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Thread: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

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    Default weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    some 'foreign' perspective on the true state of the US economy right now ...



    (snip)"Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: “so when is the sky going to fall then, eh”?

    Well, excuse me. The sky has fallen. The median price of new homes in the US has crashed from a peak of $262,6000 in March to $238,000 in September. (Commerce Department). This is a 9pc drop nationwide.

    The slide in existing homes is catching up. They have come down from $229,200 to $211,700 in three months. (National Association of Realtors). Yet we have barely begun to see the default hurricane as Teaser rates contracted in 2005 and 2006 on floating mortgages kick up venomously over the winter, peaking around in the Spring of 2008.

    Merrill Lynch has just confessed to a $7.9bn write down on CDO subprime debt and assorted follies, nearly double what it suggested three weeks ago.

    This is what happens when a bank values its CDO debt at “mark-to-market” rather than “mark-to-myth”, as some of Merrill’s rivals are still trying to do.

    Merrill’s Q3 loss of $3.5bn has cut the group’s equity capital by a fifth. This has consequences. The bank’s lending multiples will have to shrink.

    In Britain, we have had the first bank run since the City of Glasgow Bank collapsed in 1878. The Fed has cut the interest rates a half point and vastly increased the pool of eligible collateral for Discount operations. The European Central Bank has injected over €400bn of liquidity in the biggest intervention since the euro was created.

    Japan is in recession. Housing starts fell 23.4pc in July and 43.4pc in August.

    The US dollar has fallen below parity with the Canadian Loonie for the first time since 1976, and to all-time lows on the global dollar index.

    All it will take now for a full-fledged rout is a move by the Saudi and Gulf states to break their dollar pegs, which they may have to do to prevent imported US inflation causing havoc; or for the Asian banks stop buying US Treasuries – as Vietnam, Singapore, Korea, and Taiwan, have gingerly begun to do.

    And for good measure, the Bank of England has just warned in its Financial Stability Report that lenders are still in serious trouble, that there is a risk of commercial property crash, and that equities are “particularly vulnerable” to a downturn. It is said there may well be a repeat of the summer crisis, “potentially on an even larger scale.”

    What more do you want?

    It is true that stock markets have once again decoupled from the realities of the debt markets. But they did this in the early summer, when the Bear Stearns debacle was already well under way. They caught up famously in August.

    Nobody I talk to in the City credit trenches believes for one moment that the crunch is safely over. Indeed, they think that we are edging back to extreme stress levels, and the longer it goes on, the worse the damage.

    Yes, Blue Chip companies can borrow money, but most of them don’t need to do so because they have bloated cash reserves.

    Once you go down the chain, the picture changes fast. The iTraxx Crossover index measuring spreads on mid to low-grade corporate debt has jumped 100 basis points or so in the last week to around 360. It costs companies 1.8pc more to borrow than it did in the halcyon days of the credit bubble in February, if they can borrow at all."(snip)

    (snip)"Now, remember that the total stock of subprime and Alt-A (close kin) debt issued from early 2005 to early 2007 amounts to $2 trillion. Ben Bernanke’s estimate that losses would be $100bn looks wildly optimistic.

    Not to labour the point, but three-month Euribor rates are still at 62 basis points over the ECB’s 4pc rate. This amounts to a de facto half point rise since the crunch for all those in the euro-zone with floating mortgage rates – 98pc of the total in Spain, the biggest property bubble of them all.

    Asset-backed security (ABS) issuance peaked at €78bn in March, fell to €52bn in July, €9.8bn in August, €5.6bn in September, and €2.5bn in October. It has died. Banks no longer dare to hawk the stuff of fear of a humiliating rebuff.

    As for asset-backed commercial paper in the US, it has contracted every week since August as the lenders refuse to roll over short-term loans. Roughly 25pc of the market has been closed down, cutting off almost $300bn of funding for SIVs.

    These SIVs (structured investment vehicles) are `conduits’ – in City argot – that allow banks to juice profits by speculating off books on high-risk debt. They borrow short (three to six months) to invest long (five years of so), making money on the interest arbitrage. Until the game blows up, of course.

