-
weekend commentary - Say goodbye to DOW 11,000 this time ...
... unless the 'Plunge Protection Team' decides to pull off a newly printed miracle between now and closing time !
It appears that the 'truth' coming out about the immense losses which will have to be eaten by Gov't Sponsored Entities Fannie Mae and Freddie Mac, and the 'rock and a hard place' options re a US gov't bailout, have finally spooked the last of the foreign and institutional investors.
(snip)" July 11 (Bloomberg) -- U.S. stocks tumbled, extending the longest stretch of weekly losses for the Standard & Poor's 500 Index in four years, as oil jumped and financial stocks fell on growing concern about the health of Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, each lost about a third of their value, dragging down shares of Lehman Brothers Holdings Inc., Washington Mutual Inc. and Wachovia Corp. Wal-Mart Stores Inc. and Walt Disney Co. slid after crude advanced above $143 a barrel, leaving consumers with less money to spend as fuel bills increase.
The S&P 500 lost 21.09, or 1.7 percent, to 1,232.3 at 11:52 a.m. in New York, its lowest level in two years. The Dow Jones Industrial Average fell 204.44, or 1.8 percent, to 11,024.58, extending its retreat after Treasury Secretary Henry Paulson signaled the government plans to leave Fannie and Freddie in shareholders' hands. The Nasdaq Composite Index slid 35.99, or 1.6 percent, to 2,221.86.
``It's the worst of both worlds,'' said Matthew Kaufler, portfolio manager at Clover Capital Management Inc. in Rochester, New York, which oversees $2.7 billion. ``Watching two government-sponsored entities evaporate before our eyes from an equity perspective, and the damage that does to investor confidence on the one hand, and watching the price of oil, which is clearly meaningful from a consumer and business perspective, continue to escalate upward creates other pressures.''
Bear Market
The MSCI World Index dropped 1.3 percent, extending its slump from an October record to the 20 percent threshold that signals the start of a so-called bear market. The Dow industrials dipped below 11,000 for the first time since 2006.
The S&P 500, which fell into a bear market for the first time since 2002 this week, is headed for its sixth straight weekly decline. The index has erased a 12 percent rally that was spurred by a government-backed rescue of Bear Stearns Cos. for less than its market value in March. Surging energy costs, deepening credit losses and rising unemployment threaten to reduce corporate profits even as Federal Reserve officials consider raising interest rates to fight inflation.
Fannie Mae tumbled $3.05, or 23 percent, to $10.15. Freddie Mac lost $2, or 25 percent, to $6. A government takeover of one or both companies is among several options being weighed by White House officials, said Joshua Rosner, an analyst with Graham Fisher & Co. Inc., who met with the administration yesterday. "(snip)
It would also appear that the spooked investors who are now selling off their Freddie Mac and Fannie Mae shares are redirecting this money to one of the only remaining 'safe' investments ... commodities ! Oil hit a new record of $147 per barrel, gold and silver prices jumped upward etc. To make matters worse, it also looks like foreign investors selling off FNM and FRE shares are removing their money from America ... which has caused a drop in the US dollar exchange rate to near record lows (back down to 1.59 per Euro), and which will cause a secondary price increase for 'world market commodities' like oil and precious metals in US dollar terms.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Yea, around 10500 I will be getting back into the market again. :)
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
I saw this. Posted a quick, meaningless blurb on my blog. My (same age) friends are all "lolwut?" They don't get it. *frustrated*
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
StrawberrySwitchblade
I saw this. Posted a quick, meaningless blurb on my blog. My (same age) friends are all "lolwut?" They don't get it. *frustrated*
Short some stock and get them to buy it ;)
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
:party:
Quote:
(RTTNews) - In a statement that may defuse the escalating tension in the Persian Gulf since Monday, Iranian President Mahmoud Ahmadinejad ruled out the possibility of a war between his country and the U.S. or Israel.
http://www.rttnews.com/ArticleView.aspx?Id=649109
:bear:
Quote:
Fannie, Freddie `Insolvent' After Losses, Poole Says
Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview.
http://www.bloomberg.com/apps/news?p...opA&refer=home
And part way through our trading day this happened:
Quote:
US Gov't Considers Fannie/Freddie Takeover With No Debt Guaranty!
