Bear Stearns was suppsed to pay the State of California about 1 billion in bond refinancing, now JP Morgan has assumed/bought B.S. by order of the FED. B.S. shareholders are sueing. Another 300 million is due in another week to the State of California.
A week a go....B.S. said things are cool you will get your money (something like that)......LAST WEEK.
oh yeah things are rosy especially with all the smoke and mirrors in the room. what will happen AFTER the FED goes down to ZERO??? there is over 1/2 a quadrillion (yes a Q) USD in this debt crap worldwide. Wall Street is only putting on a show and peeing in their pants at the same time.
Masterful work by the FED and PPT today to get the opposite movement out of gold with the 0.75% rate cut. All news of the failed BSC brokerage is gone. You'd have thought that the banking and mortgage crisis was now over, fini, kaput, done. Fannie and Freddie up 27% and Goldman up 16%. Wonder how much gold and silver they borrowed out of the ETF's to push this one through? It doesn't change the fact that all of them are essentially insolvent, but the FED timing was amazing. Great sleight of hand Ben. You got more chops than we gave you credit for. Now all you have to do is make this last until Friday to get through the long holiday. Good luck, you'll need it.
It is inplausible to me that there were more sellers than buyers today in gold. No doubt there were more naked short sellers than real buyers. But real sellers? No way.
People, we are in the eye of the storm. I find it hard to believe that we are thru this dangerous period. The problems facing the financial structure are enormous and although the Fed seems to be doing all within its power, without a number of changes by the Treasury and the White House, we are a long way from breathing a sigh of relief. What is needed is:
1.Expand the ability of Freddie and Fannie to buy more mortgages including new conforming jumbo mortgages
2. Modify the rules on new conforming jumbo mortgages, to allow refinancind 2nd mortgages as well as allow people to take out additional funds , say up to 70% of the value of the home.
3. Have the Treasury clearly state, that both Freddie and Fannie are backed by the full faith and credit of the Federal Government.
Actions taken, while helpful, are still behind the curve . Much more needs to be done to unfreeze funds and to clear up balance sheets and get rid of toxic loans.
It is inplausible to me that there were more sellers than buyers today in gold. No doubt there were more naked short sellers than real buyers. But real sellers? No way.
As of yesterday, there is one more SLV seller who is now glad to be out.
It still boggles the mind that buying SLV probably depressed the market in silver because it (quite possibly) didn't require removal of the physical metal from the market while diverting the money of those who would take actual physical delivery into a paper "asset" instead.
Q: Are You Printing Money? Bernanke: Not Literally
The exuberance of the market over a 0.75 point rate cut amazes me. The impetus was to try to prevent a total meltdown. But the rate cut may secure more liquidity for financial institutions but it is not a quick cure for the overall economic downslide, which will only be pushed downhill faster by inflationary pressures affecting energy and raw materials prices. Treasury Secretary Paulson has been on TV telling everyone that regardless of what the economists may say we are in a recession and things are going to get worse before they get better. Now usually the administration tries to soft talk economic declines in an effort to maintain investor and consumer confidence, so when the highest ranking member of the administration in charge of economic matters is saying the picture is bleak, what were investors thinking today?
First off, the most important education a child will EVER get is from their parents. . >>
That of course is true if the parents have at least half a brain. However judging by the direction of this country I would say that those parents are becoming as tough to find as MS-65 Early Quarter Eagles.
Page 1 of 4 CREDIT BUBBLE BULLETIN The worst-case scenario - live Commentary and weekly watch by Doug Noland
This week offered further disconcerting confirmation that the 20-Year Experiment in "Wall Street finance" is failing miserably. On Tuesday, the Federal Reserve was compelled to announce the implementation of an extraordinary US$200 billion liquidity facility for the Wall Street "primary dealer" community. Despite this action, it was necessary before the weekend for our central bank to orchestrate emergency funding for troubled Bear Stearns. We’re now clearly in the midst of a precarious systemic crisis. I concur with the characterization made on Friday by former Treasury Secretary Robert Rubin: We’re in "uncharted waters".
To be sure, the credit crisis has accelerated to a ferocious clip. Last week it was a "white shoe" (ie long-established professional
services firm) hedge fund leveraged in AAA securities that imploded. Earlier this week, a white shoe firm listed (in Europe) fund that had been leveraging in AAA Fannie and Freddie securities imploded. This week, one of Wall Street’s white shoe firms required a Fed-assisted bailout to at least temporarily ward off implosion. It is neither hyperbole nor fear mongering to warn that scores of players throughout the expansive US financial sector are now in jeopardy of finding themselves engulfed in liquidity crisis.
I found the opening question from Friday afternoon’s Bear Stearns conference call quite telling: "What is your current gross notional non-exchange traded derivative exposure?" The executive’s response - "To be honest with you, I don’t know this number off the top of my head …" - was not comforting. CONTINUED
The stock market is the biggest gambling game in the world. It consists of the big boys dealing stock out to Joe and Jane Public at higher and higher prices. Then when a panic begins, the stock goes from the weak hands of the Public , back to the Big Boys at bargain basement prices.
Panic and fear rule the Public. They panic at the wrong time and then fear missing out and pile back in at the wrong time.
Then there is the Lemming tendency on the part of the public. They rush to follow the leader, rush into hot stocks at the top and are unable to see the edge of the cliff, that they rush over.
Most of the increases that occur in the market happen in a small percentage of trading days. Perhaps as little as 8% of trading days. Since the public often flees the market in panics, they miss out by not being in on the big days. The other error the public does, is hold onto stocks that are big losers with poor long term prospects. They seem to think that one does not have a loss if they do not actually sell their losing stocks.
The market place can be a highly emotional place. One needs a well thought out plan and specific goals that one wishes to achieve. Growth, value or dividends. High risk vrs low risk. Defensive stocks or aggressive more speculative stocks.
The stock market is the biggest gambling game in the world. It consists of the big boys dealing stock out to Joe and Jane Public at higher and higher prices. Then when a panic begins, the stock goes from the weak hands of the Public , back to the Big Boys at bargain basement prices.
Panic and fear rule the Public. They panic at the wrong time and then fear missing out and pile back in at the wrong time.
Then there is the Lemming tendency on the part of the public. They rush to follow the leader, rush into hot stocks at the top and are unable to see the edge of the cliff, that they rush over.
Most of the increases that occur in the market happen in a small percentage of trading days. Perhaps as little as 8% of trading days. Since the public often flees the market in panics, they miss out by not being in on the big days. The other error the public does, is hold onto stocks that are big losers with poor long term prospects. They seem to think that one does not have a loss if they do not actually sell their losing stocks.
The market place can be a highly emotional place. One needs a well thought out plan and specific goals that one wishes to achieve. Growth, value or dividends. High risk vrs low risk. Defensive stocks or aggressive more speculative stocks.
<< <i>As of yesterday, there is one more SLV seller who is now glad to be out.
It still boggles the mind that buying SLV probably depressed the market in silver because it (quite possibly) didn't require removal of the physical metal from the market while diverting the money of those who would take actual physical delivery into a paper "asset" instead. >>
Thank You!!
Yes, those buying paper silver actually depress the true value of the physical metal.
It might not be so bad if they actually had to have the metal to back the paper, but at ratios of 1,000 to 1 or more, there is an awful lot of silver on paper that doesn't actually exist anywhere but the balance sheet.
If only I could sell each of my 100 ounce bars 1,000 or more times over and still hold it, why, I could get rich. Filthy rich, illegally rich, financial house rich.
I could probably buy a few Congresscritters in the process and they would help prop me up. What a Scam!!!!!!!!!!!!!!
Why does this remind me of a pyramid scheme?? Just on a grander scale.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Just exactly when, did what interest rate we could borrow, or lend at, become the most important factor of our markets?
I suppose it was when we as a nation decided that feeding the, “cancer of debt dependency” was the most important issue in life!
As the Wall Street Journal wrote this weekend, the entire country is facing a "margin call". The US has come to depend on $800bn inflows of cheap foreign capital each year to cover shopping bills.
As usual all of the FAST MONEY guys on Wall Street called the bottom yesterday in the stock market, and the end to the commodities, and metals boom. Wow just like that all our troubles are over, ain’t that great.
One of the most important questions we have asked in this thread over the last several years is just when will the rest of the world get tired of being the loan patsy and stop buying our debt? Surely that day is much closer after the events of this week?