    Some $370bn still needs to be rolled over, and there lies the rub. The strong suspicion is that Hank Paulson’s $75bn SIV rescue for the big four US banks is intended to cover up the problem by feeding out losses slowly, rather than allowing firesales to cause a cascade.

    As the Bank of England warned, the Super-Siv should not be used to prop up fictitious valuations.

    “It stinks, as does the Treasury’s sponsorship of the scheme. It seems designed to prevent price discovery.”” says Bernard Connolly, global strategist for Banque AIG.

    Connolly says it resembles the slippery practices at the start of the Bear Stearns debacle, when creditors quickly abandoned attempts to force CDO sales by the Bear Stearns hedge funds as soon as they realized that prices were collapsing – exposing the awful truth that hundreds of billions were falsely valued on books.

    Nauseating though Paulson’s MLEV -- `Master Liquidity Enhancement Conduit’ – may be, it probably has to be done.

    Connolly says the Fed-led pack of central banks have made such a mess of capitalism by blowing credit bubbles (with low rates in the late 1990s and 2003-2006) that they now have no alternative other than to relaunch the “Ponzi Scheme”, or risk depression.

    This will have political consequences, of course. “The looming threat on the horizon, or just over it, is that the socialization of risk will be accompanied, in many countries, by the socialization of wealth,” he said.

    Indeed. The investors now baying for bail-outs had better be careful what they wish for. Democracy will have its way of making them pay. One recalls the 98pc tax rate on dividends in Britain in the late 1970s. Haircut now, or haircut later.

    In any case, the Paulson Super-Siv has failed to calm the horses. “This rescue has back-fired. The central banks don’t want anything to do with it. There is a fear that the big four US banks are trying to hide their debts,” said Hans Redeker, currency chief at BNP Paribas.

    The DOW is down 500 points or so since peaking in early October, and it looks wobbly.

    Even so, equities have not begun to reflect the reality that the 2006-2007 credit bubble has popped and cannot be easily reflated at a time of stubborn, lingering inflation. Spare me the mantra that the “fundamentals” are sound. Credit is the ultimate fundamental.

    Woe betide Wall Street if the Fed fails to slash rates dramatically over the Winter, starting on October 31."(snip)

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Melonie View Post
    some 'foreign' perspective on the true state of the US economy right now ...

    http://blogs.telegraph.co.uk/busines...yhasfallen.htm

    (snip)"Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: “so when is the sky going to fall then, eh”?

    Well, excuse me. The sky has fallen. The median price of new homes in the US has crashed from a peak of $262,6000 in March to $238,000 in September. (Commerce Department). This is a 9pc drop nationwide.

    The slide in existing homes is catching up. They have come down from $229,200 to $211,700 in three months. (National Association of Realtors). Yet we have barely begun to see the default hurricane as Teaser rates contracted in 2005 and 2006 on floating mortgages kick up venomously over the winter, peaking around in the Spring of 2008.

    Merrill Lynch has just confessed to a $7.9bn write down on CDO subprime debt and assorted follies, nearly double what it suggested three weeks ago.

    This is what happens when a bank values its CDO debt at “mark-to-market” rather than “mark-to-myth”, as some of Merrill’s rivals are still trying to do.

    Merrill’s Q3 loss of $3.5bn has cut the group’s equity capital by a fifth. This has consequences. The bank’s lending multiples will have to shrink.

    In Britain, we have had the first bank run since the City of Glasgow Bank collapsed in 1878. The Fed has cut the interest rates a half point and vastly increased the pool of eligible collateral for Discount operations. The European Central Bank has injected over €400bn of liquidity in the biggest intervention since the euro was created.

    Japan is in recession. Housing starts fell 23.4pc in July and 43.4pc in August.

    The US dollar has fallen below parity with the Canadian Loonie for the first time since 1976, and to all-time lows on the global dollar index.

    All it will take now for a full-fledged rout is a move by the Saudi and Gulf states to break their dollar pegs, which they may have to do to prevent imported US inflation causing havoc; or for the Asian banks stop buying US Treasuries – as Vietnam, Singapore, Korea, and Taiwan, have gingerly begun to do.

    And for good measure, the Bank of England has just warned in its Financial Stability Report that lenders are still in serious trouble, that there is a risk of commercial property crash, and that equities are “particularly vulnerable” to a downturn. It is said there may well be a repeat of the summer crisis, “potentially on an even larger scale.”