http://mrmortgage.ml-implode.com/200...debt-guaranty/
Quote:
Fannie and Freddie Waterfalls Are Too Big to Bail
http://globaleconomicanalysis.blogsp...s-are-too.html
Relevant to what you do around your stop-losses:
Quote:
The economic and psychological term known as "sunk-cost fallacy" is a bias that leads someone to make a decision based solely on a previous financial investment. For example, a baseball fan might attend every game of the season only because he already purchased the tickets. But not everyone would force themselves to brave the pouring rain for a single game in one season simply because they previously paid for the seats.
http://www.scientificblogging.com/ne...ng_a_bad_movie
Quote:
Paulson: Financial Institutions Must Be Allowed To Fail
http://globaleconomicanalysis.blogsp...s-must-be.html
:moped:
Quote:
PETROL could hit $8 a litre within a decade as oil production begins to dwindle and demand continues to soar, a CSIRO study to be released today says.
http://www.smh.com.au/news/national/...658037458.html
Lolwut :D
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
If the US bails out Fannie Mae bonds as suggested in We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable, inquiring mind just might be wondering "Who is the biggest beneficiary?".
It's a good question too. Please consider Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds.
http://globaleconomicanalysis.blogsp...hina-over.html
:pickle:
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
^^^ what Mike Shedlock failed to mention in his commentary at your link is the very real possibility that the USA will resort to 'Argentina Debt Restructing" as the only politically palatable means of dealing with its 'unpayable' foreign debts to the Chinese, Japanese, Saudis etc. If and when that happens, foreign investment in the USA will run for the proverbial hills and today's 'capital shortage' and 'liquidity problems' will appear to be minor !
(snip)"From The Economist print edition
IN 1902, after Venezuela defaulted on its sovereign debt, German, British and Italian gunboats blockaded the country's ports until the government paid up. In 1881, after the Ottoman empire failed to honour its obligations, European powers simply seized Ottoman customs houses and helped themselves to their due. The options available to more than 500,000 aggrieved creditors of the Republic of Argentina, which defaulted on bonds worth $81 billion in December 2001, were more limited. After much bluff and bluster, a large majority of them meekly surrendered their claims before a deadline on February 25th, in exchange for new bonds worth roughly 35 cents on the dollar.
The giant debt swap is epic in scale. It involves 152 varieties of paper denominated in six currencies and governed by eight jurisdictions. These bonds will now be exchangeable for three new issues. More importantly, the swap carries important lessons for emerging-market creditors and debtors alike. Bondholder groups think it a travesty. But on March 1st, Néstor Kirchner, Argentina's president, declared the restructuring a triumph, claiming “at least 70-75%” of bondholders had accepted it.… "(snip)
- essentially, Argentina employed its sovereign immunity, and a calculated risk that creditor nations would not resort to the use of military force to seize collateral, to 'restructure' its foreign debts ... with an eventual payout rate of only 35 to 40 cents on the dollar owed to those foreign creditor countries which agreed to restructuring i.e. that 'getting paid back something was better than nothing' !!! Of course, some foreign creditors who held out for payment under original terms of the debt got paid nothing !
Quote:
Yea, around 10500 I will be getting back into the market again
no guts, no glory I suppose !!! good luck on that call !
(later edit to add) ... well the 'Plunge Protection Team' did manage to pull the market above 11,000 at the close, thanks to the following ...
(snip)"Typically, the Fed has acted as a lender of last resort only for commercial banks. But the Fed has authority to lend to almost anyone, if the Fed Board of Governors agrees that conditions are dire enough.
Earlier this year, the Fed board voted to open up its discount window (where it makes cheap loans to banks) to the investment banks. The Fed even created a special entity to hold the especially toxic assets from the Bear Stearns fire sale.
Under Fed regulations, regional Fed banks can offer loans to any "individual, partnership, or corporation" under "unusual and exigent circumstances" but only "if, in the judgment of the Federal Reserve Bank, credit is not available from other sources and failure to obtain such credit would adversely affect the economy."
There's no indication that Fannie or Freddie have asked to borrow money from the Fed, or that the Fed board has voted to authorize any loans.
Bernanke's statement isn't an indication that Fannie or Freddie will be going to the discount window any time soon. It's really more like a letter from the fire department saying that of course they'd come if there were a fire.
