Fear and Panic rears it's ugly head. The cause ? A rumor ... which turned out to be false. It's a little off topic, but it relates well to the market and people running scared.
I dont know if this plan would even work, but I am pretty sure that the total economic cost will be much greater if we just let the chips lay where they fall. As we have discussed in this thread before, this current society is not prepared for a MASSIVE economic slowdown. People have riots and some even die when thier favorite football or basketball team loses. What do you think would happen when the grocery stores are empty? When their employer gives them IOUs instead of a paycheck?
The general opinion that I hear from J6P is any downturn would be short and sweet. I believe they couldnt be further than the truth. How will entitlement programs be paid when 1 out 7 people is unemployed? How much would it cost to provide unemployment benefits to 25 million people? Who will make up the increased burden of taxes? Surely not Wall Street or any large corporation that needs to access the debt market. Corporate profits will be greatly reduced leading to lower taxes being paid into govt coffers.
Most people see this as an attempt to save the "fat cats" on Wall Street, I see it as an attempt to keep us from reaching 15% unemployment (or more) and the subsequent ramifications.
Personally, I say let the chips fall as I am fully prepared thanks to a decent upbringing, unconventional thinking and the information and ideas contained in this thread. I also know that 95% of America is not prepared, but, and to be honest, neither I nor probably you, are prepared for a Civil War.
Edited to make last sentence make a little more sense.
Unfortunately, the vast majority of americans and many politicians, it seems, don't understand the fact that this bailout is not designed to line the pockets of corrupt investment bankers, lenders or save the stock market....It is designed to take a more systemic approach to the fact, that the funding mechanisms for businesses and municipalities are broken and on the verge of seizing up completely. Paulson, Bernanke, Bush as well as other have done a very poor job of getting the message across in a way that lay people can understand the issue. So that leaves us with an uneducated citizenry, that unfortunately gets it perception of the plan from right and left wing idealogues, who of course spew mainly misinformation and hyperbole. Ah, but what else is new.
Unfortunately, the vast majority of americans and many politicians, it seems, don't understand the fact that this bailout is not designed to line the pockets of corrupt investment bankers, lenders or save the stock market....It is designed to take a more systemic approach to the fact, that the funding mechanisms for businesses and municipalities are broken and on the verge of seizing up completely.
Eliminating "mark to market" accounting rules isn't the way to make the system legitimate. They are headed back in exactly the wrong direction once again. Bogus finance is going to bring down the "funding mechanisms for business and municipalities" whether or not the bailout occurs. If that's the case, I'd rather see the fiasco based on reality than on these "Alice-in-Wonderland" games that reward the fat cats.
Q: Are You Printing Money? Bernanke: Not Literally
Personally, I say let the chips fall as I am fully prepared thanks to a decent upbringing, unconventional thinking and the information and ideas contained in this thread. I also know that 95% of America is not prepared, but, and to be honest, I and probably not you, are prepared for a Civil War. >>
Dave, I certainly can see all your points I just do not see this happing as fast as you seem to predict?
First this is not the U.S.A. of our Grandfathers. Huge portions of the economy are already getting checks in the mail from the government and that will not stop overnight.
Many of the S&P 500 are buying back stock, that might have to stop, so they can use their own capitol. Hey, how about Microsoft making loans to tech companies, they have an extra 40 Billion.
Government safety nets are already in place for retired folks, poor folks, farmers, defense, car companies, medical, and many other industries. All of these will continue to get printed fiat money.
In listening to cspan today as Senators had their hearings there were two camps. One professing the end of the working class with vague explanations of what might happen with no facts to back this up, and another group telling how all these slick depravities guys are going to get billions for worthless paper. Today was all Dems.
One other comment from the floor I thought was interesting, was that all of the Senators that testified, and this excluded anyone from NY, said none of their banks were in trouble and had none of the toxic waste?
"...the funding mechanisms for businesses and municipalities are broken and on the verge of seizing up completely." "How will entitlement programs be paid when 1 out 7 people is unemployed?"
"...neither I nor probably you, are prepared for a Civil War. "
There's really no voodoo magic here, the infrastructure needs to be maintained, plain and simple and that is not an option. Many subsidies are about to disappear for the simple reason that there is no money to send to the programs.
There is going to be a considerable amount of unrest and supplies and the distribution routes and stores that furnish them will be pressured to maintain a broad range of products, particularly those in the produce markets. Excellent opportunity to consider moving away from the urban centers for a few years because once this stuff starts showing up in the papers, your options are going to be more limited regardless of your funding. Have a plan B, seriously.
In my thinking, this is going to be a rough patch that we will get over but it is absolutely necessary. We all know that stupid is as stupid does and when you keep doing the same thing and expecting a different result then that's what stupid does. You can not have a new order for our economy if we just keep trying to perpetuate the existing system. We can not keep funding the excess of constant expansion and wild west mentality at the top and expect things to change. There are only three major banks now, as we anticipated and that's probably good because they will need to be large and powerful to compete in the world economy; there are a lot of international, big, vicious players out there right now in the banking industry so big is good. It is difficult to imagine how government and banking can be very distant from each other, they must work in a cooperative way if we are going to be able to compete in the international markets. Now, the surviving banks using the middle class consumer as their food source...that simply has to stop, although they have just about wiped out the native population.
The lobbyists, the ex congressmen that peddle influence from the private sector to their congressional office holders, the endless low yield programs we pay for...that has got to stop and it will simply because of lack of funding. I think folk are focused in on this situation and it has been exposed for the excessive, symbiotic relationship that exist between lobbyists, excongressmen, and program managers that we suffer. There simply has to be much more public oversight here; not the gotcha journalism oversights that we see, but good public oversight that can stand the light of day.
If we want to evolve, we need to educate everyone...all the way to the last kid at the bottom, everybody had to be educated and it's not their choice, they must be educated in math and reading and it must be in english. If we will spend our money on that, then the rest will work itself out. We have to take care of our seniors and the better we take care of them, the less it will cost and the better it will be for everyone involved. We have to have a healthy society and that is a good place to spend money so that we save multiples of what we currently spend, it must be done. All programs should have a 5 year sunset provision in their funding, a review of their effectiveness as compared to what was intended in the funding bill, that will force the programs to perform or be unfunded or at the very least will allow new provisions to the funding that should be able to correct any underperformance. These things will come to pass and it will take 10-12 years to get a kid from kindergarten to highschool so call it a 10 year plan. The same 10 year plan that we must begin to achieve energy independence.
So, to my thinking, this is going to take about 10 years to redirect our economic system. In the meantime, gold is good, cash is king, have a plan B.
$700B gives the markets a few more days or weeks. The FED has already been dumping in $200B per day on its own. So why the need for a smaller bailout package that starts with $200B?
After the $700B is gone in a matter of days or weeks, the deleveraging of short term derivatives continues unabated. This is a case of $700B being woefully too small to handle the unwinding of $1000 TRILLION. It is mathematically impossible. The financial asteroid will still be hurtling directly at us regardless of that $700B. This was like tossing $50B at the Iraq war and saying that would be enough to cover everything. In reality that amount will end up in the trillions eventually. In the end, only time will cleanse the financial system as we don't have enough money to fix it.
The FED and Paulson know what the ball park number is for a full bail out. Let them come clean and ask for all they will need now. Apparently at least 40% of congress understands that.
If the banks cancelled credit lines, I think the entire economy would come to a screaching halt in about 14 days. How long can petty cash operate a business?
Most companies that have announced buybacks in the last few years have been done with borrowed money. This would cease immediately. Personally I have always considered buybacks a complete waste of money as they do nothing to grow a business and the impact on stock prices is marginal at best.
Poor folks and retired folks living entirely off the govt really dont contribute to the economy anyway.
mhammerman, I like your timeframe. This is going to have to be a global restructuring.
<< <i>Time to send millions of emails, calls, etc. to these Senators
Senate May Try to Revive Financial-Rescue Legislation (Update2)
By Alison Fitzgerald and Matthew Benjamin
Sept. 30 (Bloomberg) -- The U.S. Senate will try to salvage a $700 billion financial-rescue package after the measure was defeated in the House of Representatives. The lawmakers won't have a lot of room to negotiate. >>
This is what you get when you try to email:
"Heavy Load Warning: Because this site is getting pounded by people attempting to contact their members of Congress about the Wall Street bailout (over 100 people a minute!), the response time may be a little longer than normal. If you can't get this site to work, try http://www.congressmerge.com/ for the same information on a different site. "
You can Google their name for a local phone number.
