer, le deleveraging continuera alors que les hedge funds et autres acteurs à levier seront contraints de vendre des actifs illiquides sur des marchés déprimés, conduisant ainsi à une cascade de chutes des prix des actifs, appels de marge , et deleveraging continueront, d’autres institutions financières tomberont, les économies de marché de certains pays émergents connaîtront de véritables crises financières, et certains pays seront confrontés au risque de défaut de paiement de leur dette souveraine.Certes, les États-Unis feront l’expérience de leur pire récession depuis des décennies. La vision autrefois dominante que la contraction-récession aux Etats-Unis serait courte, en forme de V avec un rebond rapide, comme celles 1990-91 et 2001 a vécu. Au lieu de cela, la contraction aux États-Unis sera en forme de U: longue, profonde et durable, sur 24 mois. Peut-être encore plus longue, en forme de L, stagnation de plusieurs années, comme celle que le Japon a subi dans les années 1990.Comme l’économie américaine se contracte, l’ensemble de l’économie mondiale se dirige vers la récession. En Europe, le Canada, le Japon et les autres économies avancées, elle sera sévère. Les économies émergentes, liées au monde développé par les échanges de marchandises, la finance et la monnaie n’échapperont pas à des situations très douloureuses.La définition de la “récession” dépendra du pays en question. Pour la Chine, ce serait un atterrissage brutal de la croissance annuelle moyenne de 12 à 6 pour cent. La croissance de la Chine doit être de 10 pour cent ou plus chaque année pour pouvoir intégrer dans la modernité 12 à 15 millions de pauvres agriculteurs. Pour les autres marchés émergents comme le Brésil ou la Corée du Sud, la croissance en dessous de 3 pour cent représenterait un atterrissage brutal. Les pays les plus vulnérables, comme l’Équateur, la Hongrie, la Lettonie, le Pakistan, l’Ukraine pourraient faire l’expérience de véritables crises financières et il faudrait alors un financement externe pour éviter un effondrement.Pour les pays les plus riches, une combinaison débilitante de stagnation économique et de déflation pourrait arriver alors que les marchés des marchandises sont déprimés par une demande globale baisse. Compte tenu de la façon dont les capacités de production ont fortement augmenté en raison des surinvestissements en Chine et autres marchés émergents, cette baisse conduira au très probable ralentissement de l’inflation. Ainsi les pertes d’emplois augmenteront le taux de chômage grimpera, exerçant une pression supplémentaire à la baisse sur les salaires. L’affaiblissement persistant des marchés de matières premières dans un environnement de récession mondiale, alors que les prix ont déjà chuté depuis leur pic de l’été aboutiront à une inflation plus faible encore. En effet, au début de 2009, l’inflation dans les économies avancées pourrait tomber vers le niveau de 1 pour cent, trop proche de la déflation pour être à l’aise.Ce scénario est dangereux pour de nombreuses raisons. Un certain nombre de banques centrales sera très proche des taux d’intérêt à zéro, leurs économies risquant de subir la trilogie infernale de la trappe à liquidité, de la trappe déflationniste, et la déflation par la dette. Les banques centrales perdent alors leur capacité à stimuler l’économie, car elles ne peuvent pas fixer des taux d’intérêt nominaux en dessous de zéro. Dans le piège de la déflation, la baisse des prix signifie que les taux d’intérêt réels sont relativement élevés, bloquant la consommation et l’investissement. Cela conduit à un cercle vicieux dans lequel les revenus et l’emploi sont en baisse, la demande baisse encore. Enfin, avec la déflation de la dette, la valeur réelle des dettes nominales augmente à mesure que les prix baissent, mauvaises nouvelles pour les pays comme les États-Unis et le Japon qui ont des ratios dette/PIB élevés.Comme les outils monétaires habituels deviennent inefficaces, les décideurs vont se tourner vers des approches peu orthodoxes. Nous verrons les traditionnelles politiques budgétaires, sous la forme de réductions d’impôts et d’augmentation des dépenses, mais aussi dans le monde entier de sauvetage des prêteurs, des investisseurs,des institutions financières ainsi que des emprunteurs. Les banques centrales vont injecter des quantités massives de liquidités dans les systèmes financiers pour tenter de desserrer l’emprise du credit crunch. Des actions plus radicales, telles que l’achat de sociétés et d’obligations des gouvernements ou du subventionnement des taux hypothécaires, pourrait également être nécessaire afin d’obtenir le retour à un bon fonctionnement des marchés du crédit.Cette crise n’est pas seulement le résultat de la bulle du logement aux États-Unis et de l’éclatement ou l’effondrement du secteur des prêts hypothécaires. L’excès de crédit qui a créé cette catastrophe a été global. Il y avait beaucoup de bulles au-delà du logemen, dans de nombreux pays, pour l’immobilier commercial et les prêts hypothécaires, les cartes de crédit, les prêts-auto et les prêts étudiants. Il y avait des bulles pour les produits titrisés qui convertissaient ces prêts et ces hypothèques en produits complexes, toxiques et destructeurs. Et il y avait encore des bulles sur les marchés de la dette publique, les rachats de levier, les hedge funds, les prêts commerciaux et industriels, les obligations de sociétés, les produits de base, et les crédit-default swaps, un marché non réglementé et dangereux où 60 000 milliards de $ de protection nominale ont été vendus basés sur un stock d’obligations privées de seulement 6 000 milliards.Au total, c’est la plus grande bulle d’actifs et de crédit de toute l’histoire de l’humanité qui en éclatant pourrait provoquer des pertes de crédit pouvant atteindre les 2 000 milliards de $. Si les gouvernements n’agissent past avec plus d’empressement pour recapitaliser les banques et autres institutions financières, la crise du crédit va devenir encore s’aggraver et les pertes monteront plus vite que les entreprises ne pourront reconstituer leurs bilans.Grâce aux actions radicales du G-7 et autres, le risque d’un effondrement total du système financier a été contenu. Mais malheureusement, le pire n’est pas derrière nous. Ce sera une année douloureuse. Seule une très agressive action coordonnée des décideurs politiques permettra que l’année 2010 ne soit pas encore pire que 2009 est susceptible de l’être.

Look at the GIANT bid under the SSO!! You guys still don’t believe me?

As the dollar drops, how long do you think you are going to remain as an umpire?

Where on Fox are you reading this?

Why the optimism when things look so bad at this point?

If you saw a true unbiased economist, would we even recognize his as such? Or would our own ideologies, beliefs and preconceptions cause us to characterize him as biased?

economicminor, I nominate you for a spot as a commentator on the RGE blog.

I’ve had the golden touch since the November lows but I don’t know how long it will last. The trick has been buying low (i.e., stuff that looks fundamentally attractive long term even if it ends up being a trade for a quick nice gain). I posted my moves in this blog in almost real time so that my moves are a bit more transparent and easy to check than Jim Rogers’, who always appears to be doing the right thing but after the fact.I loaded up on banks at the bottom on 11/20-21; then, the huge citi bailout got financial stocks in rocket fuel. When things got a bit frothy, I got out the first Friday in December. I sold: BAC @ 15.16 C @ 7.90, GE @ 18.21 GS @ 70.66 (only one trading now much higher) JPM 33.85 @ WFC 29.82. In mid-December, I bought USO and XLE a bit early and got out super quick at a little loss but then loaded up on USO and XLE leaps at the bottom. I also bought TBT pretty much at the bottom of long T rates.In addition in the last trade days of the year, I also bought, simultaneously, on-the money feb09 calls and puts on SPY and yesterday to try to profit from volatility and the apparent rally that appeared to be developing.Yesterday, when I said I saw the bear coming back in full force, that I would be surprised if the rally survived inauguration day, I sold: TBT, XLE leaps, and SPY calls. I am still long USO and DBA leaps, and SPY feb puts.As I said above, my rationale has been to buy stuff when I believe they are so cheap the downside is limited and they would be good holdings for the long term. However, I’ve been lucky that significant up moves have followed quickly after my moves so I have not been able to resist taking quick profits in these volatile markets.So “investing” has turned into speculating but with good results so far. I have not made any move just because I think something is going up or down.I post all this detail so that people may learn from it; not to brag about good performance. Those of you who follow my posts know I also let the board know when I screw-up.So Hayes, my hunch is that the bad news have finally brought the bear back. I wouldn’t go long stocks here as I believe we will see cheaper prices. I see quite a bit of downside risk which does not mean we may not see an up spike. Goldilocks are hard-headed and they are still looking for a good excuse to rally but things are so bad they may not get their excuse.

China is coordinating monetary in the most direct way. Its called a currency peg. Of course, the peg is designed to do just the opposite as this article calls for. It is designed to perpetuate the trade imbalance at is current level. Maybe the Chinese will ‘cooperate’ further with currency depreciation next. Add huge growth in Chinese unemployment in the last 3 months, with its resultant hit to the Chinese consuming class, and their consumption is likely to go down, not up. At least their production will go down somewhat.And since US policy is designed to restart consumption, we in the US also moving in the wrong direction. Unfortunately, Pettis is preaching to the choir – I doubt policy makers are listening.

Spot on! True transparency and honest regulation would go a long way towards thwarting the endless ponzi like schemes and manipulation of markets and economies. Maybe Harvard and all other business schools should start offering an MBM “Masters in Business Morality”.

Thankyou for sharing!

Definitely missionary style, being a good Catholic.

“The trick has been buying low (i.e., stuff that looks fundamentally attractive long term even if it ends up being a trade for a quick nice gain).”That’s the best summary of a trading system I’ve ever heard. I’m glad you had the courage to follow your instincts and grateful that you publish your results. How do you determine when to sell? Do you use technical indicators or just instinct?

OR, thanks for your insights!I have a question – what are your thoughts on TBT long term? Are you waiting for a drop to jump back in? I thought your reasoning for buying was bulletproof, did you sell just to take profit?

seeing that just kind of makes me want to puke my guts out.