What we are now seeing is the final stages of our country rolling over to the final communistic policies of central government, where the folks in Washington now “protect” every aspect of our lives. The problem with this approach is that, just like all communist governments all they own is a printing press. The collapse of our nanny governments monetary policy is happening so rapidly now that there is not even enough time to raise taxes and redistribute the wealth, the only thing that works at this point is printing trillions of dollars.
when the highest ranking member of the administration in charge of economic matters is saying the picture is bleak, what were investors thinking today?
It seems that someone on TV has told them to buy stock bargains because the underlying economy is great. Then, they list the financial sector and a couple others as the only ones having any problems. Then, they have Lehman and Goldman report higher earnings unexpectedly. Voila! See the bunny from the Hat?
Q: Are You Printing Money? Bernanke: Not Literally
Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck.
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
For the long term, a sharp, short correction is the best thing that could happen in here. As forum readers can observe, a lot of newbies have bought in or have been thinking about it. Washing out newbies with a sharp correction is a natural course of events. Newbies like to buy tops and many panic and get out on the correction. It is their way, always has been, always will be, no matter what is being traded. With price gains of over 50% for gold since September 07, a retracement of half the move would be normal and healthy in a strong bull market.
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
funny how it is a correction if you look at the price of gold every day. to other people who only look at the price monthly, they see a gradual upwards trend that warms their heart! :-)
<< <i>The stock market is the biggest gambling game in the world >>
I disagree with that remark. I've been in the market, via Mutual Funds, since the 70's & I would venture to say, that if you are in for the long haul, 10+ years, you will have a difficult time finding any other instrument that will give you a better return. I agree that for a short term investment, the market can be devastating.
they are all a bunch of crooks on Wall Street - they lie and cheat while the FED strokes their egos and saves them from ruin, while the little guy takes it in the shorts in higher mortgage rates and inflation - and the talking heads!! - where would we be without the talking heads on Wall Street and their continued mockery of the truth!!
currently putting together a EF/AU/BU 18th & 19th Century Type Set; and CC Morgan Set
just completed 3d tour to Iraq and retired after 28+ years in the US Army
“Interest rates have been a determining factor in business since the Romans.”
Dave this is correct, but as you know I am a student of history, and what history tells us is that nearly every large civilization was done in by communism, even the Romans.
Once you take individual right away from the populace, and give the determination of every facet of life to the government, and the mob vote, your country is headed down the toilet.
I am amused by various discussions here about issues that will never be solved, including the recent discussion about education.
There will always be more poor people, lazy people, unfortunate people on the planet in any one country, than there are hard working people, and successful people. For over one hundred and fifty years in our country the successful folks were admired, looked up to as shining examples of what might be accomplished, this is no longer the case.
Once you make the majority of voters dependent on government handouts, jobs, retirement, medical, etc. and communism begins to take effect, the end of the systems is on the way and NOTHING can stop its devastating tide!
<< <i>“Interest rates have been a determining factor in business since the Romans.”
Dave this is correct, but as you know I am a student of history, and what history tells us is that nearly every large civilization was done in by communism, even the Romans. >>
Hmm......I like to think I'm well read and history is one of my favorites as so many people are virtually clueless.
However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.
This is the first time I've ever heard Communism and the Romans connected.
Now, Socialism and the Romans, yes, I've read tons and tons on that issue.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
This is a little off track but I always thought that the inclusion of lead into the water supply of the Romans hastened the demise of the empire. I'm dead serious, as the romans started using excessive amounts of lead and that started to affect their brains.
<< <i>This is a little off track but I always thought that the inclusion of lead into the water supply of the Romans hastened the demise of the empire. I'm dead serious, as the romans started using excessive amounts of lead and that started to affect their brains. >>
That's true to a degree, but that was later in their history and only affected a small percentage.
But what brought down the Empire was the give aways to all who came into the Empire. It was said back then that if you could make your way to Rome, you could live a grand life as a poor Roman. A poor Roman was much better off than 99% of the rest of the known world. Sound familiar?
They had the free public baths, free food handouts, it's where the term "Bread and Circuses", comes from.
The had to entertain the people to keep them happy. Hence the Colosseum and the Gladiators and the Lions and the Christians, etc.
They over extended their armies and broke their treasury in the process of all this.
Those who study history are doomed to watch others repeat it.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Once the buzz of the fed actions simmer down a bit everything will turn back as the problem in the economy is still not being addressed. Stock market gave back most of what it gained yesterday, I would bet that gold will gain back most if not all of what it lost today be weeks end.
"For over one hundred and fifty years in our country the successful folks were admired, looked up to as shining examples of what might be accomplished, this is no longer the case. '
It sure seems like we still respect hard work and success -- why are Gates and Buffet and Andy Grove all cultural icons? Why are colleges admissions so competitive, and schools like Princeton and MIT worshipped? As you said, any society has lazy people and hangers-on -- but I think there is still quite a lot of respect for hard work in ours -- probably more so, actually, than there was 30 - 40 years ago.
<< <i>The stock market is the biggest gambling game in the world >>
I disagree with that remark. I've been in the market, via Mutual Funds, since the 70's & I would venture to say, that if you are in for the long haul, 10+ years, you will have a difficult time finding any other instrument that will give you a better return. I agree that for a short term investment, the market can be devastating.
“However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.”
Deadhorse, perhaps I see a fine line between socialism and communism.
Exactly when is the change over that calls for,”From each according to his abilities, to each according to his needs.”
Real taxpayers in this country are now paying 60% of the money they earn in taxes, at what point are we at communism?
In my mind the Republicans are now socialists, and the Democrats are now communists.
“It sure seems like we still respect hard work and success -- why are Gates and Buffet and Andy Grove all cultural icons? Why are college’s admissions so competitive, and schools like Princeton and MIT worshipped? As you said, any society has lazy people and hangers-on -- but I think there is still quite a lot of respect for hard work in ours -- probably more so, actually, than there was 30 - 40 years ago.”
Higashiyama,
I suppose we just see this a little different, I see a press, and the general liberal public, as constantly harassing every successful business person as just making to much money or demanding that they, “pay their fair share”
Most successful people today avoid the public like the plague, and stay in the good graces of the government only by giving huge amounts of their earnings to charities. I don’t see colleges and successful people idolized except by the successful, or soon to be successful. In fact most colleges and universities are badgered into being politically correct simply to avoid the mob!
Sorry Deadhorse got off the track. Ever wonder where the term, “being on the dole” came from?
“Grempel says the other side of Roman decadence was the dole. Millions were spent on bread and pork, by the end of the second century, and circuses for the non-working poor.
"One of the primary catalysts to the deterioration of the economy was the lack of circulating currency in the Western Empire. Two reasons for the lack of funds are wholesale hoarding of bullion by Roman citizens caused by inflation, and the widespread looting of the Roman treasury by the 'barbarians'. These two factors, coupled with the massive trade deficit with Eastern Regions of the Empire served to stifle the growth of wealth in the west."
From another source,
Two main causes of the Roman collapse:
1. Economic (lack of circulating currency due to inflation, and trade deficit.
2. Citizenship granted to all, reduced the incentive to join the army.
3. Nero and other emperors debased the currency in order to supply a demand for more coins.
4. By debasing the currency is meant that instead of a coin having its own intrinsic value, it became representative of the silver or gold it had once contained. By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly silver denarius was only .02%. This led to/(or was) severe inflation.
The Cato Institute says that emperors deliberately overtaxed the senatorial (or ruling) class in order to render it powerless. To do this, the emperors needed a powerful set of enforcers -- the imperial guard.
Once the wealthy and powerful were no longer either rich or powerful, the poor had to pay the bills of the state. These bills included the payment of the imperial guard and the military troops at the empire's borders.
Since the military and the imperial guard were absolutely essential, taxpayers had to be compelled to produce their pay. To escape the burden of tax, some small landowners sold themselves into slavery, since slaves didn't have to pay tax and freedom from taxes was more desirable than personal liberty. Since the Empire wasn't making money from the slaves, the Emperor Valens (368) declared it illegal to sell oneself into slavery.
Reloading PM's on the pull back. Don't really see that anything substantial has changed. Interesting observation regarding paper silver screwing up the silver PM deal but maybe that's how those paper people stay alive. It will be very interesting to see what the BS stockholders do about all this $2 buk deal.
Commodity prices (and other prices, across the board) are a lagging indicator in each of our previous recessions. See link See also full article discussing this trend.