RR you really think there is a quad-rillion of this crap?
Absolutely.
That number comes from the International Bank of Settlements which is the reporting bank for all the Central Banks of the world. The odd thing was that up to sometime in early 2008 they were reporting the figure at around $650 TRILL. Then on the next update they jacked it up to $1.1 QUAD. Did they find another $450 TRILL sitting under a rock or something? I don't know. It's not all bad though. Only about half of that value is Over-The-Counter stuff (ie illiquid, unsubstantiated, unbacked, unregulated, non-transparent derivatives). But either amount can wipe out the financial system 10X over.
Hey, on 2nd thought I'm for the bailout!
I'll give Paulson his $700B but only if there are 2 single line items in the bill. That is, wipe out all the other existing conditions in the bill as it stands (ie no marked to myth accounting, etc.). The only string is that a board of 7 "experts" outside the main banks will oversee the purchases by Paulson. Those guys should include Ron Paul, Jim Bunning and 5 other decent Americans who are known to do the right thing when it comes to the nation's finances. Perot and Buffet come to mind but it's hard to know who is not bought and paid for already. 2 of them should be well-versed derivatives. The 2nd condition is that within 6 months a sweeping reform bill for OTC derivatives, lending, etc. has to be implemented by Congress. There has to be an end to bank leverage beyond 10:1 and no further OTC derivatives along with additional regulation of the "legal" ones. Another regulatory body needs to be found for the SEC and similar bodies who do little but rubber stamp the Treasury's wishes.
Giving the $700B away is nothing...and it will keep the sheeple happy as well as most of Congress. We'd spend that $700B (actually only $200-$250B initially) in a week with or without the bill. It's the damaging conditions in the bill that will ultimately kill us and allow the game to go on.
There is going to be a considerable amount of unrest and supplies and the distribution routes and stores that furnish them will be pressured to maintain a broad range of products, particularly those in the produce markets.
Hummm, sounds like a good time to start that garden.
Regards, John
Need the following OBW rolls to complete my 46-64 Roosevelt roll set: 1947-P & D; 1948-D; 1949-P & S; 1950-D & S; and 1952-S. Any help locating any of these OBW rolls would be gratefully appreciated!
Another article in Ty Andros' crack-up boom series:
....The BAILOUT of the BANKING system MUST occur. It is INSOLVENT and cut off from the short-term funding required to fund itself. But the devil is in the details. The CREDIT markets are in CARDIAC arrest as we speak, as no one trusts US and G7 financial and banking institutions. CAPITAL IS NOT AVAILBLE to them. Their ONLY source of capital and credit is their RESPECTIVE governments and central banks. The government DID not produce it. It is a fake bailout!!!
LIBOR (London Inter-bank Rate for Loans Between Banks) is at its highest levels EVER. Loans longer than 1 or 2 days are UNAVAILABLE. Three-month, yearly and multi-year lending is a dream (keep in mind these financial and banking entities have OVER 1 TRILLION dollars of MATURING obligations between now and next summer which either must be paid off or ROLLED). They HAVE NO hope to do so. Last week $6 billion of Muni debt issues were anticipated. Only $100 million was actually placed and the rest was POSTPONED, but CANCELED may be a better word for it.
MANY times I have urged readers to IGNORE the headlines and look at public servants’ actions. This is one of those times and the word that comes to mind is: DESPICABLE. Socialism for the rich, debt slavery for the poor.
These short term credit items cannot be rolled over and their failure will continue to force the unwinding of the $1 QUAD in derivatives. There is no alternative at the moment. This is why the proposed $700B is a merely a droplet in the frying pan and has no hope of unfreezing the credit markets. The FED has already spent $1.8 TRILLION since the Bear Stearns failure. Did any of that need congressional approval.
And finally:
NOTHING being considered fixes the FUNDEMENTAL flaw that was outlined in Roach Motels. The bottom line of Roach Motels is this — they will NEVER be able to print enough money fast enough to cover the losses as these OVER-the-COUNTER investment products FALL to (ultimately) a price of ZERO, as they have already begun to do. Nobody will buy or hold an investment if it is IMPOSSIBLE to know its value or sell them to control risk, so no one will buy them, and everyone who HOLDS one WANTS OUT NOW. Now the US government wants to be the bidder for these THINGS, these MONSTERS. Do you think you can expect them to pay what they are worth, or will they pay what their biggest campaign supporters WISH them to be? The only solution is to create an exchange for them AS QUICKLY as possible to promote PRICE discovery. Nothing less will FIX the problems. (READ ROACH MOTELS)
On top of that problem we have the DEVIL’s spawn of NAKED credit default swaps which must be OUTLAWED at the earliest possible time. A naked credit default swap (CDS) is a BET on the ultimate success or failure of a bond or borrowing, such as credit cards, car loans, mortgage, commercial lending, municipal obligations, etc. For the people who actually OWN those lending obligations, credit default swaps are a legitimate hedge, and as long as the counterparty that sold the swap has the ability to PAY OFF then it should be allowed. However, as PRINTED money has mushroomed around the world, NAKED credit default swaps have become a casino unparalleled in history. These issues were barely MENTIONED in the congressional hearings on the bailouts.
You can read the rest of the article on financialsense.com below. There is some great stuff here on credit market status. It was fascinating to read that Buffet has $40 BILL in equity puts on the stock market and $8.8 BILL in CDO's. Guess that explains his eagerness for the bailout to occur and his $5B-10B Bank stake. A good read. Other worthwhile "dirt" in the article as well such as seeing the obscene leverage Barclay's is carrying of toxic debt and called "Lehman" on steroids by Andros. That would make me want to run out and buy even more shares of SLV! Of other note today, Goldman finally covered their net short position on the TOCOM after several years. In March of 2006 they had a short position of 52,000 contracts, today...essentially zero. Wonder what they think the next move is going to be? In fact most of the bigger shorts have all reduced their positions markedly from earlier this year. Seems they know something. Even though GS lost close to $200MILL on their gold shorts the past few years, they made a lot more in the currency and stock markets by zinging gold the past few years.
The bailout must go through look at these stories!!
Entrepreneurs struggle to hang on across the USA If there is a rock and a hard place in the U.S. economy, small businesses are there. Right in that little crevice where money is tight — and getting tighter. Right where weekly payrolls can be financed only by personal credit cards or home equity loans. And right where "income" for the boss is taking five bucks from the till and paying for a sandwich that day for lunch. Oct. 1 (Bloomberg)
Duke has $650 million in bonds coming due this year, $442 million scheduled to mature next year and $500 million in 2010, according to data compiled by Bloomberg. Chief Financial Officer David Hauser said Duke is drawing from its credit agreement because it wasn't clear whether it would be able to secure more than $1 billion in new financing this year as planned.
RC2, the maker of Learning Curve products, sank the most in more than a year in Nasdaq trading after canceling its acquisition of Publications International Ltd.'s children's publishing unit.
Spansion, the memory-chipmaker that hasn't reported a profit since it was spun off from Advanced Micro Devices Inc. in 2005, may need to raise capital to stay in business, according to Cowen & Co. LLC analyst Daniel Berenbaum. Spansion had $240 million cash at the end of the second quarter, down 28 percent from three months earlier. It has $2.4 billion in liabilities, according to Bloomberg data.
State, Local Tax Revenue Stagnates
Government officials already have begun clamping down on costs. For example, when the Federation of Tax Administrators recently discussed plans for future meetings, several state officials replied their states had just imposed travel-spending freezes.
Despite growing concern about the problem, it's unlikely that many states will enact significant, broad-based tax increases because of fears that voters would react angrily.
WSJ reporting that a tag on this "bailout" bill will be for the FDIC to be able to tap into Treasury for anything they need with individual limits to $250k
not too surprising, but it won't keep people from moving their accnts to the big 4
a few i know have exited from very solvent smaller banks & s&l's becase they are just freaked out.