    What more do you want?

    It is true that stock markets have once again decoupled from the realities of the debt markets. But they did this in the early summer, when the Bear Stearns debacle was already well under way. They caught up famously in August.

    Nobody I talk to in the City credit trenches believes for one moment that the crunch is safely over. Indeed, they think that we are edging back to extreme stress levels, and the longer it goes on, the worse the damage.

    Yes, Blue Chip companies can borrow money, but most of them don’t need to do so because they have bloated cash reserves.

    Once you go down the chain, the picture changes fast. The iTraxx Crossover index measuring spreads on mid to low-grade corporate debt has jumped 100 basis points or so in the last week to around 360. It costs companies 1.8pc more to borrow than it did in the halcyon days of the credit bubble in February, if they can borrow at all."(snip)

    (snip)"Now, remember that the total stock of subprime and Alt-A (close kin) debt issued from early 2005 to early 2007 amounts to $2 trillion. Ben Bernanke’s estimate that losses would be $100bn looks wildly optimistic.

    Not to labour the point, but three-month Euribor rates are still at 62 basis points over the ECB’s 4pc rate. This amounts to a de facto half point rise since the crunch for all those in the euro-zone with floating mortgage rates – 98pc of the total in Spain, the biggest property bubble of them all.

    Asset-backed security (ABS) issuance peaked at €78bn in March, fell to €52bn in July, €9.8bn in August, €5.6bn in September, and €2.5bn in October. It has died. Banks no longer dare to hawk the stuff of fear of a humiliating rebuff.

    As for asset-backed commercial paper in the US, it has contracted every week since August as the lenders refuse to roll over short-term loans. Roughly 25pc of the market has been closed down, cutting off almost $300bn of funding for SIVs.

    These SIVs (structured investment vehicles) are `conduits’ – in City argot – that allow banks to juice profits by speculating off books on high-risk debt. They borrow short (three to six months) to invest long (five years of so), making money on the interest arbitrage. Until the game blows up, of course.

    Some $370bn still needs to be rolled over, and there lies the rub. The strong suspicion is that Hank Paulson’s $75bn SIV rescue for the big four US banks is intended to cover up the problem by feeding out losses slowly, rather than allowing firesales to cause a cascade.

    As the Bank of England warned, the Super-Siv should not be used to prop up fictitious valuations.

    “It stinks, as does the Treasury’s sponsorship of the scheme. It seems designed to prevent price discovery.”” says Bernard Connolly, global strategist for Banque AIG.

    Connolly says it resembles the slippery practices at the start of the Bear Stearns debacle, when creditors quickly abandoned attempts to force CDO sales by the Bear Stearns hedge funds as soon as they realized that prices were collapsing – exposing the awful truth that hundreds of billions were falsely valued on books.

    Nauseating though Paulson’s MLEV -- `Master Liquidity Enhancement Conduit’ – may be, it probably has to be done.

    Connolly says the Fed-led pack of central banks have made such a mess of capitalism by blowing credit bubbles (with low rates in the late 1990s and 2003-2006) that they now have no alternative other than to relaunch the “Ponzi Scheme”, or risk depression.

    This will have political consequences, of course. “The looming threat on the horizon, or just over it, is that the socialization of risk will be accompanied, in many countries, by the socialization of wealth,” he said.

    Indeed. The investors now baying for bail-outs had better be careful what they wish for. Democracy will have its way of making them pay. One recalls the 98pc tax rate on dividends in Britain in the late 1970s. Haircut now, or haircut later.

    In any case, the Paulson Super-Siv has failed to calm the horses. “This rescue has back-fired. The central banks don’t want anything to do with it. There is a fear that the big four US banks are trying to hide their debts,” said Hans Redeker, currency chief at BNP Paribas.

    The DOW is down 500 points or so since peaking in early October, and it looks wobbly.

    Even so, equities have not begun to reflect the reality that the 2006-2007 credit bubble has popped and cannot be easily reflated at a time of stubborn, lingering inflation. Spare me the mantra that the “fundamentals” are sound. Credit is the ultimate fundamental.