Arsonists, take note."(snip)
~
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
Melonie
^^^ what Mike Shedlock failed to mention in his commentary at your link is the very real possibility that the USA will resort to 'Argentina Debt Restructing"
I am watching this with interest. It really does seem to be a bit of a pickle. And they can't just invade China or something either.
Quote:
(snip)"Typically, the Fed has acted as a lender of last resort only for commercial banks. But the Fed has authority to lend to almost anyone, if the Fed Board of Governors agrees that conditions are dire enough.
The phrase "shuffling deckchairs on the Titanic" comes to mind. I seem to recall the Fed pretty much running out of money a few months ago.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
I am watching this with interest. It really does seem to be a bit of a pickle. And they can't just invade China or something either.
Actually, with the US being the probable defaulting debtor, it's a question of the Chinese / Japanese / Saudis invading us in order to seize collateral assets in partial satisfaction of America's unpaid foreign debts to them. This won't happen of course ... but undoubtedly the Chinese / Japanese / Saudis could decide to stop shipping America their products until our foreign debts were paid (specifically - until US gov't bonds owned by the Chinese / Japanese / Saudis were paid off in full by American taxpayers). In the case of China and Japan this would cause as much economic damage in the home country as it would in the US, since much of their home economies is dependent on manufacturing for export to US markets - thus the loss of the US market could never be 'made up' by other potential export markets.
However the Saudi story is very different. The Saudis could sell the oil currently being exported to the USA to a bunch of other countries ... or simply leave the oil in the ground rather than shipping it to America in exchange for de-facto IOU's that may eventually amount to less than 50 cents on the dollar in real payout ! This of course would have a PROFOUND effect on America ... gas rationing, outright shortages of heating oil, non-essential businesses being forced to shut down etc.
Quote:
I seem to recall the Fed pretty much running out of money a few months ago.
In terms of 'existing' funds, absolutely true. However, the FED has the luxury of being able to print up as much money as it wants / needs, so it will never 'run out' of money. This in fact may be the only means available to stave off widespread bank failures / Fannie Mae bankruptcy etc. However, the printing up of huge amounts of new dollars out of thin air does extract a price ... further devaluation of the US dollar internationally, with associated increases in prices for all 'world market' commodities i.e. energy, food etc. This would also guarantee that no foreign investors would risk the probable exchange rate losses of loaning Euros - yen to Americans today but being paid back in future US dollars that are worth far less than when the loans were originally made. You might want to Google 'Weimar Germany' ! Also, there are some very disturbing similarities summarized at this link ...
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
Melonie
This won't happen of course ... but undoubtedly the Chinese / Japanese / Saudis could decide to stop shipping America their products until our foreign debts were paid (specifically - until US gov't bonds owned by the Chinese / Japanese / Saudis were paid off in full by American taxpayers).
IIRC, China has a large amount of US T bonds and maybe USD, and Japan has way too much USD as well, so having them become worthless would be a losing proposition there.
Quote:
Originally Posted by
Melonie
However the Saudi story is very different. The Saudis could sell the oil currently being exported to the USA to a bunch of other countries ...
And get themselves invaded?
Quote:
In terms of 'existing' funds, absolutely true. However, the FED has the luxury of being able to print up as much money as it wants / needs, so it will never 'run out' of money.
Combining the effects of devaluing the USD and the domino effects on commodities (and US consumers) as well as seriously affecting other countries' foreign reserves (who will not be happy at losing billions of dollars in real terms), maybe it's better to let a load of businesses in the US go broke... I wish I knew more about economics :P
Quote:
This would also guarantee that no foreign investors would risk the probable exchange rate losses of loaning Euros - yen to Americans today but being paid back in future US dollars that are worth far less than when the loans were originally made.
Also, the threat of the US doing this should actually be already priced into currency swap futures and other instruments with such things embedded... hmm...
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Better dig your diamonds out of that Arkansas park while ya can - cuz it'll be to dangerous once the Feds move their excavators in there to dig their way out of debt.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
here's some related commentary from an 'expert' ...