You can read the rest of the article on financialsense.com below. There is some great stuff here on credit market status. It was fascinating to read that Buffet has $40 BILL in equity puts on the stock market and $8.8 BILL in CDO's. Guess that explains his eagerness for the bailout to occur and his $5B-10B Bank stake. A good read. Other worthwhile "dirt" in the article as well such as seeing the obscene leverage Barclay's is carrying of toxic debt and called "Lehman" on steroids by Andros. That would make me want to run out and buy even more shares of SLV! Of other note today, Goldman finally covered their net short position on the TOCOM after several years. In March of 2006 they had a short position of 52,000 contracts, today...essentially zero. Wonder what they think the next move is going to be? In fact most of the bigger shorts have all reduced their positions markedly from earlier this year. Seems they know something. Even though GS lost close to $200MILL on their gold shorts the past few years, they made a lot more in the currency and stock markets by zinging gold the past few years.
<< <i>ban on short selling tomoorrow.....what will be the impact? feeble minded like me want to know!
>>
The short selling ban did nothing to keep the market from dropping 400 points in 5 minutes on Monday. Nor did it keep NCC from falling from 6 to 1, or AIG from dropping from 5.60 to 2.60. Up until a few days ago you could not short the Chinese market so they dropped over 60% in a year. Shorting also does not cause PM's to drop. All you need is less buyers than sellers on any given day and you will get a price decline.
Do not believe the media BS that shorts or naked short selling or the lifting of the uptick rule has caused the market to drop.
Speaking of Buffet, old Warren is really socking it to these big broke companies!! He had better be careful; I thought he said that all these derivates were financial weapons of mass destruction? He is sure invested in a bunch of these companies loaded with this junk.
I guess this is a case of do what I say, not what I do?
GE Raises $15 Billion; Buffett Gets Preferred Stake (Update2) By Rachel Layne and Erik Holm Oct. 1 (Bloomberg) -- General Electric Co. plans to offer $12 billion in common shares and billionaire investor Warren Buffett's Berkshire Hathaway Inc. will buy $3 billion in preferred shares as GE bolsters its cash cushion amid volatile markets.
Buffett's stake will pay an annual 10 percent dividend and is callable after three years at a 10 percent premium.
By Javier Blas in Kyoto Published: October 1 2008 03:00 | Last updated: October 1 2008 03:00
Investors in gold are demanding "unprecedented" physical levels of bullion bars and coins and moving them into their own vaults as fears deepen about the health of the global financial system.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
"There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career," said Jeremy Charles, chairman of the LBMA. "The gold refineries cannot produce enough bars."
Johan Botha, a spokesman for the Rand Refinery in South Africa which manufactures the Krugerrand, the world's most popular gold coin, said the plant was now running at full capacity seven days a week. "Even so, now and then we have shortages," he said.
The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand.
Last week, the US mint suspended the sale of its American Buffalo coin after it ran out of stocks.
Do not believe the media BS that shorts or naked short selling or the lifting of the uptick rule has caused the market to drop.
But I do believe it when actual traders and investors tell me so. Naked shorts can sell anything with no risk or capital. Once the market is stampeding a bit, the automatic sell stops start getting hit, etc, etc , etc. It is an effective tactic.
<< <i>Speaking of Buffet, old Warren is really socking it to these big broke companies!! He had better be careful; I thought he said that all these derivates were financial weapons of mass destruction? He is sure invested in a bunch of these companies loaded with this junk.
I guess this is a case of do what I say, not what I do? >>
Yeah, but Warren's getting deals that you or I couldn't get. 10% Preferreds not callable for 3 or 5 years (I forget which) and 5 year warrants to buy more common at a low price? The rich do indeed get richer.
“When the people find that they can vote themselves money, that will herald the end of the republic.” — Benjamin Franklin
My icon IS my coin. It is a gem 1949 FBL Franklin.
<< <i> Do not believe the media BS that shorts or naked short selling or the lifting of the uptick rule has caused the market to drop.
But I do believe it when actual traders and investors tell me so. Naked shorts can sell anything with no risk or capital. Once the market is stampeding a bit, the automatic sell stops start getting hit, etc, etc , etc. It is an effective tactic.
roadrunner >>
And this lasts for about a day. I am a trader and investor, so believe me.
"For whom the bell tolls, it tolls for thee"....the American taxpayer.
I'm so disgusted with the added $150b to the existing $700b "crap-sandwich."
No committee, no hearings, just a rush job and an open portion of the bill that is completely empty to be filled at a later date at Congresses discretion(?).
$100b for the discretion of the President which will no doubt happen quickly.
It's October and I feel the pain.
And I read that the central banks are curtailing general ownership of gold and silver.
Now these Turkeys tell us that the 700 Billion will just not cut it! No kidding Sherlock!
Anyone else want to trust the EXPERTS?
The house has not even passed the bill and already the markets are going to the devil. Gee we might have at least had a one day rally just for show.
“U.S. Stocks Drop on Economic Data, Rising Bank Rates; GE Falls By Lynn Thomasson Oct. 2 (Bloomberg) -- U.S. stocks dropped for a second day as a jump in borrowing costs and reports showing a worsening economy spurred concern that the government's $700 billion bank bailout plan won't be enough to stimulate growth.”
This from a friend in Atlanta with strong banking connections: “Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
<< <i>This from a friend in Atlanta with strong banking connections: “Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
Yepper, this is a lot like Katrina and N.O. because once the cover was pulled off, we saw the urban core. If they don't pass this bill then the cover comes off and the fish float to the surface while the rats run for cover. If the bill passes then the game remains the same.
<< <i>This from a friend in Atlanta with strong banking connections: “Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
I sincerely hope I do not offend anyone or get booted from the forum ... but you must view this now! It is 10 minutes but to the heart of the bailout issue. 5 Stars!!!
I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000.
If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?
When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.
What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.
A Modern Day Weimar:
Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week.
For God's sake protect yourself.
Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening.
This is a modern day Weimar happening right before our eyes.
In the days of the Weimar Republic, lenders did not want to lend out of fear that they would be repaid in worthless Marks. Today banks are reluctant to lend to each other not out of fear of being repaid in worthless currency, but rather out of fear that the borrowing bank will fail, which of course would mean that the lending bank would not be repaid at all.
I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000.
If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?
When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.
What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.
A Modern Day Weimar:
Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week.
For God's sake protect yourself.
Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening.
This is a modern day Weimar happening right before our eyes.
Respectfully yours, Jim
roadrunner >>
Rather chilling. But at this point, who knows what to think???? But like he says, what do you have to lose? Won't hurt to keep some cash on hand....
barnum and bailey presents how to interpret a gold bugs email.
<< <i>I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000. >>
start out with the greed factor. play into what people who subscribe to the email/website want to hear. they want to hear gold is going up. be vague in your timelines. do not be too specific because that will allow people to point out your mistakes easily. being vague allows you to say what you wish down the road and allows flexibility.
<< <i>If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash? >>
Use arguments that try to make sense at first blush. Critical thinking of each statement will show you that comparing an apple to an orange is foolish. Small banks are known to be more conservative. They are well capitalized. Small banks do not take such large risks as the big banks do. They of course have problem assets but no where near as much as large banks. Smaller banks do not make multi-million and up dollar loans on a whim like large banks do. Smaller banks analyze loan applicants more closely then larger banks did two years ago. They advertise savings and checking accounts.. not loans for the most part. The rely on safer core deposit holdings. Since they are so small they have a vested interest in their business unlike the top suits at larger banks have an interest in their bonuses.
<< <i>When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street. >>
He said this is "it" and gold could not stay above 1000 for more then a few days/weeks. The writer is trying to cover past mistakes and probably wishes he did not use such specific language at that time. Yes it is trying times for the man on the street but if I had to pick a country to live in right now... what do you think it would be? USA USA
<< <i>What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account. >>
One moment he states it is unnescessary for the majority but on the next he says it is prudent to stick money under your mattress. What do you have to lose? Not much but he is basing this all on the fact that the majority of the banks in the US could fail including small ones which are so much more conservative then the banks failing today.
<< <i>A Modern Day Weimar: >>
Pick the nastiest event in the 20th century economy wise to spread fear.