    Woe betide Wall Street if the Fed fails to slash rates dramatically over the Winter, starting on October 31."(snip)
    If you cheer the drop in price of a tomato, you should cheer the drop in price of real estate.
    *If you had invested in S&P 500 every time median real estate prices went down, you'd be a very rich person now

    Don't even get me started on why Dow Jones Industrial Average is the most useless Index of the measure of anything in this world. But just to play along,
    It is ridiculous to say that DOW is down 500 points from the top(or 0.35% if you are not being sneaky about it). Please go through the list of years where the DOW dropped 0.35% from its top.
    *If you had invested in S&P 500 every time DJIA went down 0.35%, you'd be a very rich person now


    *If you had invested in S&P 500 every time a company wrote down its assets, you'd be a very rich person now

    *If you had invested in S&P 500 every time Asset-backed security (ABS) issuance died, you'd be a very rich person now
    .
    .
    .
    .

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    If you cheer the drop in price of a tomato, you should cheer the drop in price of real estate.
    A very flawed concept, since extremely few people already own a garden with truckloads of tomatoes - but many people already (partially) own real estate, plus owe debts to other people which are dependent on a stable price of that real estate for repayment. Tomatoes are consumables, real estate is durable goods in the extreme as well as collateral. I will agree that in a theoretical world where there is no debt that your point would be true. However, we clearly don't live in that world !!!


    It is ridiculous to say that DOW is down 500 points from the top(or 0.35% if you are not being sneaky about it). Please go through the list of years where the DOW dropped 0.35% from its top.
    I believe the author's point would translate into a different question ... please go through the list of years where the DOW dropped 20% from it's top, and compare the pre-existing economic conditions.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Every time someone claims it's a new paradigm, they get proven wrong in the end.

    CNBC is pushing global growth to pump the market up. The globe tells CNBC thats bullshit (most indexes haven't broken their double top last I checked). Because a slowing US means less demand for global crap, as we are the biggest consumers on the planet. It's funny how geared CNBC is toward getting people to buy stocks, especially when they call their news, "unbiased".

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Decreasing housing values is a bit overblown, as housing is a durable good, and thus of significant calamitous value only if you're a short term NET seller, or if you've recently taken out a huge home equity loan, and you feel the crunch coming on.

    Given that shelter is a necesity of life, if someones selling a home, then they're very likely looking at buying a home in diff. location. In that case (I know, diff. localities have diff. hot & cold times), in supposedly down market, seller turned buyer may take price hit on home, BUT will also be paying lower price on new home, which should at least partially offset supposed "hit" that they took on their prior home.
    Granted, if they bought a short while ago @ $240K, and must now sell, (or make HE loan pmts), that would suck, but how many owners/sellers are in that particular boat?? Likely, they bought a few yrs ago @ say, $150- $200K, and instead of $62K- $112K profit , at peak, they must now eat crow , and "settle" for "only" $38K- $88K profit. Life's tough.

    Now for those staying in present home for a few more yrs: decreased values mean lower tax payments, those can translate into a few xtra LD's (Note: Warren Buffet, 2nd wealthiest billionaire behind Gates, has lived in same house for over 20 yrs). Again, price levels have significance mainly if you're buying or selling at the moment. For others- life goes on.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Melonie,

    Why are all of your weekend commentaries so negative. Are you just naturally pessimistic or what?

    RJ

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    ^^^ re negativity, I would substitute the term 'realistic' for 'pessimistic'. I would gladly post some good news about the US economy, if it were actually true (reference to faked CPI / unemployment stats etc), and if it were actually good (reference to FED repo's + securities lending + M3 expansion)


    ^^^ in regard to the issue of decreasing housing values, your example is admittedly true. However, your example is highly atypical ... because it depends on the following, to name just a few ...
    - the homeowner must have a fixed interest rate loan (or US interest rates must remain absurdly low)
    - the homeowner must have job security + no compelling reason to move
    - the homeowner's city must NOT have enacted real estate tax increase caps (i.e. cities with caps created a situation where property taxes on even today's decreased property values are still lagging and will continue to increase)
    - the homeowner's city's economy must not be contracting (i.e. loss of high paying industries greatly reduces demand for upscale housing)