4:39 p.m.[EMC] EMC CEO, senior executives to take pay cuts in 2009

@Danish: “What I really miss from professor Roubini is some sort of reflection on the impact of globalization on the world economy and the current mess. … In my view globalization is the root cause to the turmoil. Due to the run away american trade deficit with China, the FED drowned in dollars, returning from China – and Greenspan recycled the american trade deficit into the US economy, causing multiple asset bubbles, mainly the one in housing which prof Roubini repeatedly has pointed out as the trigger of the crisis…”Liberty must be given a higher value than all other objectives.The fact is, the money industry based in the U.S. but operating throughout the world, has achieved such power that it now controls American foreign policy. In the China/Taiwan disputes, for example, the pledges to support Taiwan after WWII have gradually succumbed to the US-based money power and its need to have Communist China as a partner. The whole range of China’s violation of human rights and its constant military threats against Taiwan are overlooked because the money power needs China for its purchases of U.S. debt and for its slave labor pool.From the days of the clipper ships, there’s always been global competition for resources. But global economic competition is not the same as repressive international political arrangements that benefit the narrow interests of the power brokers. For this reason, America’s labor resources have been sold out and her small businesses and US product producers wiped out through foreign competition brought in for that purpose. American inventions, technology, patents and freedoms have been traded and bartered for increased advantages by the international corporations and New York bankers.This is Teddy Roosevelt in the Philippines multiplied a million times: with one exception, this time it is being done at America’s expense and her demise.The chips used in this international poker game are namely the homes, lives, estates, and futures of the American people, but most of all, their freedoms.“When our country shamefully entered into a political partnership with a regime in China that has killed upwards of 50 million people and holds nearly 1 billion people in bondage,” said Robert Ringer in 1979 in his book “Restoring the American Dream,” “it was celebrated as a step in defense of peace.’”One of the most glaring examples of capitalism versus communism, said Ringer, was found in the comparison of Taiwan, a tiny nation of but 17 million inhabitants, with China, whose population in 1977 was close to 1 billion. “Taiwan, notwithstanding its size, was one of the top 20 trading nations in the world. Taiwan’s foreign trade in 1977 was $17.9 billion, as compared to Communist China’s $16.4 billion.”Thus a country at the time 50 times the size of Taiwan could not equal its production because free enterprise was outlawed and man’s freedom restricted. And so, China, like Lenin when faced with revolution, threw open its communist doors to “despicable Western capitalism,” to show it how to become capitalistic and industrialize its imploding country.Ironically, political globalization is leading America down the road to world serfdom, where, in the end, no one (except the dictators) owns anything. The reaction of economies is never divorced from politics. Never!

Krugman is way too full of his opinion of Government’s ability to really make a difference. He wants a bigger stimulus to limit unemployment. Even during the GD, when we put people to work doing almost anything we could think of, unemployment was still over 20%.Keynesian stimulus, which is what they are trying, was conceived of in the 1930′s which was a completely different world than now. Now we have an economy full of services industry jobs, which are being shed at an astonishing rate. The downward spiral has begun, and it is off to a steeper descent than any of us could have imagined 6 months ago.In the end, the finger pointing Krugman anticipates will happen. But neither side will be right, because neither side yet appreciates what is really happening in this crisis. The seeds of this crash were sown over decades, and go all the way back to mistakes in the early part of the 20th century. They have roots in fiat money, the fallacy of the Fed, poorly structured international monetary exchange systems, even the way capitalism itself is pursued and regulated in our modern economy.The economists, politicians, and pundits will argue over things that were really just minutiae in this unfolding history, such as the wisdom of letting Lehman fail, timing of rate cuts, the amount of the stimulus, etc. They will miss the big picture, and history will overwhelm them and their arguments soon enough.

The following, taken from elsewhere on RGE, shows that the EU will not follow the us debasing itself. If the Eurozone holds together, this should mean that the dollar will crash relative to the Euro.”One leading anti-recession idea for the moment is a global fiscal stimulus amounting to 2% of the planet’s GDP. The precise math behind this calculation is still forthcoming, but it obviously assumes a big stimulus in the US and also needs to include a pretty big fiscal expansion in Europe. (Emerging markets will barely be able to make a contribution that registers on the global scale.)What are the likely prospects for a major eurozone fiscal stimulus? My presentation yesterday on this question is here. The main points are:The pressure is really on euro sovereigns with relatively weak fiscal positions. This may not seem fair, in the sense that the crisis started far away (in some sense), but that is how crises work.Whether or not the global recession is bad, countries like Greece and Italy (and a set of countries now known in the markets by the unfortunate acronym of PIIGS) are being pushed towards urgent fiscal austerity, i.e., the opposite of expansion.They could, of course, get some sort of help from stronger eurozone members, for example in the form of much lower interest rates. But this does not seem to be immediately in the cards.The reaction that one hears from senior European officials and richer eurozone countries is that Greece (and Italy and others) should deal with their fiscal problems. There is very little sympathy and even less bailout money. This is in striking contrast with the attitude – and willingness to open pocket books – shown towards East-Central Europe, which is currently being treated more as a set of innocent bystanders.It is hard to see how to pull a large global fiscal stimulus out of the hat. Pursuing expansionary monetary policy in the US and elsewhere is much more likely to have first order effects on industrial countries and, through them, on the world’s economy.Asking for a major push on fiscal policy is not a bad thing in most contexts. But it does encourage free riding, i.e., you go build a lot of roads and bridges and I’ll recover through exporting vehicles and machinery to you – which appears to be the current German strategy.Getting the G7 or G20 to really coordinate on fiscal stimulus is rather like OPEC trying to coordinate oil production cuts. Both are really hard to do in a severe downturn, particularly as budget pressures mount.”http://www.rgemonitor.com/euro-monitor/254977/eurozone_hard_pressed_2_fiscal_solution_deferred

So when does it get bad?

We haven’t had one for a long time.

Eamonn Fingleton author of Jaws of the Dragon gives interesting confirmation of p1aql’s point, discussing why and how China suppresses consumption. (video link).http://fora.tv/2008/03/12/Eamonn_Fingleton_Discusses_In_the_Jaws_of_the_Dragon

As I said yesterday, I think I sold TBT too soon. 30 yr Ts will see 4% yields again. But if we have of of those panic scares again which we may. Then, the 30yr T rate may go under 3% again. I had just read Shilling’s letter. The guy loves long Ts and he was making the half foolish argument that even at 2.65% the 30yr T bond may be a good buy if we get deflation. So bottom line. I will wait a bit and see if this bear gets T rates a bit closer to panic levels again and go long TBT again.

I wrote a bunch of comments above following Hayes on 2009-01-07 13:02:17 post which may be worthwhile reading.

BTW, I have nibbled a bit into risky things lately but I still maintain my view US cash is king now.

IMHO, U R wrong on the Euro and Europe. hedge your bets.

I question the relevance and usefulness of your post.I am sure there are many more suitable blogs for that discussion.

I agree the eurozone is not in the MOST peril, though I think they are in peril. And I stand corrected – I tend to lump the UK into the Eurozone because, in my lifetime, the UK has become so much more like the rest of Europe than it was before (my mother is English, so England and I go way back!). Plus the pound and the euro are almost matched up now in value, itself a shocking fact.As for Ireland, as I recall they were accused of beggar-thy-neighbor at the time, but your interpretation is most likely more in line.If you want some dogmatic writing, here it is – my story on how I became ex VRWC.

Think straight. The Germans aren’t going to repeat Weimar, but the US sure is.

Besides the crisis in Spain could be (I might be wrong in this) due to UK borrowing – when UK banks started tightening, the housing market is Spain was affected.

yeah some ruby-lipped honeys would be interesting

I tend to lump the UK into the Eurozone

…and then you use UK to demonstrate some of the faults of Eurozone? Besides that, Iceland is not part of Eurozone either.

The EUs failure to issue coordinated rate cuts, and in fact, issue instead an increase as late as July 2008.

I suspect it is more UK that sees that as a failure as it probably has contributed to the loss in the value of the pound.

The current vilification of Germany, who, as a net exporter, is chided for not participating in the joint response enough and not consuming enough.

Some journalists in UK finance media have been finding faults in the way Germany runs its economy since time immemorial. I guess Germany should have based their economy on lower lending standards like some other countries…

Average family size is 3.14 x $5,000 = $15,700 per family this year alone!What a setback!Then, 12 trillion national debt comes out to $157,000 per family.Can the US file for Chapter 11? (Just asking)

Can you tell us more about the CDS auction dates? I don’t know what they are and, thus, not follow them at all.

Est-ce que vous êtes l’auteur de l’essai, zebla?SWK

My take from the latest Pettis Blog:”I have always advised anyone who will listen that the government should be very sparing in its willingness implicitly or explicitly to guarantee credit risk.”food for thought

See what you started, Ben and Hank? Porn industry seeks federal bailoutWASHINGTON (CNN) — Another major American industry is asking for assistance as the global financial crisis continues: Hustler publisher Larry Flynt and Girls Gone Wild CEO Joe Francis said Wednesday they will request that Congress allocate $5 billion for a bailout of the adult entertainment industry.“The take here is that everyone and their mother want to be bailed out from the banks to the big three,” said Owen Moogan, spokesman for Larry Flynt. “The porn industry has been hurt by the downturn like everyone else and they are going to ask for the $5 billion. Is it the most serious thing in the world? Is it going to make the lives of Americans better if it happens? It is not for them to determine.”Francis said in a statement that “the US government should actively support the adult industry’s survival and growth, just as it feels the need to support any other industry cherished by the American people.”“We should be delivering [the request] by the end of today to our congressmen and [Secretary of the Treasury Henry] Paulson asking for this $5 billion dollar bailout,” he told CNN Wednesday.Flynt and Francis concede the industry itself is in no financial danger — DVD sales have slipped over the past year, but Web traffic has continued to grow.But the industry leaders said the issue is a nation in need. “People are too depressed to be sexually active,” Flynt said in the statement. “This is very unhealthy as a nation. Americans can do without cars and such but they cannot do without sex.”"With all this economic misery and people losing all that money, sex is the farthest thing from their mind. It’s time for congress to rejuvenate the sexual appetite of America. The only way they can do this is by supporting the adult industry and doing it quickly.”So far, there has been no congressional reaction to the request.http://politicalticker.blogs.cnn.com/2009/01/07/porn-industry-seeks-federal-bailout/#more-34724

Darn, I just remembered it’s from Hesiod’s Works and Days.

@ORThe reply to comment below your most recent post was not available so I’m posting my response further up the thread.CDS auctions are listed on isda.org. On the left side of the screen are a list of the the CDS protocols. Click on the one you want to view and then a new window will open. I always look at the FAQ’s first since I want to know the deadlines, which if you scroll down you’ll see adherence letter deadlines and also the auction and cash settlement dates. I also follow the list of parties to see who the counterparties are and how many of them there are that have already submitted adherence letters.I see they’ve just added a new one for Ecuador, and it’s a bit too soon to gather much info until deadlines approach. What I’ve witnessed is that the day AFTER the auction is when the market typically sells off, and the bigger the auction, the harder it falls. Lehman was a great example of this when the auction took place on Oct. 9 but the market was limit down Oct. 10. Although the cash settlement dates aren’t usually for about 2 weeks after the auction, it appears counterparties are selling assets as soon as possible after these auctions to beat their competition to the exits.Auction results post on Markit.org immediately following the auction so this will give you a lot of info regarding how much the debt sold for, who bought, and amount. Of course, the larger, the bigger the sell-off the following day.Cash settlement dates typically see a sell-off as well, and if my memory serves me, I believe the Icelandic auctions settled near Nov. 21.Now that I’m revealing my hand, this strategy probably won’t work anymore, but it’s worth a try. Maybe it will give some of you an edge on making a quick buck or a great long term buy! GOOD LUCK!