<< <i>Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week. >>
It has gone done since last year by quite an amount. It will probably stay stable or trend down again compared to last month. A planetary financial crisis sounds so scary right? FEAR MY WORDS.
<< <i>For God's sake protect yourself. >>
FEAR
<< <i>Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening. >>
Spread FUD (fear && uncertainty && doubt!!!)
<< <i>This is a modern day Weimar happening right before our eyes. >>
Finish off with a sprinkle of fear and bake for 2 hours at 350 degrees.
<< <i> Rather chilling. But at this point, who knows what to think???? But like he says, what do you have to lose? Won't hurt to keep some cash on hand.... >>
The only commodity you want to hold until the credit crunch subsides is dollars.
“Where does he gets this Weimar bs. We couldn’t be further from inflation. No economy = no inflation.
Imp not saying gold couldn’t go up, but it wont be due to inflation.”
Dave, you and I are on he same page on this, at least for the time being. This economy feels very deflationary to me at this point.
What I am having a hard time figuring out is how, and when, do the inflated dollars get down to the public so that we can have to many dollars chasing to few goods???
All of these trillions of dollars being pumped into the system are targeted for BAD INVESTMENT relief. Someone please tell me how all these trillions get in the hands of the public in the form of excess paper dollar bills?
I can certainly see that over time as the government prints trillions to pay for S.C. and Medicare etc. that the trillions finally get in the hands of the public, but I do not see that happening for several years.
This is not to say that any of us should give up our long-term gold and silver physical positions as the market has shown us this week that physical PM’S may not always be available.
I am also not that concerned about a depression, as this is not the America of our grandfathers, as much of industry and the public are already on the dole.
What this looks like, and I think the PM markets are telling us this, is that we are in for one heck of a recessionary cycle lasting maybe a couple of years where CASH will not only be king, but Emperor.
Sinclair's reference to "this is it" is the state of the banking industry and financial economy. He is agreeing with Ben, Hank, Chris, and Nancy that we are in the deep darks right now. The pog and USDX can go up or down on the whims of Paulson and Bernanke....at least in the short term. They have nothing to do with "this is it." The dollar can rise to 0.85 in the short term, it still doesn't improve long term strength. JS is saying is that we are now against the wall and have been since March. He's been proven right once again. Whether or how the banking industry self-destructs is up to how the FED and Treasury intervene in the markets. More ill-advised intervention will lead to worse results. We're probably better off if they did nothing from here on in.
The inflationary part comes in now as the FED is powerless to do anything but toss TRILLIONs at the problem. Those TRILLIONs will end up in assets J6P doesn't own. The price of those assets will go up while most everything else goes down. Those dollars will NEVER make it to the public at large. Investors and speculators will spend them all long before that. TRILLIONs of investor dollars will be chasing too few goods that are climbing in value (hint: not growth stocks, mutual funds, bonds, residential real estate, currencies).
A good % of these trillions of dollars being pumped into the system "tageted" for BAD INVESTMENT relief, will be used for speculation and towards assets climbing in price. The public won't see a dime. It was never intended to get to them either. The minimum of $10-20 TRILLION in liquidity pumped out over the next 2-3 years will boost a number of asset classes (none of the ones listed above).
We've already been in a recessionary cycle since the end of 2006 if we utilized 1980 GDP methods (not the ones Clinton and Bush2 revised). Current GDP calculations assume a preposterous 1% annual inflation rate. How many here are lining up for TIPs priced at 1%? What will the USDX fall to once another $10-$20 TRILL show up in the money/liquidity troughs?
Cash may be king in a recession, but gold is the emperor.
Where does he gets this Weimar bs. We couldnt be further from inflation. No economy = no inflation.
Let's review. The Weimar hyperinflation was directly caused by the politicians increasing the supply of currency as a way to pump up the economy and the effects of too much currency chasing too few goods. The economy had been dragging for years due to the heavy burden of war reparations which created heavy disincentives to risk-taking in business, thus less production. The budding middle class and the tax base had been destroyed and families sold off their belongings. Sound vaguely familiar? A recipe' for disaster.
Now, take $700 Billion. Better yet, pick a number - any number. Create that many T-Bills and trade them for bogus paper in order to make Big Banking whole - heck, throw in a few hundred $Billion extra for profit. The dollars get cancelled out immediately and don't get into the system. That's not inflationary, but it does create a helluva liability. That's deflation in the near term, and deflation means that dollars are King, in the near term. The liability sets the stage for inflation later on.
On the other hand. Take that scenario a few steps further. Pump out another $10 Trillion over the next year or two. Make sure to insist that the world is coming to an end. If Big Banking only holds $8 Trillion in bogus paper, then the "extra" $2 Trillion makes it into the system and solves the "credit problem" (i.e. - credit problem = Big Banking holding gun to Congress's heads by refusing to lend to anyone until they get their way). Assuming that the $2 Trillion surplus is "enough", and that $2 Trillion makes in all the way into the credit cycle and rejeuvenates the economy, finally. That's inflationary.
However - the $10 Trillion creates not only a helluva liability, but one big gonzo liability and more! That liability REQUIRES a major inflation, but it's also a recipe' for a disastrous system default, because the added interest on the debt then requires more T-Bills to be sold. Not just a few extra T-bills, but a whole bunch of extra T-Bills. And since China, and Saudi are probably a bit leery of T-Bills by that time, they will be hard to sell because there will be so darned many of them. That's hyperinflationary, my friends.
But hey, that's just a guess on my part.
Q: Are You Printing Money? Bernanke: Not Literally
For all of the wringing of hands about the Fed selling more and more T-Bills, of late investors have been parking their cash in T-Bills in such desperation for security that the yields have been bid down close to zero. Think about that. The gov’t can borrow money at an interest rate near zero. The flight to the greenback has sent the Euro and Pound into a nose dive. Gold has sort of muddled along. No one has run to park their assets in the Euro, the Pound or any other currency.
So long as that $700 billion can be borrowed at a near zero financing cost, the burden on Federal revenues is tempered. But oddly, if investors believe that the bailout will work they will swing their dollars out of T-Bills and back into equities, which will cause interest rates on government debt to go back up. This would be better for growing the economy but will cost us more in interest to fund the bailout.
I think we're 15% into a serious deflationary/recessionary time period. Contrary to popular/media belief, there will be more unrest in the world if Obama/Biden get in. The world rowdies will be more confident/brazen. Gold and silver will trend downward for the foreseeable future, with occasional sharp spikes upward when scary world/economic events hit. The US population in general is presently lulled into a false sense of security - thinking all will wake up tomorrow and all problems will be solved/gone. After all, we've grown to expect prosperity and good times. Foreign wealth (and possibly US wealth) knows differently, and are socking away PM's. This holiday shopping season is going to be a disaster, now that people have been spooked by the "Wall St" collapse. I had to chuckle with the latest happy consumer confidence report - wait 'til the next one comes out. As a result of all this, in a few years, there are going to be two classes - struggling, and wealthy. Soon, unemployment is going to skyrocket, house values will continue to fall. The government is going to do their best to bail everyone out (after the current bank bailout, universal mortgage refinancing will come, then another round of economic stimulus checks, etc). Eventually, inflationary forces will overcome deflationary, with less supply and more demand forcing commodities (food, water, oil) higher along with PM's. I'd guess this will really kick in by late 2010.
Gold has sort of muddled along. No one has run to park their assets in the Euro, the Pound or any other currency.
Even with gold muddling along people are having trouble getting 1-oz gold coins without a substantial premium to spot (ie a paper vs. physical price disconnect). Many people want to be silver buyers but can't find 1-100 oz silver anywhere near melt.
So long as that $700 billion can be borrowed at a near zero financing cost, the burden on Federal revenues is tempered. But oddly, if investors believe that the bailout will work they will swing their dollars out of T-Bills and back into equities, which will cause interest rates on government debt to go back up. This would be better for growing the economy but will cost us more in interest to fund the bailout
I don't see any longer term swing of dollars back to equities other than a quick trap set by Wall Street. Americans have been bit hard and are going to think much harder about going back into stocks considering there is no solution to the economy's woes on the horizon. We're in the process of slowly heading back down to the 4,000-7,500 range, if that's what people want in their nest eggs, all power to them.