I predicted on this board a few months ago that we would see both oil and gold get crushed by the end of the year. So far I've been quite wrong, but we'll see how things turn out.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
disagree with that remark. I've been in the market, via Mutual Funds, since the 70's & I would venture to say, that if you are in for the long haul, 10+ years, you will have a difficult time finding any other instrument that will give you a better return. I agree that for a short term investment, the market can be devastating.
If you pick 1966-1982 or in your case 1972-1982 those 10 years were a net loser for mutual funds. The next 20 years really presented a new paradigm in the stock market....huge amounts of liquidity and credit. With that paradigm now shattered, I don't expert your 10+ year rule to apply to 2001-2011. In fact, to counter all the excesses of those past 20 years, I would expect some serious retracements in "real" value....nothing like what was seen from 1966-1982 where the market gyrated up and down with net losses only to inflation.
We're still in a long term commodities bull. The FED saw a great opportunity to stampede the market by dumping a few hundred billion in liquidity to its buddies. Funny thing is, Goldman, Lehman, and JPM all drank from the well this week. And one of them had the nerve to say they were just trying it out to establish everyone else's confidence in the mechanism. What a line of bs. They needed the money.
<< <i>“However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.”
Deadhorse, perhaps I see a fine line between socialism and communism.
Exactly when is the change over that calls for,”From each according to his abilities, to each according to his needs.”
Real taxpayers in this country are now paying 60% of the money they earn in taxes, at what point are we at communism?
In my mind the Republicans are now socialists, and the Democrats are now communists.
>>
The underlying principle of socialism/communism is force. This is what makes that ideology and immoral ideology as it draws everything, legislates everything on the basis of force.
Freedom is the opposite. It is based on what is voluntary. It's is a moral ideology.
Most people cannot see that as those lines have become almost invisible. The USA used to be a long time ago a clear cur champion of freedom. No more. Far as freedom in the countries of the world, it's all become a matter of varying degrees of tyranny and the US isn't even number 1 anymore on the scale of freedom.
Now that's it's finally clear that we don't even have free elections..........what's left before a plunge into a more militant form of socialism......communism?
By JEANNINE AVERSA, AP Economics Writer 7 minutes ago
WASHINGTON - Big Wall Street investment companies are taking advantage of the Federal Reserve's unprecedented offer to secure emergency loans, the central bank reported Thursday.
The lending is part of a major effort by the Fed to help a financial system in danger of freezing.
Those large firms averaged $13.4 billion in daily borrowing over the past week from the new lending facility. The report does not identify the borrowers.
Thursday, March 20, 2008 "The Fed Will Do Whatever It Wants" and RAISE CASH NOW!
.... so claim some people.
Oh really? Not so fast!
"Congress is starting to probe the Federal Reserve-backed agreement to sell Bear Stearns to J.P. Morgan Chase, examining the deal to see if it complied with regulations and trying to determine taxpayer exposure, The Wall Street Journal reported Thursday." Gee, Congress giveth (The Federal Reserve Act) and Congress can taketh away.
Duh.
And not everyone thinks this will pass muster either:
"The Federal Reserve bypassed its own emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank sought last weekend to stave off a financial-market meltdown." Hmmmm.....
Now this will be interesting. Congress should do its damn job, but whether it will is another matter. Nonetheless, the politics of this are certain to get interesting, especially given the historical feckless lack of regulation coming from The Fed and elsewhere.
At minimum the likely outcome of this little mess is forcing Investment Banks under bank-style regulation by The Fed and/or OCC. That would be amusing, as it would shut down the "infinite leverage" games and force these IBs into the 7:1ish maximum gearing ratios that exist for commercial banks.
Now if we can just get those off-balance-sheet games to stop at the same time, we might actually accomplish something here and come out of this stronger as a nation and market.
Oh, the Conference Board reported leading economic indicators, with the 5th straight decline.
While we're on the subject of distortions and lies, many people say "The Fed doesn't care about the equity markets", or alternatively, "The Fed is trying to prop equity markets."
The truth is a bit more obscure and obtuse than that; one must look into how bank capital requirements are determined in order to get to the bottom of it.
Here's reality - Bank Tier Capital - the measure of whether you are "well capitalized" or "dead" as a bank - includes common stock equity.
Specifically, Tier 1 Capital, the most important type for a bank, includes common and preferred stock as well as retained earnings.
So consider this folks - you can sink a bank if you sink its stock price.
Now do you get it? The Fed and the rest of the fools on The Street want to pump bank stock prices because if they sink sufficiently the bank can actually be declared insolvent as a consequence!
This also, however, means that our banking system is in fact 100% based on confidence and it is the clearest indication you will ever find on why we must have transparency in our financial markets, including an absolute and irrevocable ban on off-balance-sheet and other hidden crap, and forced mark-to-market.
There are many people who have recoiled in horror at the idea that everything should be marked to the market. Well, I think it should be. I think it should be precisely because the only way a bank survives is if there is investor confidence in its position in the marketplace and you cannot obtain and keep that confidence unless you have full transparency.
If I can't read a balance sheet and know that the figures there present an accurate and complete picture of that firm's exposure, good and bad, then I have no reason to trust that presentation of the firm's financial condition and as a consequence I have no reason to buy and hold that firm's stock.
It is absolutely essential that everyone - domestic and foreign - have this trust in our financial system.
Without it we run the risk of dislocations whenever that confidence is shaken, and those "shakes" can come absolutely without warning. The "run" on Bear Stearns was able to be initiated and sustained precisely because of the opacity of Bear's balance sheet - but for that anyone could read their balance sheet and KNOW whether or not there was real risk to investors and customers or not.
We are now living in the dislocation. And despite the claims that "its all ok" and "we're at a bottom" (the calls of which are nauseating) the bond market says otherwise - check this out:
That is the IRX, or the interest rate on the 13 week T-bill in the open market, measured in 10s of basis points.
In other words the current trading price is 0.4% annual yield on the 13-week T-Bill, a level lower than that seen at any time in the last 50 years and in fact you can earn a positive carry borrowing those and buying JGBs - short term Japan bonds - which currently have a higher yield! Can you say "Carry Trade in Reverse"?
What does this mean? It means that people are willing to "park their money" with the government at a rate far less than price inflation and in fact for all intents and purposes ZERO because they do not believe that they will get it back from anyone else.
Now if you remember, I and others have commented that once we reach a "zero interest rate" policy The Fed is out of bullets in terms of policy actions. Well, we're at zero kids. 0.4% effective interest rate is for all intents and purposes zero.
No, the FFT doesn't matter - what matters is real interest rates, and for short-term cash it is now zero, as is confidence in anyone except The Federal Government.
Congratulations Ben; you've failed in restoring confidence because you have failed to force banking and other institutions to cut out the horsecrap and instead have continued to enable it. As a consequence irrespective of your meddling the market no longer trusts ANYBODY with their money EXCEPT for the folks with 6,000 nuclear weapons as backing - that would be the US Federal Government.
This is why I have continued to rant and rave about transparency - given our banking system and how it is capitalized, without transparency and trust the system and our economy will collapse.
I know, I know, the market was up big today with Options Expiration. Its all ok, and you should buy bank stocks. All of them. So says Dick Bove, and lots of people are today, with all of them up 5%, 10% or more.
You did not hear the truth about the Treasury complex on CNBC today, not even from Rick Santelli. Why not?
The Truth: The people with a working brain in their head know what's coming and that it is going to be extraordinarily ugly. They are prepared for it and have moved their billions of dollars into cash where they know they will get it back - the short end of the US Treasury Curve.
The Truth: In the last recession at the depths of it in the summer of 2003, just before the market turned, the lowest the 13-week bill yield reached was 0.774%. We are now trading at 30-50% below that level.
The Truth: People who know this for a fact including CNBC won't tell YOU because it is critically important to them that they get through the door before the fire starts burning the curtains, as the door is only so wide and there are a lot of people in the room. If you don't get your butt through the door your financial assets will be consumed in what's coming.