The economy wil not pick up before 2013. The facts are laid bare to see. Now, perhaps you all will see why McCain acted erractically as he did when he found out all of htis info on the economy last September. He knew what was coming and didn’t want the legacy of his presidency to be the Great Depression II. He knows those in power, and he knew what is coming for the next four years with our economy. He threw the election. Think about his behavior since last September, and it wil make sense to you. McCain changed immediatley. Besides, who really revived his bankrupt presidential campaign in 2007 to make him run? His enthusiams was barely there in 2008, and he pretended to “lose it” in September. Smart man for throwing the election. No one can prevent the economical collapse that is coming.

And look at the goverment-oriented solution to this. To modify the mortgages means that–as has happened– delaying the foreclosures. The ones that were modified in March-April 90 percent of them added in foreclosure 3,4months later. So, a crisis that could last 6 months will last 2 years because of goverment modifying the mortgages, and within this uncertainty banks reluctant to take risks and thus delaying the rebound. This drag is reminscent of the depression…where rather than letting things happen you find the Dodd-democratic solution and become the superman in between.My friends this will only end when the housingg crisis ends and the quicket that happens the better it is. It will happen only when people out of owned homes drive the prices of rent up and the rent-home price ratio comes to a value that a lot of people feel it is better for them to buy homes thus spurring demand of homes to meet the excess supply. Now we could reach there in 6 months to a year or if the goverment intervenes it could take 2-3 years and a depression.

Thanks OR and others, your comments above and in previous threads are welcomed/valued by myself and I am sure most visitors to this site – I have been doing the day trading thing of late and have had mixed success on SSO – clearly some patterns are evident and as CM has counseled, discipline, rules (and patience) are key; unfortunately they are virtues that for me are wanting. I had about 50 or so favorable trades (SSO) in the past few days but got caught yesterday by relying on “gut” without the technical confirmation. This morning after three good trades I misread a signal(s)and am currently sitting on a chunk of SSO bought at 27.37 (well above its 26.69 close)- it’s a good thing I had a positive return in ’08 (though that type of rationalization will soon begin to wear thin). I continue mostly in cash (including currency – still in safety deposit boxes) – got burned (1% loss) on gold (bullion certificate) back in late September ($900+, but that was more of a safe haven than investment). While I think the gloom scenario could be overdone, I also have concerns that the meltdown to date is but a microcosm or canary in coal mine of a failed system – sort of like global warming [if you subscribe to that theory] descending into an unstoppable feedback loop. Apart from that apocalyptic view, currency and inflation/deflation continue to be my biggest questions. My gut and intellect say inflation, lower dollar and higher commodities but my intellect and gut say the opposite. Meanwhile I have an underlying fear of a systemic breakdown and all that is implied with that.

We are fully capable of making our own, Mr. Flynt.

Here it is: even dogs won’t work under socialism.i.e., no incentive.DOGS CAN TELL WHEN THEY’RE GETTING RAW DEALWashington (AP) — No fair! What parent hasn’t heard that from a child who thinks another youngster got more of something? Well, it turns out dogs can react the same way.Ask them to do a trick and they’ll give it a try. For a reward, sausage say, they’ll happily keep at it.But if one dog gets no reward, and then sees another get sausage for doing the same trick, just try to get the first one to do it again. Indeed, he may even turn away and refuse to look at you.Dogs, like people and monkeys, seem to have a sense of fairness.”Animals react to inequity,” said Friederike Range of the University of Vienna, Austria, who led a team of researchers testing animals at the school’s Clever Dog Lab. “To avoid stress, we should try to avoid treating them differently.”Similar responses have been seen in monkeys…In the reward experiments reported in the December 8, 2008, edition of Proceedings of the National Academy of Sciences, Range and colleagues experimented with dogs that understood the command “paw,” to place their paw in the hand of a researcher. It’s the same game as teaching a dog to “shake hands.”Those that refused at the start — and one border collie that insisted on trying to herd other dogs [Paulson?] — were removed. That left 29 dogs to be tested in varying pairs.The dogs sat side-by-side with an experimenter in front of them. In front of the experimenter was a divided food bowl with pieces of sausage on one side and brown bread on the other.The dogs were asked to shake hands and each could see what reward the other received.When one dog got a reward and the other didn’t, the unrewarded animal stopped playing.When both got a reward all was well.One thing that did surprise the researchers was that — unlike primates — the dogs didn’t seem to care whether the reward was sausage or bread.http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/12/08/national/w074934S71.DTL&type=printable

To put a face on the tragedies: how it grips the heart and tears apart the spirit. To acknowledgement the devastation. That is why, in “The Gulag Archipelago,” Aleksandr I. Solzhenitsyn put in the “few such chance photographs” that he had of those who were shot, “to leave a scar on our hearts… So that they should not have died in vain!”How handsome, how beautiful these young men and women were—-these gone to flowers everyone who did not live to tell the story of Russia’s nightmare. Wrote Solzhenitsyn:“Thus many were shot—thousands at first, then hundreds of thousands. We divide, we multiply, we sigh, we curse. But still and all, these are numbers. They overwhelm the mind and then are easily forgotten. And if someday the relatives of those who had been shot were to send one publisher photographs of their executed kin, and an album of those photographs were to be published in several volumes, then just by leafing through them and looking into the extinguished eyes we would learn much that would be valuable for the rest of our lives. Such reading, almost without words, would leave a deep mark on our hearts for eternity.“Look at these at least:Viktor Petrovich Pokrovsky—shot in Moscow in 1918Aleksandr Shtrobinder, a student—shot in Petrograd in 1918Vasily Ivanovich—shot in the Lubyanka in 1927Aleksandr Andreyevich Svechin, a professor of the General Staff—shot in 1935Mikhail Aleksandrovich Reformatsky, an agronomist—shot in Orel in 1938Yelizaveta Yevgenyevna Anichkova—shot in a camp on the Yenisei in 1942.”And look at these at least—the tragedies of 71 lives extinguished. And despair.

well let’s hope the economy starts moving ‘upwards’ just in time for the 100-year “anniversary” of the ‘Great War’

How grand of you to translate Roubini for the convenience of his readers in France. NR is fast becoming a worldwide commodity. I’m sure his dire predictions for 2009 ring a bit less dire in romance language versus flat and matter-of-fact English.

2008: Year in ReviewBloomberg News presents commentary from guest contributors including former Hewlett-Packard Co. Chief Executive Officer Carly Fiorina, Economist Nouriel Roubini, Yale History Professor Paul Kennedy, Pulitzer Prize winner David Kennedy, and Economist James K. Galbraith. Here is the Commentary by James K. Galbraith:James K. Galbraith Says Predator State Hit Wall: Year in ReviewDec. 31 (Bloomberg) — This is the first full-fledged credit collapse and debt deflation since 1930, bringing with it a violent economic decline and a surge of unemployment.How did it happen? For half a decade, a toxic stew of abusive and explosive mortgages, subprime securitization and complicit ratings companies was allowed to simmer, piling leverage on leverage, while credit default swaps spread risk until risk no longer could be traced.This was market failure. But it happened because of a deep failure of the state. The government has the power to prevent such things. But the state abandoned its post. Marching under the banner of free markets, the government turned regulation over to agents of a predator class. Thus the unchecked growth of derivatives, tax havens, regulatory arbitrage and the carry trades. Thus Bernard Madoff, undetected by the Securities and Exchange Commission.In August 2007, the banks peered into their books, where each saw the mirror of the others. None could know what they were worth. Trust and clarity and interbank lending broke down. It took a year, via Northern Rock Plc and Bear Stearns Cos., for the larger world to understand. When it did, panic ensued. And panic is deadly to finance.Paulson’s GambitGovernment responded, but we discovered then how badly economic ideas now failed us. Action was needed. Ideology got in the way. The Treasury and Federal Reserve sought to minimize “intervention,” to preserve “market discipline.” Thus, the decision to let Lehman Brothers Holdings Inc. fail. The result was suspicions of cronyism and more panic.Henry Paulson now demanded $700 billion from Congress to purchase “troubled assets.” This too was ideology: a price mechanism for assets whose core characteristic, from the beginning, was that they were too opaque and corrupt to be priced.Congress ultimately took charge. It was necessary to create a zone of safety in banks and money-market funds, by extending deposit insurance and guaranteeing commercial paper. This was done. Banks were also stabilized by partial nationalization. The financial panic subsided — but now the economic crisis deepened. With housing in collapse, industry, insurance, and state and local governments all threatened to follow.Two-Part ChallengeThe Great Crisis thus transcends market failure. It is system failure, failure at the heart of the mechanism that makes the economy run. We are witnessing the financial and the physical consequences of the end of a governing creed.The challenge facing the American government now comes in two parts. The first is to maintain spending in an economy that cannot, for the duration, draw spending power from the poisoned wells of private finance. The second part must be to reconstruct the necessary economic functions of government — beginning with effective global financial regulation — for our own sake and as a model for the world.The inauguration of President-elect Barack Obama offers hope that these matters have been understood. Yet it wouldn’t be wise to assume this. The American public, whose common sense and good judgment rejected the predator state in the elections of 2008, needs to remain engaged, informed and active on all fronts.(The opinions Mr. Galbraith expressed are his own.)http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=ajfEj3ait.SY

Anon.. Brilliant,that’s why he choosed Palin,(virtually a nobody)Mccain isnt an idiot, even if he’s still suffering from Post-trauma POW syndrome,im sure his advisors are intelligent people

People are clearly paying too much simply for a roof over their head – many people upwards of 1/3-1/2 of their income is going for the mortgage…so of course everyone is broke and can’t afford anything but the basics of living.

You are insane and have no clue what you are talking about – more immigration is the last think America needs right now with the shrinking job market. in fact, we should be encouraging immigrants to head back to their home countries if possible.There is no way that millions of immigrants will want to drop decades of hard-earned savings on a crappy McMansion in an anonymous and boring American suburb (this is where all of these foreclosed homes are) where they know no one and there is nothing to do except drive from strip mall to strip mall.

