US Slump Spreading Around the Globe
Yahoo to Cut 1,000 Jobs, Warns on Growth
Ritholz: Q4 GDP: El Stinko!
Fleck: No Logic in Market Madness
Wednesday, January 30, 2008
Tuesday, January 29, 2008
You Walk Away!
There's a new business in town and it specializes in Foreclosures!
This company aims to profit from the millions of Americans that will be faced with the choice of continuing to pay a mortgage that is higher than the market value of their house or "Walking Away". Encouraging this type of logical, business-like behaviour will only make things worse in the housing market but it should be expected in the coming months/years. U.S. Housing inventories are about to go way up!
Monday, January 28, 2008
Is The Worst Over For Stocks?
From the man who predicted the 1987 crash...Is the worst over for stocks? Robert Prechter's short answer (above) is "NO." His long answer is compelling, extremely interesting and includes insights into what you should be doing NOW to prepare for what's still to come.
60 Minutes - House of Cards
Steve Kroft: "It sounds complicated but it's really very simple. Banks lent hundreds of billions of dollars to homebuyers that can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities and sold them round the world as safe investments. If it sounds a little bit like a shell game or a ponzi scheme, in some ways it was".
It took a long time for the mainstream media to clue in but they are all finally "getting it". Now that the bursting bubble has entered mainstream consciousness, the problems will only get worse as consumer psychology takes over and emotions rule the day.
Click here to play video
Friday, January 25, 2008
Rick Santelli Takes Down Jim Cramer
Sorry Jim. It's impossible to lie about your recent "bearish" position on the market, now that the internet has become a mainstream "truth-seeking" tool. This excellent compilation of clips from your show, clearly shows where you stood just before the wheels fell off the wagon. Booyah!
Wednesday, January 23, 2008
The Worst Market Crisis In 60 Years
George Soros weighs in on what got us into this mess and how it may ultimately unwind:
The current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years. Boom-bust processes usually revolve around credit and always involve a bias or misconception.
This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case.
Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks’ commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties. The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war.
Credit expansion must now be followed by a period of contraction, because some of the new credit instruments and practices are unsound and unsustainable. The ability of the financial authorities to stimulate the economy is constrained by the unwillingness of the rest of the world to accumulate additional dollar reserves. Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so. With oil, food and other commodities firm, and the renminbi appreciating somewhat faster, the Fed also has to worry about inflation. If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.
Dean Baker Throws Alan Greenspan Under The Bus!
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, has been critical of Alan Greenspan and his policies for years. He has been a strong voice and critic during the housing bubble's ridiculous run and he has every right to speak out now that the bubble has burst and the real pain has just begun.
Hopefully, in the future, sane and credible voices, like his, will be at the forefront of economic discussions and the days of having to listen to hacks like Alan Greenspan, Ben Bernanke, David Lereah, and Nicholas Retsinas...etc will only be a painful memory.
The Housing Bubble Explodes: Fed Rushes for Fire Extinguisher
Hopefully, in the future, sane and credible voices, like his, will be at the forefront of economic discussions and the days of having to listen to hacks like Alan Greenspan, Ben Bernanke, David Lereah, and Nicholas Retsinas...etc will only be a painful memory.
The Housing Bubble Explodes: Fed Rushes for Fire Extinguisher
It was easy for any competent macroeconomist to recognize that the housing market was in the midst of an unsustainable bubble. By its peak in 2006, the run-up had generated more than $8 trillion in housing bubble wealth. It was inevitable that this bubble would burst and wreak the sort of havoc that we are now seeing.
The housing bubble was allowed to expand to such dangerous proportions because the Fed was not run by a competent macroeconomist. It was run by Alan Greenspan, who used to be the greatest central banker of all time. Greenspan did nothing to stem the growth of the bubble. In fact, he encouraged its growth by recommending that people take out adjustable rate mortgages. He also dismissed the views of the competent macroeconomists who tried to warn of the bubble, assuring the markets that everything was under control.
Tuesday, January 22, 2008
Monday, January 21, 2008
An Ugly, Ugly Day!
There were huge losses on global stock markets last night/today. The U.S. Markets were closed so tomorrow will be very interesting. There are many perspectives to look at today. Here are my favourites:
Ritholz: So Much for the Decoupling
Mish: Global Bloodbath
AP: Stock Markets Plunge Worldwide
Ritholz: So Much for the Decoupling
Mish: Global Bloodbath
AP: Stock Markets Plunge Worldwide
My favourite picture of the day is this gem showing reactions at the Bombay Stock Exchange to the crashing market. It's like neanderthal man's reaction to touching fire for the first time. "What, you mean if I touch it, I can get burned". In this case, "What, you mean stock markets can go down too". Call my broker!!! Sell! Sell!
Sunday, January 20, 2008
Cramer's Plan to Save The Banks!
The always controversial and entertaining, Jim Cramer, lays out his plan to save the banks and get the market moving up again:
Jim Cramer's Plan
Jim Cramer's Plan
Saturday, January 19, 2008
Thursday, January 17, 2008
Monday, January 14, 2008
The Fed Scolded by a 92-Year-Old Legend!
Anna Schwartz wrote a seminal text on the causes of the Great Depression
When Anna Schwartz speaks, her voice still carries much weight. So when she recently spoke out about the shortcomings of the current Fed and the mistakes that were made by Alan Greenspan, the economic world took notice. It's nice to hear the voice of reason once in awhile. Greenspan can say whatever he wants to try to re-write history but his lame excuses for failed economic policies are being rejected by the majority of the economic community. The "Maestro" may have some more "legacy" repair to work on.