Comments
rears it's ugly head. The cause ? A rumor ... which turned out to be false.
It's a little off topic, but it relates well to the market and people running scared.
I dont know if this plan would even work, but I am pretty sure that the total economic cost will be much greater if we just let the chips lay where they fall. As we have discussed in this thread before, this current society is not prepared for a MASSIVE economic slowdown. People have riots and some even die when thier favorite football or basketball team loses. What do you think would happen when the grocery stores are empty? When their employer gives them IOUs instead of a paycheck?
The general opinion that I hear from J6P is any downturn would be short and sweet. I believe they couldnt be further than the truth. How will entitlement programs be paid when 1 out 7 people is unemployed? How much would it cost to provide unemployment benefits to 25 million people? Who will make up the increased burden of taxes? Surely not Wall Street or any large corporation that needs to access the debt market. Corporate profits will be greatly reduced leading to lower taxes being paid into govt coffers.
Most people see this as an attempt to save the "fat cats" on Wall Street, I see it as an attempt to keep us from reaching 15% unemployment (or more) and the subsequent ramifications.
Personally, I say let the chips fall as I am fully prepared thanks to a decent upbringing, unconventional thinking and the information and ideas contained in this thread. I also know that 95% of America is not prepared, but, and to be honest, neither I nor probably you, are prepared for a Civil War.
Edited to make last sentence make a little more sense.
Knowledge is the enemy of fear
Eliminating "mark to market" accounting rules isn't the way to make the system legitimate. They are headed back in exactly the wrong direction once again. Bogus finance is going to bring down the "funding mechanisms for business and municipalities" whether or not the bailout occurs. If that's the case, I'd rather see the fiasco based on reality than on these "Alice-in-Wonderland" games that reward the fat cats.
I knew it would happen.
<< <i>
Personally, I say let the chips fall as I am fully prepared thanks to a decent upbringing, unconventional thinking and the information and ideas contained in this thread. I also know that 95% of America is not prepared, but, and to be honest, I and probably not you, are prepared for a Civil War. >>
i agree but i'd flee to Canada or OZ, first
I certainly can see all your points I just do not see this happing as fast as you seem to predict?
First this is not the U.S.A. of our Grandfathers. Huge portions of the economy are already getting checks in the mail from the government and that will not stop overnight.
Many of the S&P 500 are buying back stock, that might have to stop, so they can use their own capitol. Hey, how about Microsoft making loans to tech companies, they have an extra 40 Billion.
Government safety nets are already in place for retired folks, poor folks, farmers, defense, car companies, medical, and many other industries. All of these will continue to get printed fiat money.
In listening to cspan today as Senators had their hearings there were two camps. One professing the end of the working class with vague explanations of what might happen with no facts to back this up, and another group telling how all these slick depravities guys are going to get billions for worthless paper. Today was all Dems.
One other comment from the floor I thought was interesting, was that all of the Senators that testified, and this excluded anyone from NY, said none of their banks were in trouble and had none of the toxic waste?
"How will entitlement programs be paid when 1 out 7 people is unemployed?"
"...neither I nor probably you, are prepared for a Civil War. "
There's really no voodoo magic here, the infrastructure needs to be maintained, plain and simple and that is not an option. Many subsidies are about to disappear for the simple reason that there is no money to send to the programs.
There is going to be a considerable amount of unrest and supplies and the distribution routes and stores that furnish them will be pressured to maintain a broad range of products, particularly those in the produce markets. Excellent opportunity to consider moving away from the urban centers for a few years because once this stuff starts showing up in the papers, your options are going to be more limited regardless of your funding. Have a plan B, seriously.
In my thinking, this is going to be a rough patch that we will get over but it is absolutely necessary. We all know that stupid is as stupid does and when you keep doing the same thing and expecting a different result then that's what stupid does. You can not have a new order for our economy if we just keep trying to perpetuate the existing system. We can not keep funding the excess of constant expansion and wild west mentality at the top and expect things to change. There are only three major banks now, as we anticipated and that's probably good because they will need to be large and powerful to compete in the world economy; there are a lot of international, big, vicious players out there right now in the banking industry so big is good. It is difficult to imagine how government and banking can be very distant from each other, they must work in a cooperative way if we are going to be able to compete in the international markets. Now, the surviving banks using the middle class consumer as their food source...that simply has to stop, although they have just about wiped out the native population.
The lobbyists, the ex congressmen that peddle influence from the private sector to their congressional office holders, the endless low yield programs we pay for...that has got to stop and it will simply because of lack of funding. I think folk are focused in on this situation and it has been exposed for the excessive, symbiotic relationship that exist between lobbyists, excongressmen, and program managers that we suffer. There simply has to be much more public oversight here; not the gotcha journalism oversights that we see, but good public oversight that can stand the light of day.
If we want to evolve, we need to educate everyone...all the way to the last kid at the bottom, everybody had to be educated and it's not their choice, they must be educated in math and reading and it must be in english. If we will spend our money on that, then the rest will work itself out. We have to take care of our seniors and the better we take care of them, the less it will cost and the better it will be for everyone involved. We have to have a healthy society and that is a good place to spend money so that we save multiples of what we currently spend, it must be done. All programs should have a 5 year sunset provision in their funding, a review of their effectiveness as compared to what was intended in the funding bill, that will force the programs to perform or be unfunded or at the very least will allow new provisions to the funding that should be able to correct any underperformance. These things will come to pass and it will take 10-12 years to get a kid from kindergarten to highschool so call it a 10 year plan. The same 10 year plan that we must begin to achieve energy independence.
So, to my thinking, this is going to take about 10 years to redirect our economic system. In the meantime, gold is good, cash is king, have a plan B.
After the $700B is gone in a matter of days or weeks, the deleveraging of short term derivatives continues unabated. This is a case of $700B being woefully too small to handle the unwinding of $1000 TRILLION. It is mathematically impossible. The financial asteroid will still be hurtling directly at us regardless of that $700B. This was like tossing $50B at the Iraq war and saying that would be enough to cover everything. In reality that amount will end up in the trillions eventually. In the end, only time will cleanse the financial system as we don't have enough money to fix it.
The FED and Paulson know what the ball park number is for a full bail out. Let them come clean and ask for all they will need now. Apparently at least 40% of congress understands that.
roadrunner
If the banks cancelled credit lines, I think the entire economy would come to a screaching halt in about 14 days. How long can petty cash operate a business?
Most companies that have announced buybacks in the last few years have been done with borrowed money. This would cease immediately. Personally I have always considered buybacks a complete waste of money as they do nothing to grow a business and the impact on stock prices is marginal at best.
Poor folks and retired folks living entirely off the govt really dont contribute to the economy anyway.
mhammerman, I like your timeframe. This is going to have to be a global restructuring.
Knowledge is the enemy of fear
i wouldn't bet against you, fella
<< <i>Time to send millions of emails, calls, etc. to these Senators
Senate May Try to Revive Financial-Rescue Legislation (Update2)
By Alison Fitzgerald and Matthew Benjamin
Sept. 30 (Bloomberg) -- The U.S. Senate will try to salvage a $700 billion financial-rescue package after the measure was defeated in the House of Representatives. The lawmakers won't have a lot of room to negotiate. >>
This is what you get when you try to email:
"Heavy Load Warning: Because this site is getting pounded by people attempting to contact their members of Congress about the Wall Street bailout (over 100 people a minute!), the response time may be a little longer than normal. If you can't get this site to work, try http://www.congressmerge.com/ for the same information on a different site. "
You can Google their name for a local phone number.
Chance favors the prepared mind.
Absolutely.
That number comes from the International Bank of Settlements which is the reporting bank for all the Central Banks of the world. The odd thing was that up to sometime in early 2008 they were reporting the figure at around $650 TRILL. Then on the next update they jacked it up to $1.1 QUAD. Did they find another $450 TRILL sitting under a rock or something? I don't know. It's not all bad though. Only about half of that value is Over-The-Counter stuff (ie illiquid, unsubstantiated, unbacked, unregulated, non-transparent derivatives). But either amount can wipe out the financial system 10X over.
Hey, on 2nd thought I'm for the bailout!