This is absurd – the porn industry is ailing (and has been for years) because of capitalistic competition from FREE PORN on the internet on websites like youporn.com or redtube.com – why pay for porn when it’s free all over the internet?Recent article on this – “Obscene Losses”: http://www.portfolio.com/culture-lifestyle/culture-inc/arts/2007/10/15/YouPorn-Vivid-Entertainment-Profile

Stop trying to scare everyone. There are and will not be “starving masses” – as it stands now the U.S. govt. and very many governments around the world pay actually pay many farmers and other food makers to produce LESS FOOD in order to keep food prices artificially high.If needed food production could easily be ramped up – but that’s not needed because, as stated, there is plenty of food to go around. Many people are just lacking the money for it because of so many other bills related to basic expenses – so if things got really bad the govt. could easily institute a mass debit card type system (food stamps for everyone!) that can be used at grocery stores. Voila, no mass starvation.

Positive real interests and deflation are OK for now, better buying times may come after a few more months of writedowns and earnings decreases.

TARP?To my knowledge only a few drops of the TARP money has been used to buy bad troubled assets. If this is true how can US Banks continue exist since nothing has been done to clear their losses? Will not the US banking system need a lot more money to get on its feet

perhaps losses will become the new profits

You forgot about the asteroid hit causing massive extinction that renders 1 through 41 irrelevent.

Michelle above: Thanks! I will look into this.Guest above: Speculaion= lust U R 100% right. Buy And hold at low prices usually beats other strategies. Whether I should just have held the bank stocks instead of selling them early December is a good question.

I guess this might push the pound lower? So what’s next…that we get 1.5 pounds for 1 euro?British interest rate hits record low of 1.5%http://sg.news.yahoo.com/afp/20090108/tts-finance-economy-britain-bank-rate-fo-cac1e9b.html

LONDON (AFP) – - The Bank of England on Thursday said it had cut its key lending rate by half a percentage point to an all-time low of 1.5 percent, as Britain grapples with a deepening economic slowdown.”The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate… by 0.5 percentage points to 1.5 percent,” the BoE said in a statement.The rate was cut from 2.0 percent to the lowest level since formation of the Bank of England in 1694, 315 years ago.

Financial & Economic Crisis

We do not yet know if the economic consequences are “merely” a severe recession or if there will be a prolonged global slump or worse.

Could the good professor give us his Dr. Doom take on the worst case scenario?Thanks

Who is us?

Welcome to the squatter nation!! Ryskamp nutjob getting his wish?10:24 a.m. Fannie Mae halts foreclosure, eviction until Jan. 31

We have had defaults on every form of credit so one other possible form of default that may turn out to be massive are those who owe taxes to the IRS. Many small business and individuals who had hoped for a rebound in the economy in 08 will find themselves struggling to pay day to day expenses many will not be able to pay the taxes owed. Unlike other debts individuals and small business owe the IRS will not be so forgiving. How much could it end up being?

Going GREEN for Mr. Obama…I hate rigged but you gotta play the hand your dealt.

I am looking forward to the speech – needs to be negative enough so as to manage expectations and solidly lay the blame at W’s feet- yet positive enough so as not to damage consumer sentiment further – and to consolidate his role as the one who will lead us out of the eco-wilderness – A strong rally after the speech would be a great headline on the evening news (and help get me out of this friggin SSO)What is interesting is that every time he has spoken in the past week the market has gone down while he was talking …

PSEUDO -From the medical POV I can tell you that we don’t have an oversupply of much. We have an overuse issue and a misallocation of resources, but we are also looking at a shrinking pool of providers (doc’s, nurses, tech’s, etc.) and the next 10 years looks very bad.IF – we can reorganize and prioritize, we can provide basic services for most.That can and should be the goal for us. No one should expect everything – but if everyone could get something, that’s better than what we have now.

Obama is going to be SOOOOOO gloom/doom just to secure $1 trillion in bailout crap! Dow should rally 500 points after his speech! LOLOL

Oh no, the hidden message in Obama’s speech is unmistakable!! He called it an “American Re-Investment Plan! Look at the first letters…A.R.I.P. = America Rest In Peace! We are toast!

Ooops-he heard me! A “Smart Grid” will be built. As opposed to a stupid grid?

This is the same old tired sh$t that every new president has promised and look where we are!! What do they do, recycle speeches?

he didn’t say much IMO – my take away is his statement that “it could last for years” that and a bunch platitudes – “things are real bad and I offer hope” but no specifics – at least I bailed from my SSO early in the speech -as I said every time he talks the market goes down (though I suspect we may get a pop later in the day)

From something posted here yesterday. This author suggests as we change the regulatory framework, we use the system of credit guarantees to address targeting more of the basic needs with credit that is not subject to speculative forces motivated by the desire for high profits and risk taking:…snip…

Policymakers should first—either within a democratized Federal Reserve or in a broader dialogue—determine which sectors of the economy get preferential access to credit. In my view, we should encourage domestic investments in which risks are relatively well understood, and, correspondingly, discourage speculative investments where risks are relatively opaque. Beyond that, we should give preference to job-creation, subsidizing the growth of green investments and the fight against global warming, and affordable housing. The financing of affordable housing, for example, would then be subsidized directly by public-policy arrangements, and not, as in the last decade, as a byproduct of high-stakes gambling.With established goals, this policy gives significant social control over major finance and investment activities, while allowing considerable decision-making freedom for both intermediaries and businesses. Intermediaries would still be responsible for establishing the credit-worthiness of businesses and the viability of their projects. Businesses would still be responsible for the design and implementation of their investments. Indeed, business would still have freedom to pursue nonpreferred projects, and banks could still finance them. Financing costs would just be significantly higher.Implementing requirements as a system of market auctions rather than quotas, as Maisel proposed, would allow more flexibility. Institutions would not have to carry the specified proportion (say, 25 percent) in loans to preferred sectors. Intermediaries that exceed the limit would obtain a permit that they could then sell to institutions whose loans to preferred sectors are below the minimum. Individual institutions could therefore choose to maintain particular market niches. At the same time, the system would ensure that some niches carried an extra burden of either higher reserves or purchases of “preferred asset permits.”A fourth measure that could channel credit to priority areas and reduce risk in U.S. financial markets would focus and expand the federal government’s already extensive but unwieldy system of direct lending and loan guarantees. The U.S. government has long been heavily invested in domestic financial markets as a direct lender and even more significantly as a loan guarantor. The sectors of the economy receiving substantial support though these loan programs include housing, education, agricultural and rural development, and small business. As of 2007, the government operated about 140 separate loan guarantee and direct lending programs. That year, the government’s $250 billion of new guaranteed loans and $42 billion of direct loans together represented about 14 percent of the total borrowing by households and businesses in U.S. financial markets. Outstanding government loans and loan guarantees were $1.4 trillion, about six percent of total debt. (These programs are separate from the operations of “Government-Sponsored Enterprises.” Fannie Mae and Freddie Mac were the largest GSEs until they were nationalized in September 2008 to stave off financial collapse. Other GSEs include the Federal Home Loan Banks, the Agricultural Credit Bank and Farm Credit Banks, and the Federal Agricultural Mortgage Corporation.)Despite their formidable size, these programs have not been integrated into a broader policy agenda or tied in any way to the Federal Reserve’s monetary policy and interest rate management efforts. They operate rather as financing vehicles for distinct programs, from student loans to rural business development. Their influence on overall financial-market risk or borrowing costs has not been considered, nor has their effectiveness in leveraging relatively small amounts of public funds to move private financial markets in socially desirable directions.An expanded loan-guarantee program could be included as a tool to promote financial stability and social welfare. Assume, for example, that the government roughly doubled its 2007 level of loan guarantees. The additional $300 billion per year could be earmarked for green investments and affordable housing, and we would set an explicit level of guarantee at, say, 75 percent. The government then would be the guarantor for $225 billion in loans for green investments and affordable housing. Interest rates on these subsidized loans would fall with the reduced level of risk—i.e. by 75 percent relative to the difference between a market interest–rate bond and a risk-free government bond. If the market interest rate is 10 percent and a government rate 5 percent, the subsidized rate would be 6.25 percent—the 10 percent market rate minus 75 percent of the 5 point difference between the market rate and the 5 percent risk-free government bond rate. Read more

I bet it was this:“Ask not…where the money is coming from–ask how much you can give to your country.”

Wal-Mart Leads Retailers in Slashing Profit Forecasts (Update3)Jan. 8 (Bloomberg) — Wal-Mart Stores Inc., Macy’s Inc. and Gap Inc. slashed earnings forecasts after the worst holiday- shopping season in 40 years squeezed retail profit margins.Wal-Mart, the world’s biggest retail chain, said today that fourth-quarter profit will miss its earlier forecasts after sales at stores open at least a year rose 1.7 percent last month, missing analysts’ estimates. Sales at Gap, the largest U.S.clothing retailer, fell 14 percent. December revenue at Macy’s slipped 4 percent, and the department-store chain announced 11 store closings.“That does not bode well going into January-February, where we go into a lull period and there’s really no reason to buy until spring,” Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia, told Bloomberg Television.Rising unemployment and tightening credit may have spawned the worst holiday-shopping season in four decades. To attract customers, some U.S. retailers cut prices by as much as 70 percent, which threatens to erode their profit margins in the fourth quarter, the most important of the year, and into 2009.“The margins are getting killed,” Tennant said.U.S. December same-store sales dropped 1.7 percent, the International Council of Shopping Centers reported today. The New York-based trade group said sales declined 2.2 percent in the last two months of the year, the biggest such drop since it started tracking the data in 1970…http://www.bloomberg.com/apps/news?pid=20601087&sid=amS7u7AYKh84&refer=homeU.S. Stocks Drop on Retail Forecasts; Wal-Mart, Limited SlumpJan. 8 (Bloomberg) — U.S. stocks slid for a second day after retailers from Wal-Mart Stores Inc. to Limited Brands Inc. said profit will trail forecasts as the recession limited holiday spending and sent jobless claims to a 26-year high.Wal-Mart tumbled as much as 9.4 percent, the most in a year. Limited, owner of the Victoria’s Secret chain, and Gap Inc. retreated more than 5 percent as their weakening profit outlooks spurred concern that President-elect Barack Obama’s $775 billion in proposed government spending and tax cuts won’t prevent the economy from shrinking this year…http://www.bloomberg.com/apps/news?pid=20601087&sid=amsjCDzSyEyo&refer=home

Yes, that about sums up what I heard.

I agree with lsCash made big headway last year and should continue while deflation continues.I would think that it will be more like a few years before we get a bottom.When the deflationary cycle stops and we move into a high level of inflation, if that’s what happens, then there will be a different strategy. Gold and high quality stocks to hedge against inflation or moving your capital to a currency or country that is less affected. and then those with capital left will be looking for dividends.Just my best guess under current conditions.Remember, investing is about probabilities. IF your decision doesn’t work out, don’t marry your position, get out and reassess.

