Thursday, October 9, 2008

Clusterflocked Nation?

The good folk at Fighting Liberals (h/t to Driftglass) have blessed us with this marvelous video of the rest of the good people in the world wishing Obama well in the coming election:

World of Friends: The Obama Song Some of my dearest friends living around the world have written this song, taken these gorgeous photos and put the whole thing together in this stunning video! Check it out and send it far and wide.
While I was reading the items below early Tuesday morning, I had trouble figuring out whether they were tongue-in-cheek or nuclear-blast reality. One way or the other, Jim Kunstler is dead on. (Emphasis marks and some editing are mine. - Ed.) When Reuters reported that (Paulson's boy) Assistant Treasury Secretary Neel Kashkari will be heading TARP, one wag (sorry, I've forgotten exactly which wag it was - probably Jim but it could have been Mish) said: "Kneel Cash Carry? I wonder how much money he was responsible for losing at Goldman Sachs?" The ubiquitous and very loud Jim Cramer was reported to have finally said "SELL!" and "as Barry Ritholtz suggests, that's one sign that a bottom might be in."
Greenscam and his evil cabal of bankster pigmen are primarily to blame for this ill-conceived credit expansion (and ensuing bust.) Can you imagine the true price of houses, autos, education, etc. in the absence of any frothy credit? We won't have to imagine much longer. Still, I don't think that treasuries will remain in a Bull the entire time. Remember 1931-32? Just as in GD1, The Fed is crowding everything and everyone out and a treasuries bust will also be coming (although it won't last too long.) So treasuries are "up" what does that mean? That so many people want to buy them the yield is 0? Or the primary dealers that caused this mess get to sell them for a fat spread (that's your "protection" money...) and I quote Gaudia from 2 months ago: "When the DJIA reaches 10000, collect your check for a large minority of your short position, IMO" Gaudia, thank you sir. You may do your superior dance now. Until the FIRE economy is little more than embers, it is not safe to go long in financials. Until all Level 3's are transparent, and the Fed's collateral is laid open for the public to see, there can be no trust in US financials. Until the "Four Whoresmen" (Goldman Sachs directors) are purged from the US Treasury, there can be no faith in the US Government. Massive bank theft has caused this market crash, but it is the continued criminal cover-up that will cause the depression. Only when the banksters are brought to justice, will those Americans working outside of the FIRE industries suffer less injustice. We are in for a bumpy October and beyond I think. Prepare your own family for financial strength as best as you can. Prepare for what comes minus and plus. Be confident and be kind. A backyard or apartment patio container vegetable garden may be helpful to many. The flip side is that market crashes only occur from very oversold levels. Also, there comes a time when TA fails and fundamentals re-assert. Is this that time? If this is truly a K-Winter credit bust as Mish maintains, the market goes much, much lower from here. Prices for all assets will be going down. Who am I to disagree with Mish? And I don't, for the most part. I can easily imagine a world where the stock market is around 4,000 and is basically not volatile at all, where it moves 20 or 30 points a day. People will buy stocks again, but it will be more of the fundamental-style investing, no leverage or margin at all. No hedge funds running home builders up to new highs in the middle of a RE bust. No manic silliness with quant funds using loads of leverage and executing black-box short squeezes for fun and profit. Just focusing on good companies with strong balance sheets and good dividends, held for the long term. BTW, Buffett has never invested in a deflationary bust. Let's see how well he does with the "be greedy when others are fearful" mantra. He'll probably get head handed to him following that line of thinking. one of the truly amazing things is the degree to which the current President of US of A has become so casually irrelevant to what is happening. If he never uttered a word, who'd miss it. Who bothers to lift an eyebrow when he does appear. At this moment it's like we don't have a President and no one either notices or cares. Euroguest - Where are you? Please, join us today and tell us how awesome Europe is compared to the US. We can all see from the markets today how right you are. The markets just stepped into the muddy pond. Nobody knows how deep it is. Toss your charts and mathmatic models out the window, because its panic time. There are still fools calling bottom. There isn't one close. We are years away from seeing positive economic data. Think DJIA 3000-4000 for the bottom. Look at long term DJIA trend, its clear. Yes it was trust that undergirded Bretton Woods II. Now that trust is gone. I don't like Sarkozy but he at least he can see the writing on the wall ... De Gaulle saw the same writing 50 years ago. Sarkozy is probably an expert on De Gaulle. I'm thinking a medium-term bottom is 2002-era prices - before the housing bubble got started. Right now I'm not seeing capitulation, my spidey sense isn't saying "bottom." Short covering ban on financials expires Thursday morning. The MOTU (masters of the universe) do not want the short sellers to have much to work with. They may be setting up the ultimate screw job for options expiration week - again. This expectation of last minute manipulation, say a 50+ bps rate cut, is the only thing keeping the market from imploding (capitulating) right now. Perhaps another 500 pt down day tomorrow will cause people to throw in the towel. The lies don't stop: "They are pulling out all the stops to try and get borrowers and lenders to meet and do transactions once again ..." Yes, except for enforcing basic transparency in accounting, the Fed/Treasury/SEC is pulling out all the stops. Scaramanga, hard to say if that is Prisoner's Dilemma thinking or if Japan is gearing up to feed at the Treasury's new bailout (read: Paulson implosion hedge fund) trough. In a quid pro quo operation, it could be argued that the FCB's will continue to support treasuries until they have sufficiently looted enough distressed assets. After that, who knows? I'm not predicting the end of the bond bull btw, just a spike similar to 1931 to kill off what's rest of the real economy and enable the FCB's and their pigmen bankster enablers to get even more "stuff" cheap. 