I'll give Paulson his $700B but only if there are 2 single line items in the bill. That is, wipe out all the other existing conditions in the bill as it stands (ie no marked to myth accounting, etc.). The only string is that a board of 7 "experts" outside the main banks will oversee the purchases by Paulson. Those guys should include Ron Paul, Jim Bunning and 5 other decent Americans who are known to do the right thing when it comes to the nation's finances. Perot and Buffet come to mind but it's hard to know who is not bought and paid for already. 2 of them should be well-versed derivatives. The 2nd condition is that within 6 months a sweeping reform bill for OTC derivatives, lending, etc. has to be implemented by Congress. There has to be an end to bank leverage beyond 10:1 and no further OTC derivatives along with additional regulation of the "legal" ones. Another regulatory body needs to be found for the SEC and similar bodies who do little but rubber stamp the Treasury's wishes.
Giving the $700B away is nothing...and it will keep the sheeple happy as well as most of Congress. We'd spend that $700B (actually only $200-$250B initially) in a week with or without the bill. It's the damaging conditions in the bill that will ultimately kill us and allow the game to go on.
roarunner
Hummm, sounds like a good time to start that garden.
Regards, John
1947-P & D; 1948-D; 1949-P & S; 1950-D & S; and 1952-S.
Any help locating any of these OBW rolls would be gratefully appreciated!
....The BAILOUT of the BANKING system MUST occur. It is INSOLVENT and cut off from the short-term funding required to fund itself. But the devil is in the details. The CREDIT markets are in CARDIAC arrest as we speak, as no one trusts US and G7 financial and banking institutions. CAPITAL IS NOT AVAILBLE to them. Their ONLY source of capital and credit is their RESPECTIVE governments and central banks. The government DID not produce it. It is a fake bailout!!!
LIBOR (London Inter-bank Rate for Loans Between Banks) is at its highest levels EVER. Loans longer than 1 or 2 days are UNAVAILABLE. Three-month, yearly and multi-year lending is a dream (keep in mind these financial and banking entities have OVER 1 TRILLION dollars of MATURING obligations between now and next summer which either must be paid off or ROLLED). They HAVE NO hope to do so. Last week $6 billion of Muni debt issues were anticipated. Only $100 million was actually placed and the rest was POSTPONED, but CANCELED may be a better word for it.
MANY times I have urged readers to IGNORE the headlines and look at public servants’ actions. This is one of those times and the word that comes to mind is: DESPICABLE. Socialism for the rich, debt slavery for the poor.
These short term credit items cannot be rolled over and their failure will continue to force the unwinding of the $1 QUAD in derivatives. There is no alternative at the moment. This is why the proposed $700B is a merely a droplet in the frying pan and has no hope of unfreezing the credit markets. The FED has already spent $1.8 TRILLION since the Bear Stearns failure. Did any of that need congressional approval.
And finally:
NOTHING being considered fixes the FUNDEMENTAL flaw that was outlined in Roach Motels. The bottom line of Roach Motels is this — they will NEVER be able to print enough money fast enough to cover the losses as these OVER-the-COUNTER investment products FALL to (ultimately) a price of ZERO, as they have already begun to do. Nobody will buy or hold an investment if it is IMPOSSIBLE to know its value or sell them to control risk, so no one will buy them, and everyone who HOLDS one WANTS OUT NOW. Now the US government wants to be the bidder for these THINGS, these MONSTERS. Do you think you can expect them to pay what they are worth, or will they pay what their biggest campaign supporters WISH them to be? The only solution is to create an exchange for them AS QUICKLY as possible to promote PRICE discovery. Nothing less will FIX the problems. (READ ROACH MOTELS)
On top of that problem we have the DEVIL’s spawn of NAKED credit default swaps which must be OUTLAWED at the earliest possible time. A naked credit default swap (CDS) is a BET on the ultimate success or failure of a bond or borrowing, such as credit cards, car loans, mortgage, commercial lending, municipal obligations, etc. For the people who actually OWN those lending obligations, credit default swaps are a legitimate hedge, and as long as the counterparty that sold the swap has the ability to PAY OFF then it should be allowed. However, as PRINTED money has mushroomed around the world, NAKED credit default swaps have become a casino unparalleled in history. These issues were barely MENTIONED in the congressional hearings on the bailouts.
You can read the rest of the article on financialsense.com below. There is some great stuff here on credit market status. It was fascinating to read that Buffet has $40 BILL in equity puts on the stock market and $8.8 BILL in CDO's. Guess that explains his eagerness for the bailout to occur and his $5B-10B Bank stake. A good read. Other worthwhile "dirt" in the article as well such as seeing the obscene leverage Barclay's is carrying of toxic debt and called "Lehman" on steroids by Andros. That would make me want to run out and buy even more shares of SLV! Of other note today, Goldman finally covered their net short position on the TOCOM after several years. In March of 2006 they had a short position of 52,000 contracts, today...essentially zero. Wonder what they think the next move is going to be? In fact most of the bigger shorts have all reduced their positions markedly from earlier this year. Seems they know something. Even though GS lost close to $200MILL on their gold shorts the past few years, they made a lot more in the currency and stock markets by zinging gold the past few years.
Crack Up Boom - part IX - Ty Andros
roadrunner
The bailout must go through look at these stories!!
Entrepreneurs struggle to hang on across the USA
If there is a rock and a hard place in the U.S. economy, small businesses are there.
Right in that little crevice where money is tight — and getting tighter. Right where weekly payrolls can be financed only by personal credit cards or home equity loans. And right where "income" for the boss is taking five bucks from the till and paying for a sandwich that day for lunch.
Oct. 1 (Bloomberg)
Duke has $650 million in bonds coming due this year, $442 million scheduled to mature next year and $500 million in 2010, according to data compiled by Bloomberg. Chief Financial Officer David Hauser said Duke is drawing from its credit agreement because it wasn't clear whether it would be able to secure more than $1 billion in new financing this year as planned.
RC2, the maker of Learning Curve products, sank the most in more than a year in Nasdaq trading after canceling its acquisition of Publications International Ltd.'s children's publishing unit.
Spansion, the memory-chipmaker that hasn't reported a profit since it was spun off from Advanced Micro Devices Inc. in 2005, may need to raise capital to stay in business, according to Cowen & Co. LLC analyst Daniel Berenbaum. Spansion had $240 million cash at the end of the second quarter, down 28 percent from three months earlier. It has $2.4 billion in liabilities, according to Bloomberg data.
State, Local Tax Revenue Stagnates
Government officials already have begun clamping down on costs. For example, when the Federation of Tax Administrators recently discussed plans for future meetings, several state officials replied their states had just imposed travel-spending freezes.
Despite growing concern about the problem, it's unlikely that many states will enact significant, broad-based tax increases because of fears that voters would react angrily.
not too surprising, but it won't keep people from moving their accnts to the big 4
a few i know have exited from very solvent smaller banks & s&l's becase they are just freaked out.
You can read the rest of the article on financialsense.com below. There is some great stuff here on credit market status. It was fascinating to read that Buffet has $40 BILL in equity puts on the stock market and $8.8 BILL in CDO's. Guess that explains his eagerness for the bailout to occur and his $5B-10B Bank stake. A good read. Other worthwhile "dirt" in the article as well such as seeing the obscene leverage Barclay's is carrying of toxic debt and called "Lehman" on steroids by Andros. That would make me want to run out and buy even more shares of SLV! Of other note today, Goldman finally covered their net short position on the TOCOM after several years. In March of 2006 they had a short position of 52,000 contracts, today...essentially zero. Wonder what they think the next move is going to be? In fact most of the bigger shorts have all reduced their positions markedly from earlier this year. Seems they know something. Even though GS lost close to $200MILL on their gold shorts the past few years, they made a lot more in the currency and stock markets by zinging gold the past few years.
Crack Up Boom - part IX - Ty Andros
roadrunner >>
That was a good read....8,000 Dow and 900 S&P if this all unravels. I think that is very optimistic.
Ren
feeble minded like me want to know!
<< <i>ban on short selling tomoorrow.....what will be the impact?
feeble minded like me want to know!