The Truth: CNBC should be SHUT DOWN as NOTHING MORE THAN A CONDUIT FOR INSIDER TRADING AND ILLEGAL MARKET MANIPULATION. Their "commentators" from various funds who are almost certainly trying to unload shares they are stuck with into YOUR HANDS should be locked up and/or sued into oblivion AS THEY ARE WELL AWARE OF WHAT IS GOING ON AND ARE USING CNBC AS NOTHING MORE THAN A WAY TO SCREW YOU WHILE THEY PROFIT. THERE IS NO BALANCE AND NO DISCLOSURE BY THESE COMMENTATORS OF THEIR POSITIONS, INCLUDING PIMCO, BOVE AND OTHERS. CRAMER IS THE WORST OF ALL OF THEM, telling people to leave money at Bear Stearns (if you believe that was about "deposits" when Bear isn't a Deposit Bank, you're dumber than a rock) and alternating between a "Caution" sign when we're down 300 and then "BUY EVERYTHING" when we're up 400 - only to see you lose 3/4 of the gains the next day! We do not have "financial TV" in this country. We have blatant market manipulation in the guise of "news" on a daily basis, 12 hours a day, AND THE SEC DOESN'T GIVE A DAMN.
The Truth: The "powers that be" (including the media, The Fed and The Banks) are absolutely beside themselves with the possibility that stocks, especially bank stocks, might decline in value. For "why" see the top of this blog entry. If you fall for this you will be wiped out. DICK BOVE PUT A MARKET PERFORM RATING ON BEAR STEARNS STOCK ON MARCH 11th - JUST THREE DAYS BEFORE IT BLEW UP AND (THE FOLLOWING MONDAY) WENT TO $2! You have NOT and you WILL NOT see CNBC or DICK BOVE take responsibility for the wipe out of SEVERAL BILLION DOLLARS IN SHAREHOLDER WEALTH - when he could have preserved YOUR MONEY if he had told you the truth about our financial institutions and that YOU SHOULD SELL ALL OF THEM AS THERE ARE AND WILL BE MORE EXPLOSIONS, ALTHOUGH NEITHER HE OR I HAVE NO WAY TO KNOW WHICH ONES AND NEITHER DO ANY OF THE ANALYSTS SINCE WE CAN'T SEE HONEST BALANCE SHEETS!
The Truth: All you hear on CNBC is "positioning for an early-cycle rebound", while in fact some $5 trillion in "value" expressed in the price of houses is permanently GONE, and that is assuming we use Freedie's and Fannie's estimates of home price decreases. If we use MY estimates the number is closer to $10 TRILLION dollars. To put this in perspective our Gross Domestic Product (GDP) is about $14 trillion annually. This will have a permanent effect on the standard of living of over 100 million households in the United States and thus our economy. It is unavoidable and as a consequence MUST have a similar impact on the earnings power of United States corporations when 70% of our economy is consumption by people just like you.
The Truth: At minimum your house is going to fall in value by 15% from 2005 numbers. In coastal and other high value areas the loss will be at least 50% from 2005 values, and may be more. It is absolutely not a time to buy real estate unless you can literally get it for at least 30% off the asking price - period. Why should you take the risk of being early? Let someone else have that risk - don't be a sucker!
The Truth: You must raise cash. NOW. Not commodities, not gold, not "solid stocks", not anything of the kind. CASH, defined as actual CASH or Short-Term United States Treasuries. Again - up to $100,000 in FDIC insured banks with the rest in short-term US Treasuries - either directly (Treasury Direct) or via a Treasury Money Market fund such as VMPXX (Vanguard).
If you don't, and what The Bond Market is saying is coming happens, don't say you weren't warned - because you were - by the only voice that matters - the market.
I am unlikely to warn you again about this in this sort of detail; I have been calling for exactly this sort of event in print since last April and now we have irrefutable proof in the form of the bond market telling you that if you don't pay attention you are going to get slaughtered in what is to come.
Thanks coinlieutenant for lifting the curtain and showing the truth.
As for historical interest rates, I belive it wasn't until the Middle Ages in Italy that loans were actually made with standardized interest rates as we know them.
The link above to Bank Balance Sheets will show you what a bank's off balance sheet's risks are. In the case of JPM, they were at $77 TRILL in derivative's risks before taking on the $14 TRILL owned by Bear Sterns. Since the large majority of this $91 TRILL is OTC junk, and it's leveraged approx 40-1 to assets, that's a huge amount of risk. JPM only factors the risk on the $91 TRILL at a lowly 1000:1 ratio or $91 BILLION. That's all fine and dandy assuming that the counter party to all those bets can pay off. The real risk is between $91 BILL and $91 TRILL. Place your bets. I'd vote for something well into the TRILLIONs.
Thank you for the very thorough and thought-provoking post.
Granted you obviously have a great deal more expertise on financial matters than I do, but it seems to me your main conclusion, which, unless I am misreading you, is keep your assets in cash, contradicts a major long-running current of this thread, which is that cash will only be further devalued by inflation for the foreseeable future.
Could you please explain this for us novices?
You say you expect housing prices to fall 15% to 50% from their 2005 levels, which, for the sake of discussion, is essentially the same as saying they will fall to about their 2002 levels. But what I am seeing, is the price of everything catch up with price of housing. I live in Los Angeles - here a house worth $400K-$450K in 2002 is worth about $900K-$1M today. An ounce of gold in 2002 that was worth $400-$450 in 2002 is worth about $900-$1K today. How does cash make sense given such a scenario?
With inflation actually running at 6%, that is the decline in value in your cash minus 3% interest you can earn on your money. Thus you suffer a 3% net loss each year on cash. However, in a turbulent period, one can lose 20 - 50% in PMs and as much as 50 -100% in stock.
The key in uncertain times is to preserve your wealth as best you can. A 3% loss per year is certainly better then a loss of 10, 20 40 or 50%. You wait until the financial system resolves its convulsions and you keep a large measure of your wealth, in short term Treasuries or FDIC bank accounts and CDs. You do what animals do in dangerous times, you hunker down and stay alert until the danger passes.
One can always compensate for inflation , by increasing savings by the 3% your savings are losing.You increase your savings by decreasing your spending. This is the strategy for survival, in a recession that could last longer then any in recent memory.
Let me clarify for everyone. That was a copy and paste from a blog that I read daily. I also read Jim Sinclair daily and listen to Jim Puplava weekly.
These are all people that I think are very intelligent and that I think have the public's best interest in mind.
That being said, they all do not have the same opinions on how this will turn out. Let me also say that I am new to much of this. But, I am also obsessive compulsive and have pretty much read about three hours per day over the past six months.
My own opinion is that we are heading for a depression. This will be brought about through fed intervention in the free markets. I dont have time to get into everything, but the massive intervention to combat deflation by the fed is what will cause this.
1. I think we will have inflation which should be good for gold and other commodities. I still think we are in a commodity bull.
2. I think that equities are massively overpriced and that this overpricing is caused by the massive leverage that is employed in the market today.
3. I think that housing is going to suffer greatly given the fed's intervention and assumption of debt in exchange for treasuries will eventually show up in the bond market. This will be the dagger that will crush the housing market in the form of higher mortgage rates.
4. To further support the inflation argument, I believe that we are at peak oil or very near it. We will never produce more oil than we are right now. Demand is not going to drop appreciably, even in a recession. This is going to be inflationary as Chindia is like a crack addict when it comes to oil. They want more and more and more.
The question is, what to be in. I can only say what I am in.
First , I was caught with my pants down on this move in gold. I was expecting further weakening of the dollar based on the interest rate cuts on Tuesday. The rise in the dollar was laughable and planned in my opinion. Regardless, I had loaded up on miners and gold and took a beating the last few days. I certainly had to control my emotions. Luckily, I am still playing with house money since I was up quite a bit.
Worst, I was short on cash and couldnt buy much on the dip we just had since I was loaded for bear when it went down.
Nonetheless, I am holding physical gold and silver, paper gold, and the following stocks: AUY, MFN, SLW, PAL, AZK, IVN, IAG, GRS, GBN, FCX, ECU, CALVF, SA, RR, TDC and CALVF. I also hold TELOZ and CHK for oil and natural gas positions. On the side, I have UGTH for some green exposure as well as a position in STEM, which I think will really go up if the market is stablized and a democrat gets elected (God help us).
I have written covered calls on some of my positions in the case that the market continues to crap the bed. I waiting too long to do so however and my protection is minimal. I was waiting to get approved for option trading. They are written that even if it goes over the strike price, I would be willing to sell and still be profitable...AND I still get the premium in my pocket on top of it.
I have bought calls on SKF (I think the financials are way overvalued), POT (everyone needs fertilizer) and FCX ( I would have bought the stock but I was short on cash).
I still have a house in IL, but am trying to sell. If not, I am in on a 30 year fixed loan at 5.625% and the rent is very near the mortgage. however, the house is old and maintenance is killing me.