Anna Schwartz blames Fed for sub-prime crisis
As rebukes go in the close-knit world of central banking, few hurt as much as the scathing indictment of US Federal Reserve policy by Professor Anna Schwartz.
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
"They need to speak frankly to the market and acknowledge how bad the problems are, and acknowledge their own failures in letting this happen. This is what is needed to restore confidence," she told The Sunday Telegraph. "There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for," she says.
Schwartz remains defiantly lucid at 92. She still works every day at the National Bureau of Economic Research in New York, where she has toiled since 1941.
Her fame comes from a joint opus with Nobel laureate Milton Friedman: A Monetary History of the United States. It revolutionised thinking on the causes of the Great Depression when published in 1965. The book blamed the Fed for causing the slump. The bank failed to use its full bag of tricks to stop the implosion of the money stock, and turned a bust into calamity by raising rates.
"The book was a bombshell," says British monetarist Tim Congdon. "Until then almost everybody thought the free-market system itself had failed in the 1930s. What Friedman-Schwartz say was that incompetent government bureaucrats at the Fed had caused the Depression."
Schwartz warns against facile comparisons between today's world and the Gold Standard era. "This is nothing like the Depression. I don't really believe the economy as a whole is going to fall apart. Northern Rock has been the only episode of a bank failure so far," she says.
Over 4,000 US banks - a fifth - collapsed in the 1930s. There was no deposit insurance. Real economic output fell by a third, prices by a quarter, and unemployment reached a third. Real income fell by 11 per cent, 9 per cent, 18 per cent, and 3 per cent in the years to 1933.
According to Schwartz the original sin of the Bernanke-Greenspan Fed was to hold rates at 1 per cent from 2003 to June 2004, long after the dotcom bubble was over. "It is clear that monetary policy was too accommodative. Rates of 1 per cent were bound to encourage all kinds of risky behaviour," says Schwartz.
She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian saving glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.
That mistake is behind us now. The lesson of the 1930s is that swift action is needed once the credit system starts to implode: when banks hoard money, refusing to pass on funds. The Fed must tear up the rule-book. Yet it has been hesitant for three months, relying on lubricants - not shock therapy.
"Liquidity doesn't do anything in this situation. It cannot deal with the underlying fear that lots of firms are going bankrupt," she says. Her view is fast spreading. Goldman Sachs issued a full-recession alert on Wednesday, predicting rates of 2.5 per cent by the third quarter. "Ben Bernanke should be making stronger statements and then backing them up with decisive easing," says Jan Hatzius, the bank's US economist.
Bernanke did indeed switch tack on Thursday. "We stand ready to take substantive additional action as needed," he says, warning of a "fragile situation". It follows a surge in December unemployment from 4.7 per cent to 5 per cent, the sharpest spike in a quarter century. Inflation fears are subsiding fast.
Bernanke insists that the Fed has leant the lesson from the catastrophic errors of the 1930s. At the late Milton Friedman's 90th birthday party, he apologised for the sins of his institutional forefathers. "Yes, we did it, we're very sorry, we won't do it again."
Saturday, January 12, 2008
Saturday, January 12, 2008
Ritholz: Consumer Debt & Spending
Mish: Bernanke Reaches Point of Recognition
Mauldin: What Are They Thinking?
Schiff: It's Inflation Stupid
Mish: Bernanke Reaches Point of Recognition
Mauldin: What Are They Thinking?
Schiff: It's Inflation Stupid
Friday, January 11, 2008
Financial Tsunami
I have featured numerous articles and news reports featuring David Walker in the past. This latest interview with Glen Beck shows that the mainstream media may finally be waking up to the reality of financial disaster which the U.S. will have to deal with if they don't get their fiscal house in order. Excellent report!
Wednesday, January 09, 2008
Tuesday, January 08, 2008
Sunday, January 06, 2008
Barbie Gives Stuart Varney Some Advice on Buying a Home
Connie says not to make low offers on properties because "you're going to offend the seller and they're not going to like you". Real estate agents are destroying their profession more and more every day. With advice like that, how can you justify a 5% commission?
Note: It is your duty to get the lowest price possible for any house that you want to buy. If you're worried about the sellers' feelings, you'd better get someone else to negotiate on your behalf. The market has turned and sellers are desperate. It is time to capitalize on this new reality.
Note: It is your duty to get the lowest price possible for any house that you want to buy. If you're worried about the sellers' feelings, you'd better get someone else to negotiate on your behalf. The market has turned and sellers are desperate. It is time to capitalize on this new reality.
Thursday, January 03, 2008
The Cheerleader vs Peter Schiff
In the TV show "Heroes", one of the Season 1 plotlines was "Save the Cheerleader, Save the World". In today's real estate market, we need to "Muzzle the Cheerleader, Save the World". In this hilarious exchange with Peter Schiff, this "Barbie Realtor" is clearly outmatched by Peter Schiff but my favourite part of her rant is when she tells people to "Please go out and do your homework". When the realtors start begging, times are very bad.
Maybe people will go out and do their homework if she says "Pretty please with sugar on top".
Maybe people will go out and do their homework if she says "Pretty please with sugar on top".
Global Property Bubbles to Implode in 2008
Courtesy of Michael "Mish" Shedlock, an excellent commentary on the Global Property Bubble that continues in some parts of the world:
Bubbles to Implode
Bubbles to Implode
Wednesday, January 02, 2008
Happy New Year!
...now for the potentially bad news...
Mish addresses a question of "things that can happen but never do" in:
Things That "Can't" Happen
It's an excellent insight to start the year off with.
Mish addresses a question of "things that can happen but never do" in:
Things That "Can't" Happen
It's an excellent insight to start the year off with.
Subscribe to:
Posts (Atom)