Hello there OR.Do you still think my “fear” was premature?As In stated about 3/4 weeks ago, my “jitters” meter was at all time highs, and that if TPTB didn’t make an “immediate” ground up plan, that things were set to get extremely bad, extremely quick….well, well, well… It seems even our president elect is saying the same thing now.3/4 weeks ago people, the economists, the press, etc… were in the midst of enjoying watching our economy rebound 10% from November lows… (while everyone was “pausing” to see an indication” of which way things were going to go) …and now we are starting to once again hear the “uh-ohs”.So all of those fence sitters, that like to jump on the bandwagons of making post game predictions after they’ve fallen onto the side they see (ALREADY) taking control, I say: WHY ON EARTH DOES ANYONE LISTEN TO YOU!!!(Octavio – this rant is not directed at you, but rather the media darlings that are well paid for their pathetic and late predictions!!! I value your daily input, and regularly read your posts. …even if you do sometimes disagree with me. (which is healthy))All the best, Miss America

It seems as though the initial punch of the “stimulus rally” has fizzled out. There is still plenty of punch left, so I don’t see the volatile drops of the last few months as the stimulus will be continuously directed to the highest stress point of the fake economy.My jitters are still high, until the true bottom approach up is rolled out. (and cash/credit is in the actual consumer hands) Until then the disconnect between the real and fake(DOW) will grow, thus leading to an even larger short run problem which will take more long run capital to fix. (a “gutting” of the real economy is in full force right now.)I’m still in the “more of the same” camp for the fake DOW economy as propping does its temporary job. Unfortunately, that is playing awful close to the vest and would turn cataclysmic if the top end stimulus stalls on recapitalization, margins, scandal, war/”event”, etc…Good luck to all and hopefully I will have my 2nd Alt En installment ready on the RGE around inauguration day.All the best, Miss America

GOIN GREEN BABY! KABOOM!

The MYTH OF SCARCITY is one of the most potent illusions of the hypercapitalist hyenas and must be opposed at all costs – we aren’t living in age where famine is widespread and decent housing is lacking. The basics of life should be provided to all people at very low cost because there is no shortage of the basics in a country as advanced as the USA.

Pseudo,You can complain that there is enough to go around and it isn’t being distributed fairly but that isn’t really the underlying problem. Why isn’t it being more fairly distributed?The reason that people can not afford food and housing are multi layered. But, other than stupidity and hubris the real underlying problem is inflation.The producers have little or no control over the benefits from their out put. The stock holders have little to say about how the company is run or in the BoDs or CEOs. We The People have almost nothing to say about what our government does. Our entire system needs to restructure.Real inflation was hidden. It is a secret and silent tax on production that benefits those who control the money. It is an insidious tax.There is also a problem that so (to) many people live off the system and those at the top never have enough. Aerial View’s constant complaint about transparency is true but our problems are also about the consolidation of power at the top of the food chain and how they benefit from unreported inflation. And their perpensity to want to win the game of Monopoly.We already have half or more of the population living off the other half. Paid for by inflation. Or it was… So many of our systems, which made sense in a feel good way, are strangling those who actually produce. The Liberals never have enough feel good programs and the Conservatives never want to fund any of them or pay taxes so we pay for them with deficit spending or inflation. This system benefits both of the powerful fringe groups but has devastating consequences to the productive sectors. Government has grown way to big and takes to much and pays for it with deficit spending and inflation that is to easily siphoned off by those with the connections.This country is more like Russia and China than anyone wants to admit.What frustrates me is that the problems of unreported inflation cause so many of the problems yet the government’s solution is to try and get more inflation back into the system.I think a good recession and restructuring would be healthy for America. It should be long enough and deep enough to force restructuring of most of our systems. It won’t happen without pain and suffering and it may entail lots of hunger but we have loads of people living off the rest and a government that is totally out of control and doesn’t serve the needs of the country in many ways. Along with corporations who neither serve their owners nor benefit the country as a whole.Maybe no one should be hungry in a land of plenty but when you feed someone and they have no incentive to feed themselves. After a few generation of this funded by inflationary policies, there comes a point where many workers, who are the structural support of the entire system, can’t even afford to eat. We reached that a decade ago but TPTB decided the solution was cheaper credit and lowering the qualifications.Now we have to deal with the consequences.

MA,Care to comment on the current flow of capital, margin calls on hedgies/their forced liquidation of assets, etc.

Test of the Dow 50DMA breakout has been successful! Off to the races for a while

High yield ETF off 2% today (credit risk indicator) and stocks aren’t even flinching. Also Vix down even though stocks are down today. Wierd mixed messages.

A little levity to end the day…A wind turbine in northeastern England stood wrecked Wednesday with one of its giant 65-foot blades torn off — after it was hit by a UFO.Locals were woken by the 4 a.m. smash after strange lights were spotted streaking towards the 290-foot-tall generator on a wind farm.Baffled power chiefs said of the smash in Conisholme, Lincolnshire: “We have a team investigating.”There was no trace of the missing blade.A UFO expert said: “We are very excited.”A woman motorist told how she saw a UFO zoom towards the wind farm and strike the turbine.Dorothy Willows — who lives half a mile from the scene of the hit-and-run — was in her car when “strange lights” loomed in the evening sky.”The lights were moving across the sky towards the wind farm,” she said. “Then I saw a low flying object. It was skimming across the sky towards the turbines.”

3:48 p.m.Roubini sees house prices falling through mid-20103:48 p.m.Roubini sees consumer price index falling 2% in 20093:48 p.m.Economist Roubini sees unemployment peaking at 9% in 20103:48 p.m.Nouriel Roubini sees U.S. GDP falling 3.4% in 2009

You gotta love coordinated buy programs!

g,this is not anarchy. it is sociopathic behaviour..”Anarchy (from Greek: αναρχία anarchia, “without ruler”) may refer to any of the following:”No ruler ship or enforced authority. Anarchy does not mean chaos and disorder”[1]“Absence of government; a state of lawlessness due to the absence or inefficiency of the supreme power; political disorder.”[2]“A theoretical social state in which there is no governing person or body of persons, but each individual has absolute liberty (without the implication of disorder).”[3]“Absence or non-recognition of authority and order in any given sphere.”[4]A society free from coercive authority of any kind is the goal of proponents of the political philosophy of anarchism (anarchists).”anarchist believe they make rules for themselves, not for other people.

Are they the prozac people?

No, they were the shit that hit the fans…

MA,Yes, I’m the same TA, and thanks for taking the time to comment.I have the same sense, it’s as though the market is becalmed, despite the recent mini-rally and pundit blather.IMHO, the 4Q earnings season will usher in the next step down, layoffs – white collar, high tech, high pay. O’s stimulus plan won’t kick in fast enough to halt the carnage that’s been discussed here over the past year. By the end of 09′, all but the very wealthy – and very smart (i.e. planners) will be affected.WRT debt reduction, A. Gary Shilling makes an interesting comment in his Dec 08′ INSIGHT newsletter (pg. 3, par. 2); “The destruction of the American Dream of homeownership for so many people will force a political response, even though the cost of subsidizing their mortgages down to their house values would be about $1 trillion.”Mr. Shilling is on to it. The only way out of this morass is to do the unthinkable, unsavory but absolutely necessary – mandatory mortgage principal reduction (mark to market?). Nothing else will unlock the log jam in the residential real estate market and hasten the return to normally functioning markets.Until the American business model is changed, normalcy won’t return until the American consumer begins consuming, and that won’t happen until their negative home equity is eliminated (not simply repackaged). 09′s catch phrase – “desperate times call for desperate measures.”I (we) await your next Alt E installment.

This conversation was overheard at a Brooklyn OTB:“Hey Pauli! What’s dis stuff ‘bouta black schwantz? Dey talkin’ ’bout da president?”“Naw it ain’t dat, Vinnie. It’s what dey call sumpin’ dat hardly never happens but den it happens ennyways, like if yer mudder ever says no.”“I tole ya before, Paulie. No mudders, awright? What’s dat got ta do wit anyting, anyhow?”“Whada I look like, an expoit on boids or sumpin’? Da economy is inna terlit. Dat’s what dey mean. Everybody is in hock, ‘specially da gubmint. Dere runnin’ from one shy to anudder just tuh pay da vigorish. Meanwhile da polticians bin dippin’ dere beaks like crazy an’ nobody bin watchin’ da store. Know what I mean, Vinnie?”“Dis is gettin’ scary, Paulie. What’s gunna happen when no shys lend to ‘em ennymore.?”“No sweat, Vinnie. Dey jist pull out the ole printin’ press an’ go to town. Dey pay off da shys wit’ funny money an’ it’s all legit.”“I don’t know, Paulie. I tink I like da way we do it better. Everybody knows who ya gotta pay an’ what happens when ya don’t. Dat way, everybody gets taken care of. Hey, will you look at dat. Dere’s a hawse inna toid name o’ Black Swan. Ya tink da fix is in?”“You kiddin’ me? Da fix is always in.”

or,he might have been referring to the five finger discount school of shopping.? fed style.

This is hilarious!I posted this original post about McCain, and I am a political atheist! The more you fight amongst yourselves between politcal affiliations, the more you fools will not be aware that your elected officials are continuing to destroy our economy. Obama is wil known as the next Hoover. His plan will destroy the economy more so than you can imagine.You know the thing about bad managers/supervisors?If the employees fight amongst themselves, then the employees will not be angry at terrible management tactics. So, keep up you foolish partisan talk and continue to be fooled by your politicians. Don’t cry about it later–YOU obviously elected someone who intends to ruin the country further.

more on starving masses coming soon to a place near you:http://news.bbc.co.uk/2/hi/science/nature/7817684.stm

Schilling was a guest on Kudlow today, and he stated that cram downs are a terrible idea and I agree wholeheartedly. What wasn’t discussed was why, oh, why, has Citigroup suddenly found Jesus and why, oh why, should I trust a BANK! Citi has SO much garbage on and off their balance sheet that they must be looking for some political way to save themselves. I don’t trust their motives and question how cram downs will make things better in the long run as they can’t. Banks should be allowed to fail, and we will be better off if they did.

@ blindman, i caught the JJ FW you tossed me. thanks for that n u r sweet. (but no one reads FW like the teacher i deep-studied with, alas.)”Oh, hell…here comes our funeral. Let us pry, for our missed understandings.”

I think the US will be Umpire at least until the end of the 9th inning.

Or a Yellowstone cook-off…

Didn’t Weimar Germany inflate at least in part to pay reparations mandated by the Treaty of Versailles?