    In reality, the effects of the falling real estate value problem have less to do with individual homeowners and more to do with financial institutions. Yes about 2 million homeowners are forecast to go bankrupt in the next year thanks to ARM's or negative economic changes in their lives. That will translate into 2 million unpaid mortgages. If those mortgages had been held by local financial institutions this would also translate into huge losses for those institutions. However, in almost all cases, those mortgages have been securitized as bonds and resold. This has greatly increased the scope of the problem, has involved big foreign banks as well as big US investment houses, has involved pension funds / retirement funds, has involved city and state gov'ts, has involved school systems, has involved union funds etc. Already the attempted early bailout efforts of the US fed, European ECB etc. since August have cost taxpayers an extra 1 trillion dollars ... which at some point will show up on the US federal budget as more debt service cost. The extra debt service cost plus the extra cost of providing social welfare benefits to 2 million soon to be bankrupt subprime homeowners will eventually cause federal and state tax rates to be increased ...

    Bottom line on all of the above is that capital is being destroyed as housing values decline ... which must be officially written off when a bankruptcy occurs. Granted, some of that capital came from foreign investors who have taken big losses. But this has provided a reason for those foreign investors to pull out their remaining money (to the tune of 161 billion dollars last month). This in turn causes the US dollar exchange rate to fall, which immediately results in rising prices for oil / energy, food, commodities etc. This in turn causes the profit margins of US businesses to be squeezed. This in turn causes falling stock prices, rising unemployment etc.

    Bottom line here is that today's global economic system creates tons of interdependent relationships. US mortgages and the income stream that they supposedly generate is the lynchpin of world finance. Falling real estate prices has undermined that lynchpin ... and we have so far only seen the 'tip of the proverbial iceberg' in terms of unintended consequences.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Melonie View Post
    ^^^ re negativity, I would substitute the term 'realistic' for 'pessimistic'. I would gladly post some good news about the US economy, if it were actually true (reference to faked CPI / unemployment stats etc), and if it were actually good (reference to FED repo's + securities lending + M3 expansion)
    Most pessimists see themselves as realists. Surely, everything can't be that bad?

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    The only thing that is good about the US economy is that so long as people keep buying stocks, they go up. The problem with that is all ponzi schemes break.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by lunchbox View Post
    The only thing that is good about the US economy is that so long as people keep buying stocks, they go up. The problem with that is all ponzi schemes break.
    Then you don't even know how the stock markets work

    Productivity (Up) => Wealth (Up) => GDP-Income (Up) => NetIncome-Dividends(Up) => Stock Price(Up)

    Please identify the Ponzi scheme in the above equation

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Robertjordan View Post
    Most pessimists see themselves as realists. Surely, everything can't be that bad?
    The way to judge the bias, pessimistic or optimistic, vs realism of Mel or anyone else who frequently makes/reports financial predictions is to look at their track record over a period of time. Do things turn out worse than they expect about as often as they turn out better? If so, that is evidence for realism. However, if things mostly turn out only one of the two, better or worse, than they predicted/expected, that is evidence for a bias. In Mel's case, it is fairly convenient to dig back through her old Dollar Den posts and judge for yourself.

    Leaving Mel and any other individual SW participant aside, it is certainly easy enough to find financial analysts and commentators who have been predicting catastrophic economic collapses around the corner for at least several decades running. They are similar to the religious nuts who constantly foresee the end of the world sometime in the next couple of years. In both cases, these gloomy prophets may turn out to be right some day, but it is not hard to see why people stop taking them serioiusly after a while.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    ^^^In my opinion, over-the-top rhetoric is also a fairly good indicator of bias (although not nearly as good as track record). For example, calling a 9% loss "poor performance" is one thing, but calling it "the sky falling" (i.e., some sort of calamitous 'end of the world') is another.

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    This very body is the Body of the Buddha."
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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by xanfiles1 View Post
    Then you don't even know how the stock markets work

    Productivity (Up) => Wealth (Up) => GDP-Income (Up) => NetIncome-Dividends(Up) => Stock Price(Up)

    Please identify the Ponzi scheme in the above equation
    It's simple, the market is giving obscene valuations to these companies.