The short selling ban did nothing to keep the market from dropping 400 points in 5 minutes on Monday. Nor did it keep NCC from falling from 6 to 1, or AIG from dropping from 5.60 to 2.60. Up until a few days ago you could not short the Chinese market so they dropped over 60% in a year. Shorting also does not cause PM's to drop. All you need is less buyers than sellers on any given day and you will get a price decline.
Do not believe the media BS that shorts or naked short selling or the lifting of the uptick rule has caused the market to drop.
Knowledge is the enemy of fear
He had better be careful; I thought he said that all these derivates were financial weapons of mass destruction? He is sure invested in a bunch of these companies loaded with this junk.
I guess this is a case of do what I say, not what I do?
GE Raises $15 Billion; Buffett Gets Preferred Stake (Update2)
By Rachel Layne and Erik Holm
Oct. 1 (Bloomberg) -- General Electric Co. plans to offer $12 billion in common shares and billionaire investor Warren Buffett's Berkshire Hathaway Inc. will buy $3 billion in preferred shares as GE bolsters its cash cushion amid volatile markets.
Buffett's stake will pay an annual 10 percent dividend and is callable after three years at a 10 percent premium.
Wealthy investors drain supply of gold
By Javier Blas in Kyoto
Published: October 1 2008 03:00 | Last updated: October 1 2008 03:00
Investors in gold are demanding "unprecedented" physical levels of bullion bars and coins and moving them into their own vaults as fears deepen about the health of the global financial system.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
"There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career," said Jeremy Charles, chairman of the LBMA. "The gold refineries cannot produce enough bars."
Johan Botha, a spokesman for the Rand Refinery in South Africa which manufactures the Krugerrand, the world's most popular gold coin, said the plant was now running at full capacity seven days a week. "Even so, now and then we have shortages," he said.
The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand.
Last week, the US mint suspended the sale of its American Buffalo coin after it ran out of stocks.
But I do believe it when actual traders and investors tell me so.
Naked shorts can sell anything with no risk or capital. Once the market is stampeding a bit, the automatic sell stops start getting hit, etc, etc , etc. It is an effective tactic.
roadrunner
<< <i>Speaking of Buffet, old Warren is really socking it to these big broke companies!!
He had better be careful; I thought he said that all these derivates were financial weapons of mass destruction? He is sure invested in a bunch of these companies loaded with this junk.
I guess this is a case of do what I say, not what I do? >>
Yeah, but Warren's getting deals that you or I couldn't get. 10% Preferreds not callable for 3 or 5 years (I forget which) and 5 year warrants to buy more common at a low price? The rich do indeed get richer.
My icon IS my coin. It is a gem 1949 FBL Franklin.
<< <i> Do not believe the media BS that shorts or naked short selling or the lifting of the uptick rule has caused the market to drop.
But I do believe it when actual traders and investors tell me so.
Naked shorts can sell anything with no risk or capital. Once the market is stampeding a bit, the automatic sell stops start getting hit, etc, etc , etc. It is an effective tactic.
roadrunner >>
And this lasts for about a day. I am a trader and investor, so believe me.
Knowledge is the enemy of fear
I'm so disgusted with the added $150b to the existing $700b "crap-sandwich."
No committee, no hearings, just a rush job and an open portion of the bill that is completely empty to be filled at a later date at Congresses discretion(?).
$100b for the discretion of the President which will no doubt happen quickly.
It's October and I feel the pain.
And I read that the central banks are curtailing general ownership of gold and silver.
Ren
No kidding Sherlock!
Anyone else want to trust the EXPERTS?
The house has not even passed the bill and already the markets are going to the devil.
Gee we might have at least had a one day rally just for show.
“U.S. Stocks Drop on Economic Data, Rising Bank Rates; GE Falls
By Lynn Thomasson
Oct. 2 (Bloomberg) -- U.S. stocks dropped for a second day as a jump in borrowing costs and reports showing a worsening economy spurred concern that the government's $700 billion bank bailout plan won't be enough to stimulate growth.”
It will be much easier and less painful just to drop the market 20% in a day, rather than bleed it for 3% everyday for the next few weeks.
Just kill it and put us out of our misery.
Let the have-nots battle the haves.
Knowledge is the enemy of fear
Rumors of a week-long Bank Holiday (BofA)
<< <i>Now these Turkeys tell us that the 700 Billion will just not cut it! No kidding Sherlock! >>
I wonder if Congress really understands the magnitude of the problem. $700 billion won't fix jack sh*t.
<< <i>This from a friend in Atlanta with strong banking connections: “Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
Rumors of a week-long Bank Holiday (BofA) >>
i guess that means get the gold and other out of the SDB as well, eh?
how credible is this???
<< <i> how credible is this??? >>
Jim Willie sells newsletters for a living. Take what those guys write with a grain of salt.
<< <i>This from a friend in Atlanta with strong banking connections: “Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”
Rumors of a week-long Bank Holiday (BofA) >>
ah internet rumors.
i work at an ISP so i read a lot of stuff online. internet rumors are tailored for each geographical area and feed on fear.
for example, the philipines has good ones about earthquake predictions on a certain date.
photoshopped pictures of a man eating a baby in japan.
the US has ones like this.. about current news and feeding on fear
with sensational headlines.
you will find that quote spreading like wild fire on the internet and
i find it HILARIOUS anyone gives it an ounce of credence.
Chance favors the prepared mind.
Dear CIGAs,
I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000.
If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?
When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.
What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.
A Modern Day Weimar:
Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week.
For God's sake protect yourself.
Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening.
This is a modern day Weimar happening right before our eyes.
Respectfully yours,
Jim
roadrunner
In the days of the Weimar Republic, lenders did not want to lend out of fear that they would be repaid in worthless Marks. Today banks are reluctant to lend to each other not out of fear of being repaid in worthless currency, but rather out of fear that the borrowing bank will fail, which of course would mean that the lending bank would not be repaid at all.
CG
<< <i>From Jim Sinclair:
Dear CIGAs,
I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000.
If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash?
When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street.
What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account.
A Modern Day Weimar:
Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week.
For God's sake protect yourself.
Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening.
This is a modern day Weimar happening right before our eyes.
Respectfully yours,
Jim
roadrunner >>
Rather chilling. But at this point, who knows what to think???? But like he says, what do you have to lose? Won't hurt to keep some cash on hand....
Im not saying gold couldnt go up, but it wont be due to inflation.
Knowledge is the enemy of fear
<< <i>I have no doubt that $1650 will come. My concern is not that it will not happen, but that I am much too conservative in my long-term price objective since 2000. >>
start out with the greed factor. play into what people who subscribe
to the email/website want to hear. they want to hear gold is going
up. be vague in your timelines. do not be too specific because that
will allow people to point out your mistakes easily. being vague
allows you to say what you wish down the road and allows flexibility.
<< <i>If major banks can be torn apart how can we have faith in the small local institutions that hold most of your ready cash? >>
Use arguments that try to make sense at first blush. Critical thinking
of each statement will show you that comparing an apple to an orange
is foolish. Small banks are known to be more conservative. They are
well capitalized. Small banks do not take such large risks as the big
banks do. They of course have problem assets but no where near
as much as large banks. Smaller banks do not make multi-million
and up dollar loans on a whim like large banks do. Smaller banks
analyze loan applicants more closely then larger banks did two years
ago. They advertise savings and checking accounts.. not loans for the
most part. The rely on safer core deposit holdings. Since they are so
small they have a vested interest in their business unlike the top
suits at larger banks have an interest in their bonuses.
<< <i>When I said “This is IT,” it is not something that I take lightly. Never in 49 years in finance have I seen a set of circumstances so challenging to the man in the street. >>
He said this is "it" and gold could not stay above 1000 for more then
a few days/weeks. The writer is trying to cover past mistakes and
probably wishes he did not use such specific language at that time.
Yes it is trying times for the man on the street but if I had to pick a
country to live in right now... what do you think it would be? USA USA
<< <i>What I am getting at is a simple question. Are you prepared? You have heard us talk repeatedly on removing financial intermediaries between you and your assets, but the time has come for us to recommend going one step further:
****Hold enough cash at your household to last you a month or two. It may be largely unnecessary for the majority, but what do you have to lose? If your bank should fail this will save you a lot of grief in the short term. If they do not, you still have all your cash that can easily be deposited back into your account. >>
One moment he states it is unnescessary for the majority but on the
next he says it is prudent to stick money under your mattress. What
do you have to lose? Not much but he is basing this all on the fact
that the majority of the banks in the US could fail including small ones
which are so much more conservative then the banks failing today.