Dollar Heads for Weekly Loss Against Yen Before U.S. PayrollsJan. 9 (Bloomberg) — The dollar headed for its first weekly loss against the yen in three weeks before a U.S. payrolls report that may show the economy lost jobs every month in 2008 and the unemployment rate rose to a 16-year high…Citigroup Inc.’s agreement to support U.S. legislation that would allow bankruptcy courts to cut mortgage rates for at-risk borrowers is “negative” for the yen, according to Commerzbank AG in Tokyo.Citigroup endorsed the bill after Senate Banking Committee Chairman Christopher Dodd, and Senators Charles Schumer of New York and Richard Durbin of Illinois, agreed to limit the legislation to existing mortgages, rather than future loans.“Citigroup’s agreement is important and a plus for market sentiment,” said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank.http://www.bloomberg.com/apps/news?pid=20601087&sid=a2efI_M082Gs&refer=home

Countries don’t have brains, countries aren’t responsible for anything. People who were stupid enough to think asset prices always go up are responsible.

Haven’t had a chance to read the comments above but here goes an excellent one from Mauldin:Is the Ultimate Bull Trap Being Set?http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/01/07/setting-the-bull-trap.aspx

A market rally over the next few months is only an opportunity to sell

I agree and this is not only true for US this is happaning in many other countries

Seems as though the Americans in the past were only good at borrowing money and slooshing around borrowed funds from themselves to eachother! When will they learn to make money? What idiots! When and if the USA really cracks and the dollar drops rapidly, Japan, the United Kingdom, Caymond Islands, Luxemburg, and China will really take it on the chin, as they’ve lent Trillions and Trillions of Dollars to the USA. They will cry at their US Dollar denominated losses. I feel sorry for the fools for ever lending that much money to the lame as hell (dumb as hell, and also violent as hell) United States.Seems as though crime and the temperature at definitely linked in the USA too, I really fear about this spring and summer, I think it will be a violent crime wave gone wild! Be careful everyone! Don’t fall for the sensationalism of “Where’s Caylee” on CNN, there’s only about 20,000 murders and homocides per year in the violent as hell USA. I blame it on the dumb-as-hell constitutional right to bear arms, which unfortunately does not mean grizzly bear, or polar bear arms, although it should. When will lawyers and the people take the words literally for what they mean?? How lame!! The entire constitution is totally lame as hell beyond belief! It’s just another example of how out of style the foundation of America is! Even the Constitution is stupid. How many trillions would it take to fix that?! Huh huh, can’t fix stupid! No amount of money can fix stupid! Huh huh.Andrew Bernhardt, Saint Louis, Missouri 1/9/2009

My friends, I am as sincere and serious as a heart attack: we, even standing on the brink of destruction as we are now with our toes hanging over the cliff and with all our faults, are but ONE IDEA-CHANGE away from sustainable global happiness, safety, peace, and prosperity. HOPE is not needed. Cold, hard, rational, ego-less CLEAR THINKING is needed, along with a mature willingness to put our most cherished MISTAKEN notions before a no-nonsense tribunal of our wits – and 99% of unnecessary human suffering is truly, remarkably, hilariously EASY to eliminate!yah – I’ll be back…to back up my “claims” with PERFECTLY RATIONAL PROOFS.btw, my questions were not rhetorical, econminor. They are Socratic questions – and they are so for excellent REASON.I have not ignored human stupidity – i have intensively STUDIED it, instead. a much wiser thing to do. by studying human stupidity (and human intelligence that is as useful as stupidity), instead of ignoring it – you can learn to see in every direction at once!YES WE CAN FIX OUR STUPIDITY! Just as soon as we finally SEE it…just as soon as we stop wallowing in the far-too-manyness, and get jiggy with reality!

Once upon a time, there was a powerful army. They surged across the land, conquering all before them. The army had battle tested generals who were well versed in military strategy. They commanded the best trained soldiers and had the best equipment. All who opposed this army were quickly dispatched. Prisoners that were taken were soon absorbed into the swelling ranks of the army and it grew exponentially. As it grew, the army became more cumbersome and inefficient. It took longer to supply and move troops. Generals began to bicker about battle tactics. The morale of the troops began to falter.To counter this, the generals increased the pay of the soldiers from profits gained by the spoils of war. Soon it became necessary to conquer more and more lands to keep the troops happy. Nevertheless, the troops grew fat and lazy. They fought half-heartedly and only when bribed heavily. The number of generals increased and some of them broke into factions that all wanted to move in a different direction. Some wanted to pull back and regroup until they could be re-supplied and reinforced. Others wanted to press forward as before, with more men and equipment.While this was going on, the enemy watched with delight as their more mobile and more loyal soldiers chipped away at the big army, causing heavier and heavier losses over time. The enemy had the support of the local people. They were re-supplied and could operate on less then half of the food and arms that the big army needed. Their smaller units were capable of concerted action against the big army, while the big army was slow to respond to attacks because of infighting and corruption among the generals.Little by little, the once powerful army dissolved. Soldiers began to desert to join the leaner, more effective units of the enemy. They armed themselves with weapons stolen from the big army and fought against their former comrades.Still, the big army committed troops and material to try to regain their former status as conquerors. The more defeats they suffered, the more troops and equipment they threw into the fray, until finally, there were no more troops to commit and no more weapons to be had. They borrowed from their allies to re-supply their men. They fought more and more with paid mercenaries who had no loyalty except to whoever was the highest bidder for their services. When bright, young officers pointed out that continuing the same failed policies was suicidal, they were brought up on charges of treason. The old guard of generals would hear of no strategy except that which would further cement their positions of power. They would rather remain captains of sinking ships than roll up their sleeves and go down in the hole to plug up the leaks.Ultimately, the big army fell apart. The former generals absconded with whatever spoils of war they could salvage and disappeared. The conquered lands were quickly repopulated with their former inhabitants and began to thrive. They became wealthy enough to support standing armies. The leaders of these lands began to look over their borders to the lands of their neighbors. They began to speculate about how much better they could do if only they owned that land too. The armies swelled in size and slowly began to move toward each other.

Yesterday Bill Gross was on CNBC (acutally it seems like he is on their payroll) – he appeared to let something slip during the interview – specifically that the Treasury will soon be buying CMBS the same way they are buying MBS — Note that Pimco was early into MBS in advance of the $500bn Treas program – If it was a slip what would be the best way to play that I wonder? Bill Gross on CMBS and a bunch of other stuff

“poison the river and sell the bastard cheeseburgers”

Why would Citigroup be given any clout in this matter? They should be court ordered to comply after surviving only by taxpayer charity. It also shows the utter stupidity of our congressional members who do not know how to protect the taxpayers let alone uphold the Constitution. Tell Dodd to dictate the terms to Citigroup and not beg. This is a sad testimony to corporatism, cronyism, and you know what comes after that.

by me who is someone else…

EconMinor,Great work as usual and an excellent post by Denninger.What do you (or anyone else) think of his assertion that a dislocation resulting from a debt default would result in deflation rather than inflation? Agree? Disagree?

cm… whats the level on the sso today?

There’s our increase in exports

I don’t know whether anyone believes the government any more about anything.Shadowstats doesn’t and if you believe their numbersGreat Depression jobs parallel may not be far flung

NEW YORK (Reuters) – When economists tell us the current U.S. slump could never turn into another Great Depression, they all point to one thing: one of four Americans was out of work in the 1930s.But since the definition of joblessness has changed over the years, this expert assessment might be too rosy.As many as 25 percent of Americans were unemployed during the days of bread lines that symbolized the Depression, but that figure is more than three times the current 6.7 percent unemployment rate, the economists say. Even the most pessimistic estimates only foresee the rate rising barely above 10 percent.”We are in a very, very different place than the U.S. economy was in the 1930s,” James Poterba, president of the National Bureau of Economic Research told a recent Reuters Summit.Or are we? Figures collected for Reuters by John Williams, from the electronic newsletter Shadowstats.com, suggest that, while we are not there yet, the comparison is not as outlandish as it might initially seem.By his count, if unemployment were still tallied the way it was in the 1930s, today’s jobless rate would be closer to 16.5 percent — more than double the stated rate.

In my opinion, we are going to see the same trading as yesterday. The sheeple need to see this over the weekend:”Depsite the worst employment news since WWII, despite now being able to make comarisons to the depression relative to the employment situation, stocks were able to claw back form large losses this morning…BLAH BLAH BLAH!!!!! RIGGED!

ONE AGAIN, THE VIX IS DOWN!!!! EVEN WITH STOCKS DOWN ACROSS THE BOARD! RIGGED!!!Ohhhh, I am getting pissed.

NEW TARP legislation being proposed by Barneytop 25 earners no bonusesno private aircraft***quarterly reports on how $ being spentno market manipulation???

shilling on cnbc right now

but they didn’t let him say much

well I my opinion I was just waiting for more ‘bad news’…when was the last time U.S. unemployment was officially over 7% using the current calculation method?…are they more willing now to publish high unemployment numbers than in the recent past?…or perhaps the method of calculation has not changed much since early 80′s at least…Anyway: the bad news will continue coming, whether they represent the reality or not. They will keep coming until a solution is represented and pushed through because it “must be done”. With the current way of thinking, U.S. population might not like the solution. After several more months of ‘bad news’, they will welcome it.

yes that is capitalism in practice, Lord Sidcup.what Guest was talking about was the idealised capitalism. Sort of like the Taliban believed (and perhaps honestly so) that by having a true islamic nation, everything would be the best.

MichelleI also share your concern (and cynicism) for CITI’s new found religion.Lenders and investors will only agree to mortgage modifications when it’s in their best interest to do so. Until then it’s status quo (witness the myriad of ineffective “rescue” programs enacted in 2008).I haven’t reviewed the Citi announcement yet, however my initial reaction is they (and the other major actors) have already negotiated the quid pro quo for their “altruism”. The most likely loss relief measure would entail expanding the “net operating loss carry-back” provision.IMHO the Citi announcement is merely an opening salvo, and expect plenty of blog and MSM discussion, debate and blather in coming weeks (moral hazard, market fundamentals, “desperate times call for desperate measures” etc.), followed by a major policy statement by the end of 1Q, with full policy enactment by the end of 2009 (just in time for the 2010 spring buying season – should be plenty of pent up demand by then).