    1) the buyback scam - companies are creating growth through buybacks, however they don't retire the shares. They even borrow to do this.
    2) buyout valuations - the cheap money for buyouts is gone.
    3) too many growth managers - way top many companies are being valued on growth that is simply unsustainable, even in the near term.

    This is a ponzi scheme because so long as people keep putting money in and don't question the pyramid, it keeps functioning. Every time we get here people claim this time it's different, a 'new paradigm'. Sure enough, every time, it eventually breaks, and we get a rush to the exits.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    then by any account you'd have to give a big tick to Mel on gold, another big tick on the US dollar, and a red cross on the SPX.


    2 out of three ain't bad. I'd call it realistic

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    ^^^ granted that I was premature on the SPX. Then again I never expected the US Fed and European Central bank to kick in A TRILLION DOLLARS in freshly printed money to save the collective a$$es of the big financial houses which heavily weight the SPX index. Nor was I expecting the US Fed would start accepting toxic mortgage bonds at 'notional value' from the big financial houses for collateral purposes resulting in new low interest loans to those big financial houses via the Fed discount window. Nor was I expecting that th Fed and US SEC regulators would go along with the creation of a $100 billion 'Structured Investment Vehicle SuperFund', which allows the big financial houses to trade toxic mortgage bonds amongst themselves and in the process avoid having to book the 'market' value loss on their corporate balance sheets. In other words, my SPX opinion vastly underestimated the will and resources that would ultimately be deployed by gov't 'manipulators' to keep the proverbial 'pigs flying'.


    Wealth (Up) => GDP-Income (Up) => NetIncome-Dividends(Up)
    The Ponzi element is that all of these are up based on huge injections of ever greater amounts of BORROWED money, not money that was generated as the result of 'real' wealth creation. Like the original Ponzi scheme, the injections of (borrowed) cash have made the 'first wave' of clients a lot of profits. But also like the original Ponzi scheme, eventually the bill will come due to pay off (or in this case pay back) on the underlying promises. As illustrated by the recent hedge fund bankruptcies / bailouts, even being forced to keep a few promises i.e. paying off a few investors who wanted out, was enough to totally devastate the Ponzi scheme.
    Last edited by Melonie; 11-01-2007 at 03:17 PM.

  16. #16
    Featured Member Wwanderer's Avatar
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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Melonie View Post
    Then again I never expected the US Fed and European Central bank to kick in A TRILLION DOLLARS in freshly printed money to save the collective a$$es of the big financial houses which heavily weight the SPX index. Nor was I expecting the US Fed would start accepting toxic mortgage bonds at 'notional value' from the big financial houses for collateral purposes resulting in new low interest loans to those big financial houses via the Fed discount window. Nor was I expecting that th Fed and US SEC regulators would go along with the creation of a $100 billion 'Structured Investment Vehicle SuperFund', which allows the big financial houses to trade toxic mortgage bonds amongst themselves and in the process avoid having to book the 'market' value loss on their corporate balance sheets. In other words, my SPX opinion vastly underestimated the will and resources that would ultimately be deployed by gov't 'manipulators' to keep the proverbial 'pigs flying'.
    In the above context, it is sometimes worth remembering that everything about our financial system, from the very concepts of money and debt to the most arcane accounting systems and loan restructuring schemes, is MERELY A HUMAN INVENTION WHICH IS ARBITRARY IN MANY WAYS AND ENTIRELY UNDER OUR COLLECTIVE CONTROL. In other words, it has no importance or power to affect the real world except to the extent that we permit it to do so. It is basically just a computer-aided mental game we play with numbers to record economic information. Put in still another way, financial arrangements and systems are NOT governed by some equivalent of physical laws that impose constraints that are beyond human control even in principle. There is no equivalent of the law of gravity to keep financial pigs from flying; if there is sufficient consensus that they fly, then fly they will.

    All of these things you didn't expect are examples of the rules of the financial "game" being changed to our (or someone's) benefit. It will not be to anyone's benefit if the global economy comes crashing down on all of our heads and returns the world to some pre-modern state, so you can expect to see a string of such "unexpected" developments deployed to avoid some financial system catastrophe. Ultimately, these efforts may or may not succeed, but if they fail it will be only because we were not clever enough to control a "game" which we invented from scratch ourselves.