<< <i>A Modern Day Weimar: >>
Pick the nastiest event in the 20th century economy wise to spread
fear.
<< <i>Unless the LIBOR rate drops sharply we are facing a planetary financial crisis next week. >>
It has gone done since last year by quite an amount. It will probably
stay stable or trend down again compared to last month. A planetary
financial crisis sounds so scary right? FEAR MY WORDS.
<< <i>For God's sake protect yourself. >>
FEAR
<< <i>Gold and gold related items will be the only true storehouses of wealth. The bailout bill is powerless to reverse what is now happening. >>
Spread FUD (fear && uncertainty && doubt!!!)
<< <i>This is a modern day Weimar happening right before our eyes. >>
Finish off with a sprinkle of fear and bake for 2 hours at 350 degrees.
<< <i>Respectfully yours,
Jim >>
go suck an egg Jim. I will think for myself.
<< <i>
Rather chilling. But at this point, who knows what to think???? But like he says, what do you have to lose? Won't hurt to keep some cash on hand.... >>
The only commodity you want to hold until the credit crunch subsides is dollars.
“Where does he gets this Weimar bs. We couldn’t be further from inflation. No economy = no inflation.
Imp not saying gold couldn’t go up, but it wont be due to inflation.”
Dave,
you and I are on he same page on this, at least for the time being. This economy feels very deflationary to me at this point.
What I am having a hard time figuring out is how, and when, do the inflated dollars get down to the public so that we can have to many dollars chasing to few goods???
All of these trillions of dollars being pumped into the system are targeted for BAD INVESTMENT relief.
Someone please tell me how all these trillions get in the hands of the public in the form of excess paper dollar bills?
I can certainly see that over time as the government prints trillions to pay for S.C. and Medicare etc. that the trillions finally get in the hands of the public, but I do not see that happening for several years.
This is not to say that any of us should give up our long-term gold and silver physical positions as the market has shown us this week that physical PM’S may not always be available.
I am also not that concerned about a depression, as this is not the America of our grandfathers, as much of industry and the public are already on the dole.
What this looks like, and I think the PM markets are telling us this, is that we are in for one heck of a recessionary cycle lasting maybe a couple of years where CASH will not only be king, but Emperor.
These are supposed brick house companies. the pe on current earnings is only a little over 3.
The fundamentals do not support this bloodletting. This isssss getting a little worrisome
The inflationary part comes in now as the FED is powerless to do anything but toss TRILLIONs at the problem. Those TRILLIONs will end up in assets J6P doesn't own. The price of those assets will go up while most everything else goes down. Those dollars will NEVER make it to the public at large. Investors and speculators will spend them all long before that. TRILLIONs of investor dollars will be chasing too few goods that are climbing in value (hint: not growth stocks, mutual funds, bonds, residential real estate, currencies).
A good % of these trillions of dollars being pumped into the system "tageted" for BAD INVESTMENT relief, will be used for speculation and towards assets climbing in price. The public won't see a dime. It was never intended to get to them either. The minimum of $10-20 TRILLION in liquidity pumped out over the next 2-3 years will boost a number of asset classes (none of the ones listed above).
We've already been in a recessionary cycle since the end of 2006 if we utilized 1980 GDP methods (not the ones Clinton and Bush2 revised). Current GDP calculations assume a preposterous 1% annual inflation rate. How many here are lining up for TIPs priced at 1%? What will the USDX fall to once another $10-$20 TRILL show up in the money/liquidity troughs?
Cash may be king in a recession, but gold is the emperor.
Quietly waiting behind the economic slowdown is inflation
The more people get disillusioned with the dollar, the more they will turn to the [resource sector].” ....Cliff Droke.
And this guy doesn't give any free plugs for free to the commodity sector. Decidedly pro-stocks most of the time.
roadrunner
Let's review. The Weimar hyperinflation was directly caused by the politicians increasing the supply of currency as a way to pump up the economy and the effects of too much currency chasing too few goods. The economy had been dragging for years due to the heavy burden of war reparations which created heavy disincentives to risk-taking in business, thus less production. The budding middle class and the tax base had been destroyed and families sold off their belongings. Sound vaguely familiar? A recipe' for disaster.
Now, take $700 Billion. Better yet, pick a number - any number. Create that many T-Bills and trade them for bogus paper in order to make Big Banking whole - heck, throw in a few hundred $Billion extra for profit. The dollars get cancelled out immediately and don't get into the system. That's not inflationary, but it does create a helluva liability. That's deflation in the near term, and deflation means that dollars are King, in the near term. The liability sets the stage for inflation later on.
On the other hand. Take that scenario a few steps further. Pump out another $10 Trillion over the next year or two. Make sure to insist that the world is coming to an end. If Big Banking only holds $8 Trillion in bogus paper, then the "extra" $2 Trillion makes it into the system and solves the "credit problem" (i.e. - credit problem = Big Banking holding gun to Congress's heads by refusing to lend to anyone until they get their way). Assuming that the $2 Trillion surplus is "enough", and that $2 Trillion makes in all the way into the credit cycle and rejeuvenates the economy, finally. That's inflationary.
However - the $10 Trillion creates not only a helluva liability, but one big gonzo liability and more! That liability REQUIRES a major inflation, but it's also a recipe' for a disastrous system default, because the added interest on the debt then requires more T-Bills to be sold. Not just a few extra T-bills, but a whole bunch of extra T-Bills. And since China, and Saudi are probably a bit leery of T-Bills by that time, they will be hard to sell because there will be so darned many of them. That's hyperinflationary, my friends.
But hey, that's just a guess on my part.
I knew it would happen.
So long as that $700 billion can be borrowed at a near zero financing cost, the burden on Federal revenues is tempered. But oddly, if investors believe that the bailout will work they will swing their dollars out of T-Bills and back into equities, which will cause interest rates on government debt to go back up. This would be better for growing the economy but will cost us more in interest to fund the bailout.
CG
I think we're 15% into a serious deflationary/recessionary time period. Contrary to popular/media belief, there will be more unrest in the world if Obama/Biden get in. The world rowdies will be more confident/brazen. Gold and silver will trend downward for the foreseeable future, with occasional sharp spikes upward when scary world/economic events hit. The US population in general is presently lulled into a false sense of security - thinking all will wake up tomorrow and all problems will be solved/gone. After all, we've grown to expect prosperity and good times. Foreign wealth (and possibly US wealth) knows differently, and are socking away PM's. This holiday shopping season is going to be a disaster, now that people have been spooked by the "Wall St" collapse. I had to chuckle with the latest happy consumer confidence report - wait 'til the next one comes out. As a result of all this, in a few years, there are going to be two classes - struggling, and wealthy. Soon, unemployment is going to skyrocket, house values will continue to fall. The government is going to do their best to bail everyone out (after the current bank bailout, universal mortgage refinancing will come, then another round of economic stimulus checks, etc). Eventually, inflationary forces will overcome deflationary, with less supply and more demand forcing commodities (food, water, oil) higher along with PM's. I'd guess this will really kick in by late 2010.
Even with gold muddling along people are having trouble getting 1-oz gold coins without a substantial premium to spot (ie a paper vs. physical price disconnect). Many people want to be silver buyers but can't find 1-100 oz silver anywhere near melt.
So long as that $700 billion can be borrowed at a near zero financing cost, the burden on Federal revenues is tempered. But oddly, if investors believe that the bailout will work they will swing their dollars out of T-Bills and back into equities, which will cause interest rates on government debt to go back up. This would be better for growing the economy but will cost us more in interest to fund the bailout
I don't see any longer term swing of dollars back to equities other than a quick trap set by Wall Street. Americans have been bit hard and are going to think much harder about going back into stocks considering there is no solution to the economy's woes on the horizon. We're in the process of slowly heading back down to the 4,000-7,500 range, if that's what people want in their nest eggs, all power to them.
roadrunner