(snip)"Nothing New In Psychology, Psychos And Economics
Watching this word-wide drama unfold compares with having a front row movie seat to the 1930’s Great Depression
Tyrants, dictators and others in Iran, Venezuela, and Zimbabwe provide first-hand views on how not to manage a nation. Those committing lesser crimes of mere rampant inflation within the US, Russia, Vietnam, and several South American countries prefer to impose economic death by a thousand cuts; slowly but surely diminishing currency values. Instead of using brutality, the latter group just steals it using inflation. Observers can define various grades of these acts by watching for something emerging beyond street demonstrations say; pitchforks, torches and a really naughty escalation of not so nice remarks about their leaders.
This is why we predict recession, hyperinflation, depression and finally world war to realign the public’s thinking away from their idiot leaders instilling phony war-rabid patriotism while blaming outsiders and others.
With a real recession in full swing and a laundry list of stats and numbers only liars could utter, we have a good idea where this is headed. The shock and awe of our current speedy bank collapse has caught the full attention of Washington and Tel Aviv. Get ready folks for $200 oil and $8 gasoline as the world’s El Supremo commanders load their guns for an attack on Iran. It’s all about oil and all about retaining power and dominance of the money supply. Israel knows how to fight. They are a small nation with a big heart and lots of brains. The unwashed vertically challenged little Iranian freak with an unpronouncable-unspellable name, that would prefer Israel be erased from the earth, will never even see it coming. Time and time again tin-pot dictators whether they would impose their religion or will upon others at the point of gun suddenly discover the barrel is bent backwards pointing toward them.
“Tensions over Iran increased, helping push the price of oil to a record, after a New York Times report that Israeli military maneuvers in the eastern Mediterranean last month were in preparation for a possible strike on Iran's nuclear facilities. Threats and comments came as Iran conducted military exercises designed to strengthen the combat capacity of its missile and Navy units.”- Bloomberg.com
In a following response also reported on Bloomberg.com by Ladane Nasseri, “Iran Says It Will Hit U.S. Ships and Israel, if attacked. (Editor: We would suggest this eventuality will be managed without problems). Ms. Nasseri further reported, “Iran would strike Israel and the U.S. Navy in the Persian Gulf as a first response to any American attack on its nuclear program, an aide to Supreme Leader Ayataollah Ali Khamenei said. Israel wants the U.S. “to prepare a military aggression against Iran,” the state-run Fars News agency today cited Ali Shirazi, Khamenei's representative in the Revolutionary Guards' naval division, as telling military personnel. "If they resort to such a silly undertaking, Tel Aviv and the U.S. fleet in the Persian Gulf will be the first targets" of Iran's response.”
In a follow-up note, Iran fired more missiles today, the 10th of July. This child-like response reminds us of “mine is bigger than yours” and you better watch out. However, one gigantic Iran power failure and they are rendered helpless. Further, what do you suppose happens to their communications systems? Game, set, match.
Its unfortunate the world must endure fallout from this monster mess but, that’s the way it goes. Our most important point today in this discussion is these events are forcing isolationist policies. With internationally interlocked banking, credit and trade interwoven with lightening fast computer power, the world is not the same as 80 years ago although today’s political and economic faulty concepts can produce nearly identical results.
Analysts studying the 1920’s, and reflecting on the 1930’s damage, so they claim, was instigated by America’s Smoot-Hawley Act, which supposedly induced restraint of trade and further encouraged negative fiscal events of the Depression. Smoot-Hawley did not help but there were earlier events contributing to the Big Depression. We say the 1930’s were produced by three primary factors. (1) The terribly cruel and one-sided Treaty of Versailles after WW I against Germany that made it impossible for them to pay war reparations imposed by that agreement. (2) Germany was in awful shape after the war anyway. When those impossible repayment terms were mandated, hyperinflation was induced wrecking an already fragile German internal economy. Thousands of Germans were starving during the war’s aftermath, and in fact America was in a short depression during 1920-1921 for about 18 months.
Thankfully, USA politicians let it run its course staying out of the way; not interfering. Consequently, this down turn cured itself in a short time. (3) Germany was badly hurt from war and the following years from 1914-1923, and didn’t fully recover. In the early 1930’s their economic and political landscape was still in disarray as Hitler and the Nazi Party emerged to fill the void. Adolph actually did some positive things early on, ordering road construction and other matters beneficial to the German nation in the early 1930’s. Gradually, as Hitler gained more power, the really nasty stuff appeared as he embarked upon a series of tragic, power-hungry criminal events.