I have sold much of my coins, but still have a sizable collection but less than 20 coins. I kept only the best of the best as I believe that there will always be a rich people who will pay for quality, and I am not afraid to hold them hostage!!
The best way for the average person to prepare for the upcoming economic shock is to be very thrifty and get out of as much debt as possible. Live BELOW your means if at all possible. Savings is imperative.
The next shoe to drop WILL be the bond market IMO. When that happens, look out. The end will be near. I will probably unload my gold/silver/miner position soon after. If the depression seems inflationary in nature as Puplava thinks it will be, I will keep the gold/silver. If it is an all out deflation, I will get out of my gold and into cash. I dont know if I buy the Sinclair arguement that people will lose trust in fiat and move into gold and silver as currency. It might happen, but I am reserving judgement as I think no one can know how people are going to react.
I hope this helps. I would lke to hear what Roadrunner thinks as I trust his judgement as well as others on this board.
Comments
Bear Stearns was suppsed to pay the State of California about 1 billion in bond refinancing, now JP Morgan has assumed/bought B.S. by order of the FED. B.S. shareholders are sueing. Another 300 million is due in another week to the State of California.
A week a go....B.S. said things are cool you will get your money (something like that)......LAST WEEK.
CA treasurer's site
oh yeah things are rosy especially with all the smoke and mirrors in the room. what will happen AFTER the FED goes down to ZERO??? there is over 1/2 a quadrillion (yes a Q) USD in this debt crap worldwide. Wall Street is only putting on a show and peeing in their pants at the same time.
It is inplausible to me that there were more sellers than buyers today in gold. No doubt there were more naked short sellers than real buyers. But real sellers? No way.
roadrunner
to believe that we are thru this dangerous period. The
problems facing the financial structure are enormous and
although the Fed seems to be doing all within its power,
without a number of changes by the Treasury and the White
House, we are a long way from breathing a sigh of relief. What is
needed is:
1.Expand the ability of Freddie and Fannie to buy more mortgages
including new conforming jumbo mortgages
2. Modify the rules on new conforming jumbo mortgages, to allow
refinancind 2nd mortgages as well as allow people to take out
additional funds , say up to 70% of the value of the home.
3. Have the Treasury clearly state, that both Freddie and Fannie
are backed by the full faith and credit of the Federal Government.
Actions taken, while helpful, are still behind the curve . Much more
needs to be done to unfreeze funds and to clear up balance sheets
and get rid of toxic loans.
Camelot
As of yesterday, there is one more SLV seller who is now glad to be out.
It still boggles the mind that buying SLV probably depressed the market in silver because it (quite possibly) didn't require removal of the physical metal from the market while diverting the money of those who would take actual physical delivery into a paper "asset" instead.
I knew it would happen.
CG
<< <i>
First off, the most important education a child will EVER get is from their parents. . >>
That of course is true if the parents have at least half a brain. However judging by the direction of this country I would say that those parents are becoming as tough to find as MS-65 Early Quarter Eagles.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
CREDIT BUBBLE BULLETIN
The worst-case scenario - live
Commentary and weekly watch by Doug Noland
This week offered further disconcerting confirmation that the 20-Year Experiment in "Wall Street finance" is failing miserably. On Tuesday, the Federal Reserve was compelled to announce the implementation of an extraordinary US$200 billion liquidity facility for the Wall Street "primary dealer" community. Despite this action, it was necessary before the weekend for our central bank to orchestrate emergency funding for troubled Bear Stearns. We’re now clearly in the midst of a precarious systemic crisis. I concur with the characterization made on Friday by former Treasury Secretary Robert Rubin: We’re in "uncharted waters".
To be sure, the credit crisis has accelerated to a ferocious clip. Last week it was a "white shoe" (ie long-established professional
services firm) hedge fund leveraged in AAA securities that imploded. Earlier this week, a white shoe firm listed (in Europe) fund that had been leveraging in AAA Fannie and Freddie securities imploded. This week, one of Wall Street’s white shoe firms required a Fed-assisted bailout to at least temporarily ward off implosion. It is neither hyperbole nor fear mongering to warn that scores of players throughout the expansive US financial sector are now in jeopardy of finding themselves engulfed in liquidity crisis.
I found the opening question from Friday afternoon’s Bear Stearns conference call quite telling: "What is your current gross notional non-exchange traded derivative exposure?" The executive’s response - "To be honest with you, I don’t know this number off the top of my head …" - was not comforting. CONTINUED
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
game in the world. It consists of the big
boys dealing stock out to Joe and Jane Public
at higher and higher prices. Then when a panic
begins, the stock goes from the weak hands of the
Public , back to the Big Boys at bargain basement prices.
Panic and fear rule the Public. They panic at the wrong time
and then fear missing out and pile back in at the wrong time.
Then there is the Lemming tendency on the part of the public.
They rush to follow the leader, rush into hot stocks at the top
and are unable to see the edge of the cliff, that they rush over.
Most of the increases that occur in the market happen in a small
percentage of trading days. Perhaps as little as 8% of trading days.
Since the public often flees the market in panics, they miss out by
not being in on the big days. The other error the public does, is hold
onto stocks that are big losers with poor long term prospects. They
seem to think that one does not have a loss if they do not actually sell
their losing stocks.
The market place can be a highly emotional place. One needs a well
thought out plan and specific goals that one wishes to achieve. Growth,
value or dividends. High risk vrs low risk. Defensive stocks or aggressive
more speculative stocks.
Camelot
game in the world. It consists of the big
boys dealing stock out to Joe and Jane Public
at higher and higher prices. Then when a panic
begins, the stock goes from the weak hands of the
Public , back to the Big Boys at bargain basement prices.
Panic and fear rule the Public. They panic at the wrong time
and then fear missing out and pile back in at the wrong time.
Then there is the Lemming tendency on the part of the public.
They rush to follow the leader, rush into hot stocks at the top
and are unable to see the edge of the cliff, that they rush over.
Most of the increases that occur in the market happen in a small
percentage of trading days. Perhaps as little as 8% of trading days.
Since the public often flees the market in panics, they miss out by
not being in on the big days. The other error the public does, is hold
onto stocks that are big losers with poor long term prospects. They
seem to think that one does not have a loss if they do not actually sell
their losing stocks.
The market place can be a highly emotional place. One needs a well
thought out plan and specific goals that one wishes to achieve. Growth,
value or dividends. High risk vrs low risk. Defensive stocks or aggressive
more speculative stocks.
Camelot
<< <i>As of yesterday, there is one more SLV seller who is now glad to be out.
It still boggles the mind that buying SLV probably depressed the market in silver because it (quite possibly) didn't require removal of the physical metal from the market while diverting the money of those who would take actual physical delivery into a paper "asset" instead.
Thank You!!
Yes, those buying paper silver actually depress the true value of the physical metal.
It might not be so bad if they actually had to have the metal to back the paper, but at ratios of 1,000 to 1 or more, there is an awful lot of silver on paper that doesn't actually exist anywhere but the balance sheet.
If only I could sell each of my 100 ounce bars 1,000 or more times over and still hold it, why, I could get rich. Filthy rich, illegally rich, financial house rich.
I could probably buy a few Congresscritters in the process and they would help prop me up. What a Scam!!!!!!!!!!!!!!
Why does this remind me of a pyramid scheme?? Just on a grander scale.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Just exactly when, did what interest rate we could borrow, or lend at, become the most important factor of our markets?
I suppose it was when we as a nation decided that feeding the, “cancer of debt dependency” was the most important issue in life!
As the Wall Street Journal wrote this weekend, the entire country is facing a "margin call". The US has come to depend on $800bn inflows of cheap foreign capital each year to cover shopping bills.
As usual all of the FAST MONEY guys on Wall Street called the bottom yesterday in the stock market, and the end to the commodities, and metals boom. Wow just like that all our troubles are over, ain’t that great.
One of the most important questions we have asked in this thread over the last several years is just when will the rest of the world get tired of being the loan patsy and stop buying our debt? Surely that day is much closer after the events of this week?
What we are now seeing is the final stages of our country rolling over to the final communistic policies of central government, where the folks in Washington now “protect” every aspect of our lives. The problem with this approach is that, just like all communist governments all they own is a printing press. The collapse of our nanny governments monetary policy is happening so rapidly now that there is not even enough time to raise taxes and redistribute the wealth, the only thing that works at this point is printing trillions of dollars.