18 months should do it, maybe even less. Nothing like a panic and a smoldering economy to bring about fire sale asset prices for the modern-day land barons. After all, the pigmen vampire leeches need to feed and load up for the K-Winter, and they will do what they usually do which is feed at the expense of JSP. It's time to hit the streets and protest against our government. By which I mean Goldman Sachs. Let's go down to 1 New York Plaza. Lets carry some flags and beat on some pots and pans in front of the building in which they do their dirty deeds. We can buy some cheap bulk tea and throw it in the river a la the Boston Tea Party. GS headquarters sits on the East River. We can then take over a local Wall Street watering-hole and have a wake for Bretton-Woods. Believe me or deny me, but it is NOT the end of the world. This is when it gets decided who owns what. Hopefully, the world's governments will not end up owning everything. FTSE posts biggest ever one-day points fall. The FTSE 100 ended 391.1 points lower at 4,589.2, down 7.8 percent, the third biggest percentage decline, taking the index back to levels not seen for over four years. No blue chip stock ended in positive territory. "Another Monday, another banking crisis. Just when the market thinks it has found a base level, there's another jolt to the system." said Manoj Ladwa, senior trader at ETX Capital. " Black Mondays used to be a once-a-decade event, now they're coming along more regularly than a London bus," [not that London buses are regular, in my experience while living in London for 9 years]. Cramer told his audience of idiots to sell everything. Is this capitulation or a bounce tomorrow? I don't know how much more latitude our trading partners will give us, if our consumers are no longer holding up our end of the consuming. . . no matter how much liquidity the Fed pours into the banking system, without being able to unload gargage loans to be securitized on Wall Street, banks are going to be reluctant to lend to people who have little intention of paying them back, on collateral that is declining in value, unless the Federal Government gaurantees to make good on all defaults. If the Government is irresponsible enough to do something like that, just feel free to add another trillion or two on top of the national debt. Seven years after 9/11, we are seeing Al Qaeda's long-term goal being realized: the destabilization and economic collapse of the United States. Even as it's happening, the people who supported it all along want to continue facilitating our own long-term disintegration by clinging to simplistic concepts of traditional military victory and defeat. In this sense, they are possibly the most myopic, least strategic thinkers in the history of this nation. So, with all the **noise** last week, where are all the posturing govt officials now? Any announcements, meetings, pats on the back (GOOD JOB), etc? Transparency is the only way to restore trust. The banks are committed to opaque accounting and therefore, transparency is unlikely any time soon. The Fed has been an easy mark so the banks turn to them to provide what amounts to even more cover, resulting in guessed it, even less transparency. Time and patience is important right here. Not forever, but long enough to get a few prosecutions underway. That will promote an urgency, indeed a premium, on cooperation. Cooperation is key to uncovering and creating transparency. So far, Congress has issued a "amnesty for bankers" type of bailout. It will fail and in fact, can only fail. Just have to be patient and allow a few dominoes to tumble. Henry Paulson's resignation should bve demanded at once, why haven't any of the converted no-to-yes voters demanded it as part of their agreement? Given the worldwide crisis in play, I wonder if spending $10B/month in Iraq is still a priority for McCain and that bubble-head from Alaska. In addition to body armor for our troops, we're all going to need some in a few weeks! I smell an emergency rate cut. Reuters update on new head of bailout program: Interim Assistant Secretary of the Treasury for Financial Stability is Asst. Secretary for International Economics and Development, Neel Kashkari. He's a veteran banker from GOLDMAN SACHS, and joined the Treasury in July 2006 as a senior advisor to Paulson. Hmmm... Any guesses on how much of the bailout pie Neel will give to GS? Wasn't Oct 6 D-day for the Freddie/Fannie CDS unwinding? Any news? "Since my scenario has Chinese workers rebuilding the US ..." Oh yeah. This is the perfect time to bring in cheap foreign labor. Another newsflash: If you're hiring cheap foreign labor going forward - in most any country in the world - you're gonna (need) kevlar, bullet proof glass and full riot gear to protect the work site. BURN EU BURN? How long before the angry Muslims in the slums of Europe erupt and burn France and the UK to the ground? There were some polls out recently showing a jump in dislike for Muslims in the Eu; especially in Spain. You can bet the people to suffer the most from this will be those Muslims in the slums and the last time they were upset about something they burned a chunk of France to the ground... Even