In America, raising interest rates forced the 1930’s depression deeper and Roosevelt prolonged it even more with his wide-spread, convoluted, socialism foolishness. Finally, in 1939-1941 the “always final solution” world war began. In our view, the stock markets of 1937-1938 are being replicated today in 2007-2008. USA market interventionists prevented the comparative 1929-1930/ 1999-2000 stock market downdraft (with the exception of the Nasdaq) using Sir Alan Greenspan’s shower of free consumer cash for new housing. He obviously blew another bubble prolonging the agony. In 2006 this new housing bubble was completed. Then housing tipped over along with the carry-over year 2000 stock market bubble, remaining incomplete and unsatisfied until now.
In 1937, the USA stock market dropped over -45% roughly duplicating its huge skid in 1929-1931. This is where are today. The -45% re-run copycat crash lies just ahead for our Dow despite USA interventionists’ best efforts. We see one more upside stock bubble between now and November 4. After that, Bush skitters back to Texas and our 2009 political newbies are left holding this bag of manure. Consumers, retirees, working people and anyone in the way of this freight train had better prepare for it."(snip)
from
if Mr. Weigand's prediction is true, then the DOW bottom will actually occur next year ... and fall somewhere around the 9000 level.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
In a follow-up note, Iran fired more missiles today, the 10th of July. This child-like response reminds us of “mine is bigger than yours” and you better watch out.
These ones? :D
http://thelede.blogs.nytimes.com/200.../index.html?hp
http://farm4.static.flickr.com/3229/...8d71ed13_o.jpg
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
StrawberrySwitchblade
I saw this. Posted a quick, meaningless blurb on my blog. My (same age) friends are all "lolwut?" They don't get it. *frustrated*
How do I submit a proposal for a new smilie?
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
Melonie
This of course would have a PROFOUND effect on America ... gas rationing, outright shortages of heating oil, non-essential businesses being forced to shut down etc.
December 26, 2007
Quote:
New York - Many energy experts are predicting that the price of oil will fall in 2008 from its current level of about $93 a barrel.
Behind the predictions: a slowing US economy and stronger production from both OPEC and non-OPEC sources. In addition, tensions with Iran seem to have eased somewhat, and the supply of oil from northern Iraq appears to be better. Increased production of ethanol and biodiesel will also help.
http://www.csmonitor.com/2007/1226/p01s01-usec.html
:-[
That is like the complete opposite of everything which has happened since then...
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
^^^ Your CSMonitor 'prediction' was based on a number of assumptions that never happened in 2008 ... Saudi Oil export capacity increasing by 400,000 barrels a day, new refinery capacity coming online, a boost in oil exports from Mexico, Russia and other South American countries, a decline in Chinese demand for oil due to the Chinese gov't ending domestic oil price subsidies etc. ... which would have limited the rise of 'world market prices' for oil. Your CSMonitor 'prediction' was also based on an assumption that the US dollar's exchange rate / global purchasing power wasn't going to fall as far as it has !
if anything, the inaccuracy of the CSMonitor analysis emphasizes the point that America's financial destiny is now heavily dependent on the relative price of oil, and on factors that are beyond American control which now determine that price of oil in US dollar terms !
Arguably, it was the very failure of these 'promised' international developments to actually materialize in regard to international oil production, international refinery expansion, international demand for oil by 'developing' countries declining as they removed domestic oil price subsidies etc. that has now allowed certain people in Washington DC to start calling for America to take 'domestic' action ... i.e. offshore oil drilling of new wells off all three US coasts, reduction of environmental regulatory roadblocks standing in the way of increasing US refining capacity etc. While the point was never raised in news coverage of these 'domestic' plans, undoubtedly they stemmed from discussions between the US gov't and the Saudis / Mexicans / Chinese etc. - where it was pointed out that if the US continued to do 'nothing', why should the US expect the Saudis / Chinese / Mexicans to do 'something' ? This would have particularly been the case when the 'something' the US was asking them to do involved investing additional billions in their oil infrastructure, involved shocking their economies via the removal of domestic price subsidies for gasoline / diesel / electricity etc.
~
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Beyond US control? Hell, we'll just have the fed play with it's interest rate in a US economy (even though it is part of a global economy.) :)
Kudlow says that will take care of all the problems.