It seems that someone on TV has told them to buy stock bargains because the underlying economy is great. Then, they list the financial sector and a couple others as the only ones having any problems. Then, they have Lehman and Goldman report higher earnings unexpectedly. Voila! See the bunny from the Hat?
I knew it would happen.
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
Gold will be back to $1000 in a few days!!!!!!
It's good to have this minor correction.
i would have never thought it was possible to scam the system ;-)
typical nonsense that happens when you look at our convoluted laws.
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
For the long term, a sharp, short correction is the best thing that could happen in here. As forum readers can observe, a lot of newbies have bought in or have been thinking about it. Washing out newbies with a sharp correction is a natural course of events. Newbies like to buy tops and many panic and get out on the correction. It is their way, always has been, always will be, no matter what is being traded. With price gains of over 50% for gold since September 07, a retracement of half the move would be normal and healthy in a strong bull market.
<< <i>Well, here comes the correction that the PM market has been long overdue for. IMO, this is a healthy and needed retrenchment given the trajectory of the market recently. I know quite of few of you sold at the $1000 level, figuring that might a tough psychological number to hold. You may be getting another opportunity to get in with that cash, as gold is down $40 and silver nearly a buck. >>
funny how it is a correction if you look at the price of gold every day.
to other people who only look at the price monthly, they see a gradual upwards trend that
warms their heart!
:-)
<< <i>The stock market is the biggest gambling game in the world >>
I disagree with that remark. I've been in the market, via Mutual Funds, since the 70's & I would venture to say, that if you are in for the long haul, 10+ years, you will have a difficult time finding any other instrument that will give you a better return. I agree that for a short term investment, the market can be devastating.
Bigger gambles: Casinos, Lottery tickets, Presidential elections
just completed 3d tour to Iraq and retired after 28+ years in the US Army
Interest rates have been a determining factor in business since the Romans.
Knowledge is the enemy of fear
Dave this is correct, but as you know I am a student of history, and what history tells us is that nearly every large civilization was done in by communism, even the Romans.
Once you take individual right away from the populace, and give the determination of every facet of life to the government, and the mob vote, your country is headed down the toilet.
I am amused by various discussions here about issues that will never be solved, including the recent discussion about education.
There will always be more poor people, lazy people, unfortunate people on the planet in any one country, than there are hard working people, and successful people. For over one hundred and fifty years in our country the successful folks were admired, looked up to as shining examples of what might be accomplished, this is no longer the case.
Once you make the majority of voters dependent on government handouts, jobs, retirement, medical, etc. and communism begins to take effect, the end of the systems is on the way and NOTHING can stop its devastating tide!
<< <i>“Interest rates have been a determining factor in business since the Romans.”
Dave this is correct, but as you know I am a student of history, and what history tells us is that nearly every large civilization was done in by communism, even the Romans. >>
Hmm......I like to think I'm well read and history is one of my favorites as so many people are virtually clueless.
However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.
This is the first time I've ever heard Communism and the Romans connected.
Now, Socialism and the Romans, yes, I've read tons and tons on that issue.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>This is a little off track but I always thought that the inclusion of lead into the water supply of the Romans hastened the demise of the empire. I'm dead serious, as the romans started using excessive amounts of lead and that started to affect their brains. >>
That's true to a degree, but that was later in their history and only affected a small percentage.
But what brought down the Empire was the give aways to all who came into the Empire. It was said back then that if you could make your way to Rome, you could live a grand life as a poor Roman. A poor Roman was much better off than 99% of the rest of the known world. Sound familiar?
They had the free public baths, free food handouts, it's where the term "Bread and Circuses", comes from.
The had to entertain the people to keep them happy. Hence the Colosseum and the Gladiators and the Lions and the Christians, etc.
They over extended their armies and broke their treasury in the process of all this.
Those who study history are doomed to watch others repeat it.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
It sure seems like we still respect hard work and success -- why are Gates and Buffet and Andy Grove all cultural icons? Why are colleges admissions so competitive, and schools like Princeton and MIT worshipped? As you said, any society has lazy people and hangers-on -- but I think there is still quite a lot of respect for hard work in ours -- probably more so, actually, than there was 30 - 40 years ago.
<< <i>
<< <i>The stock market is the biggest gambling game in the world >>
I disagree with that remark. I've been in the market, via Mutual Funds, since the 70's & I would venture to say, that if you are in for the long haul, 10+ years, you will have a difficult time finding any other instrument that will give you a better return. I agree that for a short term investment, the market can be devastating.
Bigger gambles: Casinos, Lottery tickets, Presidential elections >>
If you can count cards in Blackjack, you have the mathematical advantage over the House.
With our accounting laws, it's easy to hide the real condition of a company. Bear Stearns for instance.
“However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.”
Deadhorse, perhaps I see a fine line between socialism and communism.
Exactly when is the change over that calls for,”From each according to his abilities, to each according to his needs.”
Real taxpayers in this country are now paying 60% of the money they earn in taxes, at what point are we at communism?
In my mind the Republicans are now socialists, and the Democrats are now communists.
“It sure seems like we still respect hard work and success -- why are Gates and Buffet and Andy Grove all cultural icons? Why are college’s admissions so competitive, and schools like Princeton and MIT worshipped? As you said, any society has lazy people and hangers-on -- but I think there is still quite a lot of respect for hard work in ours -- probably more so, actually, than there was 30 - 40 years ago.”
Higashiyama,
I suppose we just see this a little different, I see a press, and the general liberal public, as constantly harassing every successful business person as just making to much money or demanding that they, “pay their fair share”
Most successful people today avoid the public like the plague, and stay in the good graces of the government only by giving huge amounts of their earnings to charities. I don’t see colleges and successful people idolized except by the successful, or soon to be successful. In fact most colleges and universities are badgered into being politically correct simply to avoid the mob!
Sorry Deadhorse got off the track. Ever wonder where the term, “being on the dole” came from?
“Grempel says the other side of Roman decadence was the dole. Millions were spent on bread and pork, by the end of the second century, and circuses for the non-working poor.
"One of the primary catalysts to the deterioration of the economy was the lack of circulating currency in the Western Empire. Two reasons for the lack of funds are wholesale hoarding of bullion by Roman citizens caused by inflation, and the widespread looting of the Roman treasury by the 'barbarians'. These two factors, coupled with the massive trade deficit with Eastern Regions of the Empire served to stifle the growth of wealth in the west."
From another source,
Two main causes of the Roman collapse:
1. Economic (lack of circulating currency due to inflation, and trade deficit.
2. Citizenship granted to all, reduced the incentive to join the army.
3. Nero and other emperors debased the currency in order to supply a demand for more coins.
4. By debasing the currency is meant that instead of a coin having its own intrinsic value, it became representative of the silver or gold it had once contained. By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly silver denarius was only .02%.
This led to/(or was) severe inflation.
The Cato Institute says that emperors deliberately overtaxed the senatorial (or ruling) class in order to render it powerless. To do this, the emperors needed a powerful set of enforcers -- the imperial guard.
Once the wealthy and powerful were no longer either rich or powerful, the poor had to pay the bills of the state. These bills included the payment of the imperial guard and the military troops at the empire's borders.
Since the military and the imperial guard were absolutely essential, taxpayers had to be compelled to produce their pay.
To escape the burden of tax, some small landowners sold themselves into slavery, since slaves didn't have to pay tax and freedom from taxes was more desirable than personal liberty. Since the Empire wasn't making money from the slaves, the Emperor Valens (368) declared it illegal to sell oneself into slavery.
Gee does any of this sound familiar?
17 years!?
across the pond views
I predicted on this board a few months ago that we would see both oil and gold get crushed by the end of the year. So far I've been quite wrong, but we'll see how things turn out.
If you pick 1966-1982 or in your case 1972-1982 those 10 years were a net loser for mutual funds. The next 20 years really presented a new paradigm in the stock market....huge amounts of liquidity and credit. With that paradigm now shattered, I don't expert your 10+ year rule to apply to 2001-2011. In fact, to counter all the excesses of those past 20 years, I would expect some serious retracements in "real"
value....nothing like what was seen from 1966-1982 where the market gyrated up and down with net losses only to inflation.
We're still in a long term commodities bull. The FED saw a great opportunity to stampede the market by dumping a few hundred billion in
liquidity to its buddies. Funny thing is, Goldman, Lehman, and JPM all drank from the well this week. And one of them had the nerve to say they were just trying it out to establish everyone else's confidence in the mechanism. What a line of bs. They needed the money.
roadrunner
<< <i>“However, I was certain that it was Socialism that brought down the Roman Empire, not Communism.”