    -Ww
    "At this moment what more need we seek?
    As the Truth eternally reveals itself,
    This very place is the Lotus Land of Purity,
    This very body is the Body of the Buddha."
    - Zazen Wasan

  17. #17
    Jay Zeno
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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Robertjordan View Post
    Why are all of your weekend commentaries so negative.
    I listened to a speaker in ... I'm not making this up ... 1977 talking about the upcoming crash due all these dire economic factors, the destruction of the middle class, and hyperinflation and all that. It was right around the corner.

    Advance 30 years to today. Same talk going on. If I'd followed the advice, the last 30 years would have been spent in bitter negativity.

    And who knows? Maybe what they say will come about next year or in 20 or 70 years from now. Then the people who predicted it will be like the hypochondriac who died old but whose gravestone read, "I told you I was sick."

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    ^^^ well, your professor would have probably been correct if Jimmy Carter had been re-elected !!! But instead, Reagan came into office, cut tax rates, put a lid on gov't spending growth, and sent an unspoken message to the rest of the world not to f#$k around with issues of strategic interest to the US of A ! However, I suspect that the upcoming change in the oval office will result in tax rate increases, increased gov't spending, and sending an unspoken message to the rest of the world that the US of A has no stomach for hardball and/or military actions when our strategic interests are challenged abroad.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Thank you, Melonie. Keep up providing us with your excellent posts. Many Americans need to wake up and see the truth. The rest of the world KNOWS where are headed to with our irrespondible policies, they are just too flooded with the "king" dollar to drop it all in one day. But have no doubt, we are not the superpower we used to be. Mostly due to all the lies we hear every day on TV, most people are misinformed about the true state of our economy. And when it crashes, they are going to be shocked, because they were not prepared.
    I've personally lived through an empire collapse, I see the signs it's coming here as well.

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    from
    http://www.robertamsterdam.com/2007/...t_to_unite.htm

    Russia Wipes Out Debt to United States

    "Here's an interesting piece of news that a reporter friend has pointed me towards: Sergei Storchak has announced the early repayment of an old agricultural loan of $343.25 million to the United States, which was made during the Federation's darkest days of the economic crisis. Speaking to reporters in Washington, my source tells me that Storchak explained the move as such: "From the viewpoint of financial efficiency, it was not particularly economical [to return the loan early], but it is unpleasant to have a loan in our debt portfolio that was obtained at a time when the country was at its lowest point."

    Translation: we are willing to throw away several million dollars of public money to wipe an "embarrassing" loan off the books, just to prove a point politically. Understandably, Russia is really not in any mood lately to owe anything to the Americans."
    snip

    Although it would be logical for Russia to pay off the debts later, when the dollar depreciates even more, they are doing it now for politial reasons. Wait till others start saying "pay us in euros/gold for oil". Or "raise the interest rates so we get a better ROI on treasuries"... We can, of course, scare them with our nukes, but if we don't have oil, they won't fly. And then we turn to Canada and Mexico for their natural resoures, and then good buy America, hello North American Union. We'll depreciate the dollar to the point we'll announce bankrupcy and so our debts will be wiped out, and then good buy dollar, hello Amero. Good buy CONSTITUTION, hello.... what?

  21. #21
    Jay Zeno
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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Melonie View Post
    ^^^ well, your professor ....
    Wasn't a professor. Was a right-wing survivalist type who, as far as I could tell, was trying to get people to buy coins and metals from him. I didn't stay for the full diatribe.

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    Featured Member Wwanderer's Avatar
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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Jay Zeno View Post
    I listened to a speaker in ... I'm not making this up ... 1977 talking about the upcoming crash due all these dire economic factors, the destruction of the middle class, and hyperinflation and all that. It was right around the corner.

    Advance 30 years to today. Same talk going on. If I'd followed the advice, the last 30 years would have been spent in bitter negativity.

    And who knows? Maybe what they say will come about next year or in 20 or 70 years from now. Then the people who predicted it will be like the hypochondriac who died old but whose gravestone read, "I told you I was sick."
    Exactly. Certain ideologically motivated financial 'prophets' of an imminent economic end-of-the-world-as-we-know-it have been preaching the same sermon, with minor variations, for as long as I have been following financial matters, for at least decades in other words...and probably much longer. Their prognostications have been consistently *terrible* investment advice, but your final paragraph above is a brilliant comparision. Some day they may finally be able to claim vindication, but it is perhaps most interesting that the failure of past collapses to arrive on schedule never seems to reduce their confidence in the belief that there is one lurking just around the corner.