(I am feeling especially sarcastic this morning.)
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
^^^ well, obviously, a good part of the reason for US dollar denominated price increases in oil is that the international exchange rate / purchasing power of the US dollar has been trashed by the FED's continued printing of additional dollars out of thin air, in combination with the FED's refusal to raise interest rates. For a fact, the Euro denominated price increases in oil have been far lower !!!
chart is from
http://www.hooversbiz.com/wp-content...5/oileuros.bmp
^^^ US dollar price is in RED - Euro price is in BLUE
As the chart shows in a way that nothing else can, a LARGE part of the US dollar denominated price increases of oil (and also food and other 'global' commodities) was the trashing of the US dollar's international exchange rate value rather than the evil oil companies / greedy Saudi sheiks ! For those with short memories, the big divergence between the red and blue lines happens to coincide with the February decision by the US Fed to arrange a 'bail out' of Bear Stearns and to inject large amounts of freshly printed money into the US stock markets (via repo loans to primary dealer US banks) to break the strong down-trend which gathered steam in February and early March.
Of course, this comes back to the argument that the US Fed (and US economy) is really caught between a 'rock and a hard place'. If the Fed continues to print money and maintain 'artificially' low interest rates, 'subprime' borrowers can continue to make their mortgage, auto and credit card payments - and the banks holding those 'subprime' mortgages, auto loans and credit cards can perhaps stave off going bankrupt on those loans going into total default. However, the side effect is that the prices for oil, food, all manufactured goods making use of world commodity metals / plastics etc. will continue to rise. Another side effect is that foreign investment in the US will decline as foreign investors now face potential currency exchange rate losses in addition to comparatively low interest rate payouts on US bonds / notes etc.
The flip side which you (and I) advocate is for the US Fed to stop printing up new money so fast, to raise interest rates, and to thus reattract foreign investment. This would slow the rise of oil, food, and manufactured goods prices. This would also provide US savers / retirees etc. with a halfway decent rate of return. However, the side effect is that US banks would face reduced profits due to the reduction in 'spread' between loan interest rates earned and savings / CD interest rates paid, US banks would face a much higher dollar amount of write-off losses due to more 'subprime' borrowers going into default as a result of rising monthly payments on their adjustable rate mortgages, car loans and credit card debt. This would also guarantee a much higher number of personal bankruptcies as 'subprime' Americans would choose to 'give up' on even trying to stay current on their mortgages, car loans and credit cards.
While you (and I) are of the opinion that the 'subprime' borrowers - as well as the banks that loaned the 'subprime' borrowers money - as well as the uber-rich speculative investors that 'loaned' those banks money - should face the consequences of their own financial irresponsibility, as a matter of pragmatic reality this is an election year, 'subprime' borrowers are also registered voters, and the US banking industry is a major corporate political contributor ! So as long as the FED (and US politicians) are able to perpetuate the misconception that the high prices of oil are the sole result of greedy oil companies instead of the result of a stealth bailout of the banking industry, uber-rich speculative investors, and 'subprime' borrowers, those votes and corporate contributions will continue ! But enough political commentary on this subject in Dollar Den at least ... I'll leave curious readers with a link instead .....
!
~
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
From the BBC this am:
The US government is reported to be considering injecting up to $15bn (£7.5bn) into the providers of mortgage funding Freddie Mac and Fannie Mae.
The extra capital could be announced before the US markets open on Monday, according to the London-based Sunday Times and Sunday Telegraph newspapers.
Freddie Mac and Fannie Mae guarantee almost half of all US home loans.
Their share prices fell nearly 50% last week amid fears that they might have trouble raising money.
Freddie Mac and Fannie Mae are known as government-sponsored enterprises (GSE) and they buy debt from the companies that sell mortgages to house-buyers.
They then sell on the debt to investors and because they are government sponsored, the price of mortgages is kept low.
If investors decided to stop buying the debt from the two companies it would mean they would have to stop supporting the housing market and the already tough situation would get even worse.
Nationalisation rumours
On Friday US Treasury Secretary Henry Paulson was forced to issue a statement saying that he would support the two GSEs "in their current form" to dispel rumours of nationalisation.