Ready for some humor?Job situation is terrible!Hi Benny, with rates at zero wat U gonna do now?Why don’tcha try playing some good old fashion Robin Hood: steal cash and T’s from the rich and give them to the poor?Dat way the rich will face negative interest rates and the poor positive ones! Also note that by only stealing cash and T’s (Mad-Off stolen jewelry doesn’t qualify; + U cannot steal from him as he is now broke:-) you automatically force rich folk into risky assets, so stop wasting your time buying subprime junk and penny stocks.Also, note that, just like Maynard Kaynes, Robin Hood is British. So his stuff ought to work just as well as any Keynesian trick U may have left under your sleeve.I tell U Benny, Diz idea of mine I call “Dual Monetary Policy for the 21st Century”. And it will do no worse that wat U have tried already. U open minded guy; why don’tcha give it a try?Betcha U diz “dual stuff” wasn’t in those old depression books U bought at a dollar store to study for your thesis.Yes, U blog cop, Diz is for U!:If you don’t select my comment to the thread comments honor role above, I will complain to the Professor:-)Diz dual monetary policy framework I haven’t published yet and it is untried; but I am working on the proof of a couple of theorems that show my creation is no worse than all the stuff Benny and Hanky have tried so far.

Did U know Shilling won an open bet he had with Kudlow for a free dinner at the best French Restaurant in town if rates for the 30 yr T went under 3%?Shilling clearly won the bet but I don’t know if he has cashed in:-)

I wrote: “Dat way the rich will face negative interest rates and the poor positive ones!”I should have written: “Dat way, the rich face negative rates of return on riskless assets and the poor positive returns even if bankrupt and foreclosed”I should learn to proof-read before instead of after posting:-)

Brokers Disdain Toaster Salesmen in Bank America’s Merrill Dealhttp://www.bloomberg.com/apps/news?pid=20601109&sid=aMzHGkCEv2P0&refer=homeI guess the marriage ain’t gonna be that sweet.

Gonna run her towards green!!!! BOOOOM! RIGGED!

VIX is DOWN 1.25% right now-somthing does stink here CM!

this rotten crap system is sinking.Obama cannot save it, and neither can any other human being.By the way which is likely why the idea will be to hand over legislation of finances to a supranational body such as UN. Hopefully the sum of all countries (working together) will be more than the countries individually…synergistic effect, man…

OR, from the article you cite:…snip…Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation. The funneling of assets into risk is masking the deteriorating fundamentals and giving the appearance of a market that has bottomed. But this is sleight of hand, an illusionJanet Yellen, SF Fed President, Jan 04, 2009:…snip…“I am sanguine that the Fed’s new programs will be helpful in restoring credit flows,” Yellen said. “But many of the new approaches are experimental, and there is a great deal of uncertainty concerning their likely effects.”As nations entered the Great War, they entered a brave new world of weapons and tactics that few could anticipate. The military thinking of the time stressed old fashioned wars of infantry maneuver, attack, and breakthrough. In the first months of the war, the armies of Europe threw themselves against each other using the tactics of the late 19th century. The casualties were horrific, far exceeding anything ever seen on the field of human battle. After a few months where new lines were established, the armies on the western front settled into 4 long years of horrific trench warfare, whereby the old tactics were continually tried and slowly abandoned at the cost of millions of lives and the shattered dreams and illusions of a generation. The world emerged into a twentieth century radically altered. The cost of man’s experiment in 20th century warfare far exceeded anything they could have imagined as they entered into it.We are facing, in my view, the economic version of the Great War in our time.

If Barney’s legislation goes through as is (and suspect it will) losing the exec jets will be one of the best side shows -

Will stocks rally toward the close?I would say that’s a strong probability. The market has held on pretty well despite the grim news all morning.Some traders on the floor are already rejoicing since the grim news will keep rates at “zero for a long time to come, and push people into risky assets like stocks.” Pretty pathetic if you ask me, but that’s the game plan for the Federal Reserve.

Benny the Capitalist?

Did you see that??? SSO jumped over 1/2/% in one trade on a minute chart! Someone got burned on a large morket order buy!! They used it to break the 1 hour long down trend! CROOKS!!!

WASHINGTON President elect Barack Obama is urging Congress to postpone the Feb. 17 switch from analog to digital television broadcasting, arguing that too many Americans who rely on analog TV sets to pick up over-the-air channels won’t be ready.In a letter to key lawmakers Thursday, Obama transition team co-chair John Podesta noted that the Commerce Department has run out of money for coupons to subsidize digital TV converter boxes for consumers.

in at 26.02 out at 26.15 –

Unfortunately this was the pre-capitalist version, the capitalist version involves building a massive vessel financed with debt you can’t afford, overfishing your local waters until the population collapses, then moving off to your poorer neighbors and repeating until the oceans are a desert – all the time whining about the “restrictive quota” you have been allowed by a regulatory body who don’t actually have any powers to do anything to enforce it.

Well, when the’ll realise that the ONLY possible outcome of this will be that after the 2009 deflation/deep recession will come a long stagflationary period with quasi no growth, high inflation and dollar depreciation, they’ll start dumpimp their dollar assets, T Bills and shares. We’ll see the S&P 500 at 425 before year end, and the T Bill bubble will also burst before year end. Dollar will start depreciating rapidly from then.This is the only possible outcome. What has to happen will happen.

Exactly what I’m worried about. I’ve been in CD cash since 2001 — losing every day to inflation. I can’t afford another transfer of my ‘wealth” to the Wall Street “investors”. So what am I to do? It’s Greenspan 2001 deja vu all over again. My cash has become risk: I’m trying to think of a way to use it up, such as remodeling or buying a small rental, while the money value still holds somewhat. I figure within two years, $200,000 won’t even build a garage.But I don’t Need a garage. I need savings.P.S., ptm: My circumstances, IMO, are proof that John Williams at Shadow Stats is spot on and the BLS is off the mark. Benny and Barney and Hanky and Greeny know this: they are nothing more than bank rustlers driving the economy over a cliff.

Thank You!

Correct, but in this process, they’ll simply act as the recycling arm of the federal government.Of course the fed is going to buy most of the treasury’s debt. Therefore inflation and currency depreciation. How else do you expect the current level of federal, and state debt plus unfunded liabilities of medicare, medicaid, social security, plus the TARP, and the future Obama plans and massive deficits to be paid ?This is just so obvious, it’s the ONLY possible outcome, and it seems most people are so naïve they still believe the USA is going to be able to service more than $40 trillion of current liabilities (I don’t include private debt and future Obama deficits) with real prodcutive growth without adding more debt ?Do you think anybody is going to believe this for very long ?Once these $40 trillion will have been shaved off through inflation and depreciation, then the USA will start a new cycle. But then they’ll probably be a bit more careful next time.

Your statement was” The Banks are the hearth of the economy and their in big trouble cause of home loans” I respectfully disagree. The Banks got into trouble becausethey do not have the sophistication and intellect to run their businesses. The Congress was and is at a loss of what to do,because they also lack the sophistication and intellect to produce viable solutions. Congress said we have to pass something(bailouts) and what they really did was to pass nothing. While I have reservations regarding Obamas ability to resolve the crisis, I am impressed with the way he has approached the crisis. For sure the banks have demonstrated that they can not be trusted,better regulation will be required to keep these cows in the pasture where we can keep an eye on them.

Wow! Now that’s comparing apples with apples. And the 25% unemployment during the GD was the peak of the iceberg: unemployment hovered lower throughout the decade. Thanks to John Williams at Shadow Stats for keeping the record straight, and to the NY Times for reporting it like it is, and to ptm and economicminor for beating the BS out of the BLS.Here it is:Year and the Unemployment Rate1923-29 – 3.3 (est)1930 – 8.91931 – 15.91932 – 23.61933 – 24.91934 – 21.71935 – 20.11936 – 17.01937 – 14.31938 – 19.01939 – 17.21940 – 14.61941 – 9.91942 – 4.72008 – 16.5 (see ptm above a 2009-01-08 20:42:20)http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm

Correction: Thanks to Reuters, not the NY Times: I should have known better.

We are off to greener pastures, dow only down 60 points now.

does the reason make a difference?

This quote posted by ex VRWC at 11:31 a.m. bears repeating every hour on the hour:Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation. The funneling of assets into risk is masking the deteriorating fundamentals and giving the appearance of a market that has bottomed. But this is sleight of hand, an illusionJanet Yellen, SF Fed President, Jan 04, 2009:

“Do you still think my “fear” was premature?”The situation has been bad all the time. However, the market’s positive perception since the citi bailout/fed meeting carried through the new year. As soon as I felt the momentum was faded I posted here. So you know when I turned. I wrote something like being surprised if the Goldilocks market survived very much beyond inauguration and within 24 hrs of that I wrote it may not even make it to inauguration.

I tend to agree for the most part.What I worry about is that with all the stimulus, if interest rates don’t go up to counter act the infusion of cash with no real positive value added benefit then we could see both deflation and inflation at the same time.Rising interest rates would attract savings and slow down the government’s ability to put in their stupid fixes or bail outs or subsidies to their campaign contributers or lack of understanding.Deflation in houses and auto and other big ticket items and inflation in raw materials, food and health care.This seems to me to be the most logical under what is being proposed. I am a contrarian though so maybe things will work out better than I am imagining.That would lead to is a faster conclusion of this current mess though. As the rising prices would decimate incomes and the deflation would decimate asset values and both would decimate savings.Who is in charge up there anyway? Why would they move in that direction?

That should’ve read: “Protect the bond market”

They won’t do it over 2 years.The $40 trillion question : how do you transform the current federal & state debt, unfunded liabilities of Medicaid,Medicare, Social Security, TARP, Obama Plan I, II, & III and future budget deficits into something worth only $5 trillion of today’s money ?Answer : 17.5% inflation over 12 years.Does anybody expect that they’re going to raise taxes ? I mean who on earth believes they could pay back $ 36 trillion, or $ 3 trillion a year over 12 years by raising taxes ? That would mean increasing taxes by almost 80% !Not politically correct.High inflation is the route they have already chosen, just look at the fed’s balance sheet. Shuut. Just don’t tell anybody.

CM – bounced off 25.80 yet again -

A small correction. That quote was John Maudlin, as cited by OR in this article .Janet Yellen’s quote was this:”I am sanguine that the Fed’s new programs will be helpful in restoring credit flows,” Yellen said. “But many of the new approaches are experimental, and there is a great deal of uncertainty concerning their likely effects.”Janet Yellen, SF Fed President, Jan 04, 2009, as cited in BloombergI think my post editing was unclear. I posted both quotes because the juxtaposition was striking to me.

Bummer, we make money from their Gulfstream’s too!

Man, that’s long-term pain!!

That was crazy

think it holds below 25.8?