Deadhorse, perhaps I see a fine line between socialism and communism.
Exactly when is the change over that calls for,”From each according to his abilities, to each according to his needs.”
Real taxpayers in this country are now paying 60% of the money they earn in taxes, at what point are we at communism?
In my mind the Republicans are now socialists, and the Democrats are now communists.
>>
The underlying principle of socialism/communism is force. This is what makes that ideology and immoral ideology as it draws everything, legislates everything on the basis of force.
Freedom is the opposite. It is based on what is voluntary. It's is a moral ideology.
Most people cannot see that as those lines have become almost invisible. The USA used to be a long time ago a clear cur champion of freedom. No more. Far as freedom in the countries of the world, it's all become a matter of varying degrees of tyranny and the US isn't even number 1 anymore on the scale of freedom.
Now that's it's finally clear that we don't even have free elections..........what's left before a plunge into a more militant form of socialism......communism?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
By JEANNINE AVERSA, AP Economics Writer
7 minutes ago
WASHINGTON - Big Wall Street investment companies are taking advantage of the Federal Reserve's unprecedented offer to secure emergency loans, the central bank reported Thursday.
The lending is part of a major effort by the Fed to help a financial system in danger of freezing.
Those large firms averaged $13.4 billion in daily borrowing over the past week from the new lending facility. The report does not identify the borrowers.
Investment firms tap Fed for billions
Power of pride huh?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
1. Conquest of too large and diverse
an area to adequately control.
2.A series of weak, debauched, incompetent ,or insane
dictators, inadequate to the task of administration.
3. A failed attempt, to pay for goods and services with
debased coinage and deficits.
4. Fear of the government to ask the population to pay a
price in order to preserve the Empire.
5. Increasing pressure of barbarians pressing on the boarders
as inadequate military forces manned the borders.
Rather sounds like our Governments of the past 40 years.
Camelot
This guy has a negative gold outlook....
http://market-ticker.denninger.net/
Thursday, March 20, 2008
"The Fed Will Do Whatever It Wants" and RAISE CASH NOW!
.... so claim some people.
Oh really? Not so fast!
"Congress is starting to probe the Federal Reserve-backed agreement to sell Bear Stearns to J.P. Morgan Chase, examining the deal to see if it complied with regulations and trying to determine taxpayer exposure, The Wall Street Journal reported Thursday."
Gee, Congress giveth (The Federal Reserve Act) and Congress can taketh away.
Duh.
And not everyone thinks this will pass muster either:
"The Federal Reserve bypassed its own emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank sought last weekend to stave off a financial-market meltdown."
Hmmmm.....
Now this will be interesting. Congress should do its damn job, but whether it will is another matter. Nonetheless, the politics of this are certain to get interesting, especially given the historical feckless lack of regulation coming from The Fed and elsewhere.
At minimum the likely outcome of this little mess is forcing Investment Banks under bank-style regulation by The Fed and/or OCC. That would be amusing, as it would shut down the "infinite leverage" games and force these IBs into the 7:1ish maximum gearing ratios that exist for commercial banks.
Now if we can just get those off-balance-sheet games to stop at the same time, we might actually accomplish something here and come out of this stronger as a nation and market.
Oh, the Conference Board reported leading economic indicators, with the 5th straight decline.
While we're on the subject of distortions and lies, many people say "The Fed doesn't care about the equity markets", or alternatively, "The Fed is trying to prop equity markets."
The truth is a bit more obscure and obtuse than that; one must look into how bank capital requirements are determined in order to get to the bottom of it.
Here's reality - Bank Tier Capital - the measure of whether you are "well capitalized" or "dead" as a bank - includes common stock equity.
Specifically, Tier 1 Capital, the most important type for a bank, includes common and preferred stock as well as retained earnings.
So consider this folks - you can sink a bank if you sink its stock price.
Now do you get it? The Fed and the rest of the fools on The Street want to pump bank stock prices because if they sink sufficiently the bank can actually be declared insolvent as a consequence!
This also, however, means that our banking system is in fact 100% based on confidence and it is the clearest indication you will ever find on why we must have transparency in our financial markets, including an absolute and irrevocable ban on off-balance-sheet and other hidden crap, and forced mark-to-market.
There are many people who have recoiled in horror at the idea that everything should be marked to the market. Well, I think it should be. I think it should be precisely because the only way a bank survives is if there is investor confidence in its position in the marketplace and you cannot obtain and keep that confidence unless you have full transparency.
If I can't read a balance sheet and know that the figures there present an accurate and complete picture of that firm's exposure, good and bad, then I have no reason to trust that presentation of the firm's financial condition and as a consequence I have no reason to buy and hold that firm's stock.
It is absolutely essential that everyone - domestic and foreign - have this trust in our financial system.
Without it we run the risk of dislocations whenever that confidence is shaken, and those "shakes" can come absolutely without warning. The "run" on Bear Stearns was able to be initiated and sustained precisely because of the opacity of Bear's balance sheet - but for that anyone could read their balance sheet and KNOW whether or not there was real risk to investors and customers or not.
We are now living in the dislocation. And despite the claims that "its all ok" and "we're at a bottom" (the calls of which are nauseating) the bond market says otherwise - check this out:
That is the IRX, or the interest rate on the 13 week T-bill in the open market, measured in 10s of basis points.
In other words the current trading price is 0.4% annual yield on the 13-week T-Bill, a level lower than that seen at any time in the last 50 years and in fact you can earn a positive carry borrowing those and buying JGBs - short term Japan bonds - which currently have a higher yield! Can you say "Carry Trade in Reverse"?
What does this mean? It means that people are willing to "park their money" with the government at a rate far less than price inflation and in fact for all intents and purposes ZERO because they do not believe that they will get it back from anyone else.
Now if you remember, I and others have commented that once we reach a "zero interest rate" policy The Fed is out of bullets in terms of policy actions. Well, we're at zero kids. 0.4% effective interest rate is for all intents and purposes zero.
No, the FFT doesn't matter - what matters is real interest rates, and for short-term cash it is now zero, as is confidence in anyone except The Federal Government.
Congratulations Ben; you've failed in restoring confidence because you have failed to force banking and other institutions to cut out the horsecrap and instead have continued to enable it. As a consequence irrespective of your meddling the market no longer trusts ANYBODY with their money EXCEPT for the folks with 6,000 nuclear weapons as backing - that would be the US Federal Government.
This is why I have continued to rant and rave about transparency - given our banking system and how it is capitalized, without transparency and trust the system and our economy will collapse.
I know, I know, the market was up big today with Options Expiration. Its all ok, and you should buy bank stocks. All of them. So says Dick Bove, and lots of people are today, with all of them up 5%, 10% or more.
You did not hear the truth about the Treasury complex on CNBC today, not even from Rick Santelli. Why not?
The Truth: The people with a working brain in their head know what's coming and that it is going to be extraordinarily ugly. They are prepared for it and have moved their billions of dollars into cash where they know they will get it back - the short end of the US Treasury Curve.
The Truth: In the last recession at the depths of it in the summer of 2003, just before the market turned, the lowest the 13-week bill yield reached was 0.774%. We are now trading at 30-50% below that level.
The Truth: People who know this for a fact including CNBC won't tell YOU because it is critically important to them that they get through the door before the fire starts burning the curtains, as the door is only so wide and there are a lot of people in the room. If you don't get your butt through the door your financial assets will be consumed in what's coming.
The Truth: CNBC should be SHUT DOWN as NOTHING MORE THAN A CONDUIT FOR INSIDER TRADING AND ILLEGAL MARKET MANIPULATION. Their "commentators" from various funds who are almost certainly trying to unload shares they are stuck with into YOUR HANDS should be locked up and/or sued into oblivion AS THEY ARE WELL AWARE OF WHAT IS GOING ON AND ARE USING CNBC AS NOTHING MORE THAN A WAY TO SCREW YOU WHILE THEY PROFIT. THERE IS NO BALANCE AND NO DISCLOSURE BY THESE COMMENTATORS OF THEIR POSITIONS, INCLUDING PIMCO, BOVE AND OTHERS. CRAMER IS THE WORST OF ALL OF THEM, telling people to leave money at Bear Stearns (if you believe that was about "deposits" when Bear isn't a Deposit Bank, you're dumber than a rock) and alternating between a "Caution" sign when we're down 300 and then "BUY EVERYTHING" when we're up 400 - only to see you lose 3/4 of the gains the next day! We do not have "financial TV" in this country. We have blatant market manipulation in the guise of "news" on a daily basis, 12 hours a day, AND THE SEC DOESN'T GIVE A DAMN.