    Quote Originally Posted by Melonie View Post
    ^^^ well, your professor would have probably been correct if Jimmy Carter had been re-elected !!! But instead, Reagan came into office, cut tax rates, put a lid on gov't spending growth, and sent an unspoken message to the rest of the world not to f#$k around with issues of strategic interest to the US of A ! However, I suspect that the upcoming change in the oval office will result in tax rate increases, increased gov't spending, and sending an unspoken message to the rest of the world that the US of A has no stomach for hardball and/or military actions when our strategic interests are challenged abroad.
    I agree that Reagan's election and policies had an excellent effect on the economy, but of course the economic voices of doom did not let up their chatter during his term of office either. The Reagan-era version of their economic "the end is nye" sermon focused on the soaring real (inflation corrected) public and private debt and convinced more people than it has in most other eras. The destruction/collapse of the US economy due to that debt load was confidently predicted to be no later than the early 1990s, and many people felt certain that the 1987 stock market crash was its first act and proof certain that we had beguan a decent into another 1930s style depression or worse. But, as it turned out, history was again following a different script, and the 1990s were not so bad for investors...to put it mildly. (Personally, I made a minor mint buying stocks post- 1987's Black Monday; how about you?)

    -Ww
    "At this moment what more need we seek?
    As the Truth eternally reveals itself,
    This very place is the Lotus Land of Purity,
    This very body is the Body of the Buddha."
    - Zazen Wasan

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    Quote Originally Posted by Adelina View Post
    from
    http://www.robertamsterdam.com/2007/...t_to_unite.htm

    Russia Wipes Out Debt to United States

    Translation: we are willing to throw away several million dollars of public money to wipe an "embarrassing" loan off the books, just to prove a point politically. Understandably, Russia is really not in any mood lately to owe anything to the Americans."
    snip
    'Slavsya, Otechestvo nashe svobodnoye, Schast'ya narodov nadyozhny oplot,'


    hehehehehehe

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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    gees the reason the us ecomony is in tatters is that you guys borrow for stuff that goes down in value or has no value eg cars and holidays

    the countries that used to support your dollar arent anymore
    and the country as a whole indivduals and businessesand government just borrow borrow and borrow


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    Default Re: weekend commentary - the Sky has Already Fallen (we just refuse to look up !)

    gees the reason the us ecomony is in tatters is that you guys borrow for stuff that goes down in value or has no value eg cars and holidays

    the countries that used to support your dollar arent anymore
    and the country as a whole indivduals and businessesand government just borrow borrow and borrow

    the 'tin foil hat' crowd would tell you that this is the basis of 21st century imperialism ! Unlike the 19th and 20th century where 'third world countries' sent raw materials or very low tech manufactured goods back to the imperial country for further processing, in the 21st century the 'third world countries' send ready to sell / use high tech manufactured goods. In turn the imperial country sends little paper notes back to the third world country which are inhererently worth nothing. In turn, the consumers in the imperial country borrow most of those little paper notes back from the third world country, and spend them (again) to buy yet more ready to sell / use goods. Ultimately this 'theory' is supposed to guarantee that the third world country winds up at the perpetual mercy of the imperial country, since the third world country's production economy is totally dependent on the recycling of the imperial country's currency. However, it would appear that the third world country can fairly easily substitute another imperial country into the third world country's production economy, or the third world country can use it's massive trade surplus to stimulate domestic consumption such that an imperial country is no longer an indispensible element of their production economy.

    The day of a rude awakening 'reality attack' is not far off, as the third world countries now realize that the imperial country's little green notes are indeed inherently worthless, and the third world countries now choose not to recycle those little green notes back to the imperial country in the form of loans. Instead those little green notes are now being invested in the imperial country, which is reversing the imperial flow direction !!! This will result in a drying up of easy credit for the imperial country's consumers, followed by a precipitous drop in their standard of living as their expenditures must be reduced to a balance against their actual incomes.

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