as it's happening, the people who supported it all along want to continue facilitating our own long-term disintegration by clinging to simplistic concepts of traditional military victory and defeat. In this sense, they are possibly the most myopic, least strategic thinkers in the history of this nation. True. But they are overachievers on the 'nihilism' scale. misunderstand...the US citizenry will be the cheap labor....the Chinese will be bosses. Like Naomi said on Colbert....road paving will be done by prisoners. . . . . It's another "Have the Cake and Eat It Too" strategy. They are propping the dollar until after the election on the calculation that lower oil and food prices will save some incumbent seats. To let the dollar go now with a big unilateral rate cut and/or a spurt of huge printing would send us into the election with a down stock market and spiking oil and food prices. "Wouldn't be prudent." Anyone have a link to a good description of what happens when the dollar stops being the reserve currency? Maybe a good time for Mish to take a stab at postulating the look of the US future economy... Does anyone have a take on this really scary stuff? Just paid off credit card debt with HELOC line today. Reasons: My teaser rate runs out in December. The HELOC might not last much longer - it was pretty much untapped. I got several rolls of nickels at the same time; they might be worth something next month. You just paid off unsecured creditors with a secured creditor on your house . . . not very wise . . .if you don't pay your CC they have to come try and get your money. If you don't pay your HELOC, they take your house. What you should have done was the opposite: max out the CC and pay off the HELOC. After all the consumer debt gets written off. It could be years. Mish Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.” The Fed did not act to save a bank, but to enrich one. Congress has the power to appropriate resources for such a deal by the representative will of the people – the Fed does not, even under Depression era banking laws. The “loan” falls outside of Section 13-3 of the Federal Reserve Act, because it is not in fact a loan to either Bear Stearns or J.P. Morgan. Bear Stearns is no longer a business entity under this agreement. And if the fiction that this is a “loan” to J.P. Morgan was true, J.P. Morgan would be obligated to pay it back, period. The only point at which the value of the "collateral" would become an issue would be in the event that J.P. Morgan itself was to fail. No, this is not a loan. It is a put option granted by the Fed to J.P. Morgan on a basket of toxic securities. And it is not legal. Not only was the action illegal, the vote itself was illegal. The Fed needs 5 members to vote on such actions and only 4 members were present. Fed Governor Mishkin was missing in action. Was he opposed to this illegal hijacking? There was an excellent discussion of this idea in the comments section of the California Housing Forecast. This leads us to.... Uncertainty Principle Corollary Number Four: The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it's easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking. Let's Recap. Fed Uncertainty Principle: The fed, by its very existence, has completely distorted the market via self-reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed's actions. There would not be a Fed in a free market, and by implication there would not be observer/participant feedback loops either. Corollary Number One: The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn't know (much more than it wants to admit), particularly in times of economic stress. Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing. Corollary Number Three: Don't expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem. Corollary Number Four: The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it's easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking. Future Is Frugality - the world is on the backside of Peak Credit. The backside is deflation and The Future Is Frugality. Global Recession Headed Our Way - I wish to end with what I said in Global Coordinated Rate Cuts Won't Solve Economic Crisis. The world is heading for a global recession and a sure bet is that it will be blamed on a subprime crisis in the US. The reality is the greatest liquidity experiment in history is now crashing to earth. The root cause of this crisis is fractional reserve lending, and micromanagement of interest rates by the Fed in particular and Central Banks in general. The Fed started the party by slashing interest rates to 1%, but Central Banks everywhere drank the same punch to varying degrees. The Greenspan Fed lowering interest rates to 1% fueled the initial boom, but like an addict on heroin, the same dose a second time will not have the same effect. The Fed, the ECB, etc. could have slashed rates to 0% today and it would not have mattered one bit. The reason is simple: There is no reason for banks to go on a lending spree with consumers tossing in the towel, unemployment rising, and rampant overcapacity everywhere one looks with the exception of the energy sector. Consumers are tapped out, not just in the US, but in nearly every country on the planet. We had our party, and a fine party it was. However, the party is over and the bill is now past due. The price is a global recession. That price must be paid no matter what Central Banks do.
One thought I keep having over and over is that the bankers/investment boys at Goldman Sachs, JP Morgan Chase et al. do not understand just how poor they've left the rest of the world (and how ignobly they have enriched themselves). They expect deracinated taxpayers to jump back into the market after this fix and act like all's fair in love and war (stealing their retirements). Good luck with that. Suzan

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