15:30 ET Dow -100.27 at 8642.19, Nasdaq -35.97 at 1581.04, S&P -14.44 at 895.29:[BRIEFING.COM] Stocks began slipping back to earlier levels, but quickly pulled up amid news of a major deal in the financial sector (-2.5%). According to CNBC, Citigroup (C 6.86, -0.30) and Morgan Stanley (MS 19.61, +0.79) are in talks to merge their brokerage units.

Ohhhhhhhhh, that was a suprising close-why did they give up? There is no eco news Mon or Tues so it should hav ebeen an easy continuation. The only thing I can think of is that now, Obama wants it as ugly as it can get so he can have his way on passing this stimulus…Have a great weekend all.

No, the problem’s me: it’s Friday and I’m in a rush to get out of here, at the same time snitching time to read NR et al. You’re right, for a Fed President to say something like Maudlin would be quite a quote–and, if so, soon to be an ex-Fed president, I’d wager. I, too, would like to hear what the guvs say in private! but considering that the press is not allowed into their board meetings, I guess we’ll just have to, as Macy’s put it, BELIEVE.But, as you intended, the quote stands, no matter who said it.

Really!! What a wind-up analogy. If every single U.S. worker had lost his job in December, “mainstream” economists would still say it “wasn’t as many as expected,” and the equity markets could hold on for the recovery “around the corner.”Sayonara…

Naagh! naaggh! not ol’ Nugsby Kash-n-Kari? Goldie’s man? In the Treasury? Talk about daylight robbery. And you say Paulson’s just made another bailout taxpayer-hit piece? already #1 “Editors” Video Pick” at Bloomberg.com – “Paulson Backs ‘Robust’ Stimulus, More TARP Aid for Banks”?No doubt about it, the banksters are being bankrolled by Joe 6Pak.http://www.bloomberg.com/index.html?Intro=intro3

All I’ll do now is wait for really cheap prices on commodities and stocks. I wish oil went to like 25 buck a barrel to load up on oil-related leaps.

I am trying to figure it out. IMO, the proper kind of fixed income will do well in 2009. I have about 5% in tiaacref bond account and another 5% in their tips account. Those guys are very conservative, their bond account mainly invest in high quality mortgages and corporates.As I told MA, I am very tempted to give BG some money via PTTRX but I am resisting that. I may buy etfs and index bond funds that hold the kind of stuff that will do well.Shilling said professor Altman(?) at NYU (the Professor has posted his research) said junk bonds maximum returns are achieved when default rates peak. We are far from that. One should stick to quality but even then I am not very hot about corporates even quality ones yet.

Bush Prepares to Ask for Second Tranche of Bailout Fundsfrom Washington Post via DrudgeWashington Post Staff WritersFriday, January 9, 2009; 6:35 PMIn a move being coordinated with the Obama transition team, senior Bush administration officials are preparing to ask lawmakers for the second half of the $700 billion financial rescue package, despite intense opposition in Congress, sources familiar with the matter said.The initiative, if it goes ahead, could create an unusual political straddle between the Bush and Obama administrations. Read More

h,i don’t know you but i read your posts and i like you, whoever that might be. i like people and you seem to be one. also you make some cool links and are all over this blog. thanks. you seem to be smart and i like thatbut i hope it doesn’t mess you up cause lots of smart people get messed up in markets. swimming in chum slicks while the big fish feed in the deep water. just a thought.i would say, and remind you i know nothing, that is nothing. the market is going down. gut, period. the bottom will be around for anyone with cash money for equities, if they have any, when the opportunity presents itself.if oil tanks it will be the buy of a lifetime, long. gold is a players game if you know what you’re doing, which i do not. requires too much dedication.the system is failed but has been for some time so speculation on it’s demise is nothing more than speculation. yet, it is done and something new will have to begin to replace it almost yesterday.so finance is collapsing, what then? equities are paper. a broken promise. energy? 6 billion people. ??move on.

Octavio,Equity, whether stock market valuations or the value in your home is certainly not funny money even if the gains were never monitized.The problem is that your Equity is an asset against which you borrow. Mortgages is the most obvious example, but clearly corporations run their books using Debt/Equity Ratio. When the Markets collapse, their numbers deteriorate horrendously. So now Debt/Equity becomes unsustainable in a contracting earnings market and expensive debt market.This has not little, but tremendous impact on the real economy. Now add the credit factor into the equation and you have many companies whose busniness models nolonger work or whose finances can nolonger be sustained.The $30 Trillion loss is very real, enough for even rich people to be killing themselves.On another note, Roubini seems to be endorsing a U-shaped recovery here over the L-shaped one he seemed to be leaning more heavily towards before all relentless government intervention. It is clear that we have only 2 real world experiences which we all can draw from to shape our opinions of the likely outcome, those being Japan in the 90s and the Great Depression. Depending on our policy we may look something in between the two or perhaps totally different.It would be great if Roubini would draw more direct and detailed comparisons of our current dilema and those two historic cases. If we are likely to be a U-shaped recovery, what is different about the US versus Japan in the 90′s. Our responses have been quicker but our problems seem larger (we not only had equity and real estate bubbles, but also lack of savings and massive credit lending.How does the US and its responses measure up against those previous cases and their responses? It seems no matter what we do we will not be able to rehabilitate the consumer balance sheet for some time to come. Government stimulus spending is givesw no sense of future and security. How does the US transform from a decade or more of misdirected capital to artificially directed capital spending without major convulsions, inefficiencies and a prolong period of subpar growth? Why does Roubini think we have a U-shaped recovery on our hands?

Merrill Lynch says rich turning to gold bars for safety

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.

I don’t who this guy named Merrill is, but it sounds like he is pumping the price of gold.http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4177766/Merrill-Lynch-says-rich-turning-to-gold-bars-for-safety.html

Look at this little gem from the same article:

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate.

That’s right, tell the saps they make 4% on 3% bond when inflation is running at 9.27% for 2008. Bawahahaha.

no, just Benny the Surprised (about the US inability to create much anything else than debt)

Who said “Any stock that doesn’t pay a dividend is just a Ponzi scheme”? Well, guess again..http://www.nytimes.com/2009/01/09/business/09norris.html?_r=1&scp=1&sq=loans%20for%20dividends&st=Search

The article posted above by economicminor, “Substituting Debt for Savings and Productive Investment,” by Comstock Special Report January 7, 2009, is a blockbuster and answers many of the questions asked frequently on this blog. Its premise is that the U.S. economy is dependent upon DEBT, and has reached the debt limit!!It predicts that “deflation will dominate the global economic environment in 2009 [and be] very painful for world economies and world equity markets. And that “the bailouts and easy money will be global in nature and will probably someday cause a massive inflation.”The charts are invaluable as investment tools. I culled some statements out to emphasis the value of reading this lengthy article in its entirety:[Ned Davis from NDR Research] measures the changes in debt for each decade in relationship to the changes in GDP and concludes…that it took $1.35 to generate $1 or debt in the 1950s, $1.50 in the 1960s, $1.70 in the 1970s, $2.90 in the 1980s, $3.20 in the 1990s, and $5.40 in the latest decade with one more year to go.Over 90% of the total debt was created since 1980, 75% of the total debt was created since 1990, and over 61% since 1997. We expect the only debt sector to grow in the near future will be the Government debt…This debt cycle really started in the early 1980′s when the U.S. savings rate peaked at over 10% and continued downward until this year when it troughed at a negative savings rate.During the 1990s and first six years of the new millennium the Democrats, with the Republicans’ blessing, did everything possible to get every American into a home whether they could afford it or not.It was in the late 1990s, specifically 1997, when the stock market, using enormous leverage (margin debt grew from $27 billion in 1991 to $280 billion in 2000), went on a tear. This became the greatest financial mania of all times and drove equity valuations to double what they were at previous market peaks (P/E ratios were around 20 at previous market peaks and the P/E in 2000 reached 40).On top of all of this is the incredible situation of lowering taxes (mostly for the wealthy) just before entering a very costly war.After the stock market’s dot com bubble burst in 2000…Greenspan decided to lower rates to encourage more borrowing. In fact, in 2003 rates declined to 1%… This started the housing bubble which drove the price of homes from the prior peak of just under 3 times household median income to 5 times…During this same period of time the consumer also largely contributed to the debt mania by going on a credit card buying binge not just domestically, but especially and more importantly, buying imports… U.S. consumers have been the main support for the world economy…In 2004 the largest investment banks accelerated the debt process by asking the SEC for permission to increase their leverage from the 12 to 1 restriction to up to 40 to 1. The SEC said, “No problem”.The reason it takes more and more debt to generate the same amount of GDP is because over the long-term there are onerous restrictions on growth due to the servicing of the debt (the interest paid to accommodate it)…We believe the market will trade at around 10 times (or lower) the trendline “reported earnings” of the S&P 500. We believe this because… However, with all that said there is more fear of missing the next bull market than fear of losing more money. This could easily drive the S&P 500 up another 100 or 200 points and if that takes place it will be a very good selling opportunity before we resume the secular bear market that started in 2000.http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&category=SpecialReport&newsletterid=1432&menugroup=Home

yes, I know what Al Franken stands for: he was in my Harvard class. Franken is a classic Ivy League liberal, who believes govt will protect you from Madoff, Pearl Harbor, 9/11, bad luck, bad health and bad credit.I don’t.

Want to bet that this 80 will be at 10 within a decade ?How else do you expect the more than $40 trillion of federal/state/medical/pensions/corporate debt to be paid back ? By raising taxes ? That would necessitate raising all taxes by more than 80% for the next twenty years, you don’t think that’s going to happen now do you ?The next decade will be one of stagflation. High inflation (15%+/year), quasi zero real growth, dollar depreciation.That plan has already started, just look at the fed’s balance sheet. It will keep on growing, growing, growing.

i think macain lost purposefully.It happens everywhere.Just compare the facts:he is old,he doenst understand wny economic issues,he knows his advisors are corrupt and worthless.Only a clever man knows when to take tactical retreat.Others face fate of Napolean in russia,Hitler in russia,USA in Vietnam,Russia in afganistan.A true fighter never fights for fight alone.There is always involved calculation of winning and losing a battle

I mostly agree with Nouriel Roubini but there one area where he is very seriously wrong: China.The Chinese depression is going to be long, extremely deep and very severe. I no just a slowdown of growth but a very very large reduction in GDP of around 10-15% and maybe as much as 25%. The Chinese will feel the largest impacts from this recession due to their massive industrial over capacity and their over reliance on foreign exports.

suggest a macro-economics course for both of you: TED spread was higher for longer in 1975 crisis. Going fwd US economy will benefit from 1) lower energy prices; 2) cheaper credit & 3) Fed support MBS/CDO market

I would be a bit suspicious of anyone who needd to learn morality at a business school…

oesn’t sound like Heroditous…are you sure?