The Truth: The "powers that be" (including the media, The Fed and The Banks) are absolutely beside themselves with the possibility that stocks, especially bank stocks, might decline in value. For "why" see the top of this blog entry. If you fall for this you will be wiped out. DICK BOVE PUT A MARKET PERFORM RATING ON BEAR STEARNS STOCK ON MARCH 11th - JUST THREE DAYS BEFORE IT BLEW UP AND (THE FOLLOWING MONDAY) WENT TO $2! You have NOT and you WILL NOT see CNBC or DICK BOVE take responsibility for the wipe out of SEVERAL BILLION DOLLARS IN SHAREHOLDER WEALTH - when he could have preserved YOUR MONEY if he had told you the truth about our financial institutions and that YOU SHOULD SELL ALL OF THEM AS THERE ARE AND WILL BE MORE EXPLOSIONS, ALTHOUGH NEITHER HE OR I HAVE NO WAY TO KNOW WHICH ONES AND NEITHER DO ANY OF THE ANALYSTS SINCE WE CAN'T SEE HONEST BALANCE SHEETS!
The Truth: All you hear on CNBC is "positioning for an early-cycle rebound", while in fact some $5 trillion in "value" expressed in the price of houses is permanently GONE, and that is assuming we use Freedie's and Fannie's estimates of home price decreases. If we use MY estimates the number is closer to $10 TRILLION dollars. To put this in perspective our Gross Domestic Product (GDP) is about $14 trillion annually. This will have a permanent effect on the standard of living of over 100 million households in the United States and thus our economy. It is unavoidable and as a consequence MUST have a similar impact on the earnings power of United States corporations when 70% of our economy is consumption by people just like you.
The Truth: At minimum your house is going to fall in value by 15% from 2005 numbers. In coastal and other high value areas the loss will be at least 50% from 2005 values, and may be more. It is absolutely not a time to buy real estate unless you can literally get it for at least 30% off the asking price - period. Why should you take the risk of being early? Let someone else have that risk - don't be a sucker!
The Truth: You must raise cash. NOW. Not commodities, not gold, not "solid stocks", not anything of the kind. CASH, defined as actual CASH or Short-Term United States Treasuries. Again - up to $100,000 in FDIC insured banks with the rest in short-term US Treasuries - either directly (Treasury Direct) or via a Treasury Money Market fund such as VMPXX (Vanguard).
If you don't, and what The Bond Market is saying is coming happens, don't say you weren't warned - because you were - by the only voice that matters - the market.
I am unlikely to warn you again about this in this sort of detail; I have been calling for exactly this sort of event in print since last April and now we have irrefutable proof in the form of the bond market telling you that if you don't pay attention you are going to get slaughtered in what is to come.
I may be wrong and so may the bond market.
I wouldn't take that bet if I were you.
siliconvalleycoins.com
cautionary warnings. You have depressed the
hell out of me, however, I believe that you are
correct in every aspect of your monograph.
Camelot
As for historical interest rates, I belive it wasn't until the Middle Ages in Italy that loans were actually made with standardized interest rates as we know them.
roadrunner
Thank you for the very thorough and thought-provoking post.
Granted you obviously have a great deal more expertise on financial matters than I do, but it seems to me your main conclusion, which, unless I am misreading you, is keep your assets in cash, contradicts a major long-running current of this thread, which is that cash will only be further devalued by inflation for the foreseeable future.
Could you please explain this for us novices?
You say you expect housing prices to fall 15% to 50% from their 2005 levels, which, for the sake of discussion, is essentially the same as saying they will fall to about their 2002 levels. But what I am seeing, is the price of everything catch up with price of housing. I live in Los Angeles - here a house worth $400K-$450K in 2002 is worth about $900K-$1M today. An ounce of gold in 2002 that was worth $400-$450 in 2002 is worth about $900-$1K today. How does cash make sense given such a scenario?
Thanks -
Artist
>>>My Collection
in your cash minus 3% interest you can earn on your money.
Thus you suffer a 3% net loss each year on cash. However, in a
turbulent period, one can lose 20 - 50% in PMs and as much as
50 -100% in stock.
The key in uncertain times is to preserve your wealth as best you
can. A 3% loss per year is certainly better then a loss of 10, 20 40 or 50%.
You wait until the financial system resolves its convulsions and you keep
a large measure of your wealth, in short term Treasuries or FDIC bank
accounts and CDs. You do what animals do in dangerous times, you hunker
down and stay alert until the danger passes.
One can always compensate for inflation , by increasing savings by the 3%
your savings are losing.You increase your savings by decreasing your
spending. This is the strategy for survival, in a recession that could last
longer then any in recent memory.
Camelot
>>>My Collection
These are all people that I think are very intelligent and that I think have the public's best interest in mind.
That being said, they all do not have the same opinions on how this will turn out. Let me also say that I am new to much of this. But, I am also obsessive compulsive and have pretty much read about three hours per day over the past six months.
My own opinion is that we are heading for a depression. This will be brought about through fed intervention in the free markets. I dont have time to get into everything, but the massive intervention to combat deflation by the fed is what will cause this.
1. I think we will have inflation which should be good for gold and other commodities. I still think we are in a commodity bull.
2. I think that equities are massively overpriced and that this overpricing is caused by the massive leverage that is employed in the market today.
3. I think that housing is going to suffer greatly given the fed's intervention and assumption of debt in exchange for treasuries will eventually show up in the bond market.
This will be the dagger that will crush the housing market in the form of higher mortgage rates.
4. To further support the inflation argument, I believe that we are at peak oil or very near it. We will never produce more oil than we are right now. Demand is not going to drop appreciably, even in a recession. This is going to be inflationary as Chindia is like a crack addict when it comes to oil. They want more and more and more.
The question is, what to be in. I can only say what I am in.
First , I was caught with my pants down on this move in gold. I was expecting further weakening of the dollar based on the interest rate cuts on Tuesday. The rise in the dollar was laughable and planned in my opinion. Regardless, I had loaded up on miners and gold and took a beating the last few days. I certainly had to control my emotions. Luckily, I am still playing with house money since I was up quite a bit.
Worst, I was short on cash and couldnt buy much on the dip we just had since I was loaded for bear when it went down.
Nonetheless, I am holding physical gold and silver, paper gold, and the following stocks: AUY, MFN, SLW, PAL, AZK, IVN, IAG, GRS, GBN, FCX, ECU, CALVF, SA, RR, TDC and CALVF. I also hold TELOZ and CHK for oil and natural gas positions. On the side, I have UGTH for some green exposure as well as a position in STEM, which I think will really go up if the market is stablized and a democrat gets elected (God help us).
I have written covered calls on some of my positions in the case that the market continues to crap the bed. I waiting too long to do so however and my protection is minimal. I was waiting to get approved for option trading. They are written that even if it goes over the strike price, I would be willing to sell and still be profitable...AND I still get the premium in my pocket on top of it.
I have bought calls on SKF (I think the financials are way overvalued), POT (everyone needs fertilizer) and FCX ( I would have bought the stock but I was short on cash).
I still have a house in IL, but am trying to sell. If not, I am in on a 30 year fixed loan at 5.625% and the rent is very near the mortgage. however, the house is old and maintenance is killing me.
I have sold much of my coins, but still have a sizable collection but less than 20 coins. I kept only the best of the best as I believe that there will always be a rich people who will pay for quality, and I am not afraid to hold them hostage!!
The best way for the average person to prepare for the upcoming economic shock is to be very thrifty and get out of as much debt as possible. Live BELOW your means if at all possible. Savings is imperative.
The next shoe to drop WILL be the bond market IMO. When that happens, look out. The end will be near. I will probably unload my gold/silver/miner position soon after. If the depression seems inflationary in nature as Puplava thinks it will be, I will keep the gold/silver. If it is an all out deflation, I will get out of my gold and into cash. I dont know if I buy the Sinclair arguement that people will lose trust in fiat and move into gold and silver as currency. It might happen, but I am reserving judgement as I think no one can know how people are going to react.
I hope this helps. I would lke to hear what Roadrunner thinks as I trust his judgement as well as others on this board.
John
siliconvalleycoins.com