Under the plan reportedly being considered, the US government would receive special shares in Fannie Mae and Freddie Mac, which would further reduce the already depressed value of the existing shareholders' stakes.
Mr Paulson is insisting that if there is to be a rescue then it must not benefit shareholders, the Wall Street Journal reported on Saturday.
Freddie Mac is due to sell $3bn in short-term debt on Monday, which may hasten the government's decision.
The Democratic White House hopeful Barack Obama has made his first comments about the problems facing the GSEs.
He described the situation as being of "extraordinary concern", but did not support an immediate bail-out.
"I think we need to watch carefully and see how it plays out before we make a decision about which steps need to be taken, if any," he told reporters on a flight to San Diego.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
I sure in the fuck wouldn't buy that debt.
Who knows what those assets are worth now - in terms of resale value on the house OR in an economy with an every increasing jobless rate (not to mention five years of stagnant wages in face of a future of ever increasing costs for energy and food as well other basics.)
Tie that in with the bullshit Europe has had with towns going bankrupt with supposedly good rating instruments... fuck.
I'd borrow to a stripper before any of this mess.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
abundance of bad news, spike in VIX fear....I'm positioned for a bounce up to 11,500 then the next leg down.
http://slopeofhope.com/2008/07/doing_whats_right.htm
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Your CSMonitor 'prediction' was based on a number of assumptions that never happened in 2008 ...
plus a smattering of bad logic - that was my entire point ;) Damn analysts.
Quote:
Originally Posted by
retiredangel
From the BBC this am:
The US government is reported to be considering injecting up to $15bn (£7.5bn) into the providers of mortgage funding Freddie Mac and Fannie Mae.
The extra capital could be announced before the US markets open on Monday, according to the London-based Sunday Times and Sunday Telegraph newspapers.
Dammit, and I'm home sick today :fever: I'm going to miss all the fun.
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
britneyireland
Quote:
The market should go up this week.
If I had a dollar for every time I heard a trader say that ;) "All the fundamentals say it should be higher! Where are the buyers? Why aren't they crossing?"
Quote:
That's what the charts say.
And my tea leaves agree, so let's buy now! ::)
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
I'm positioned for a bounce up to 11,500 then the next leg down.
Yup, the scuttlebut is that this week will likely see a 'Dead Cat Bounce' materialize.
For those who aren't familiar with the term, it's a rough stock value analogy to throwing a cat out the 7th story window ... if a whole category of stocks have taken a big and rapid decline in price (as in Freddie Mac and Fannie Mae in this case), the very size and speed of the decline often results in a 'bounce' to the upside. But like the gravity challenged cat, the upward bounce has no 'life' behind it meaning that the price is likely to quickly fall right back down to the 'sidewalk' again (if not actually falling further into the basement )!
Quote:
Where are the buyers? Why aren't they crossing?"
A lot of them are back in Europe / Abu Dhabi, nursing their additional US dollar vs home currency exchange rate losses on top of their US dollar denominated stock value losses !!!
What I'm trying to figure out is this. If the European and Middle Eastern and other foreign investors have finally been sickened by their meager returns on US investments ( including exchange rate pain ), and have now received the wake-up call that the implied US gov't backing of FNM and FRE may in fact be open to question, WHERE is their money going to go next in order to find a 'safe haven' ? Swiss Francs ? German Gov't bonds ? commodity futures again ?
~
-
Re: weekend commentary - Say goodbye to DOW 11,000 this time ...
Quote:
Originally Posted by
Melonie
What I'm trying to figure out is this. If the European and Middle Eastern and other foreign investors have finally been sickened by their meager returns on US investments ( including exchange rate pain ), and have now received the wake-up call that the implied US gov't backing of FNM and FRE may in fact be open to question, WHERE is their money going to go next in order to find a 'safe haven' ? Swiss Francs ? German Gov't bonds ? commodity futures again ?
~
Like everyone else they are trying to figure out
1) Who the next super power is...
and
2) Do they have a history of nationalizing shit.
Europe has been pretty friendly to Islam (accepting Sharia decrees and court decisions as legally binding) as well inviting immigration from ass backward countries (full of US dollars) while accepting bombs blowing up on their buses and radicals calling for nuclear terrorist attacks parading around on their streets.
Wouldn't want to be a woman in Europe next decade.