Home Prices Down 12.7% in Feb
Fed's Bear Stearns Bailout: "The Wost Policy Mistake in a Generation"
OPEC Says Oil Could Hit $200
GM to Cut 3,500
Stiglitz: Greenspan, Bush to Blame for Crisis
Monday, April 28, 2008
Thursday, April 24, 2008
Restaurants Feel Sting of Surging Costs, Debt
Whirlpool Posts Lower Profit; Warns on Year; Stock Down 9%
Apple Profit Jumps 36%
Amazon Gains in Slowing Economy - Revs up 37%
Ford Has a $100 Million Profit - Thanks Global Economy & Weak Dollar!
US New Home Sales Plunge More than Expected
US Regulator Fears Wave of Bank Failures
Mike Whitney: Enough with the Rate Cuts Already!
Howard Ruff: It is Too Late. Hyperinflationary Depression on the Way
FTSE Slouches Toward 6,000
London Hit With Moody's "Code Red"
Whirlpool Posts Lower Profit; Warns on Year; Stock Down 9%
Apple Profit Jumps 36%
Amazon Gains in Slowing Economy - Revs up 37%
Ford Has a $100 Million Profit - Thanks Global Economy & Weak Dollar!
US New Home Sales Plunge More than Expected
US Regulator Fears Wave of Bank Failures
Mike Whitney: Enough with the Rate Cuts Already!
Howard Ruff: It is Too Late. Hyperinflationary Depression on the Way
FTSE Slouches Toward 6,000
London Hit With Moody's "Code Red"
Wednesday, April 23, 2008
Monday, April 21, 2008
Friday, April 18, 2008
Wednesday, April 16, 2008
Monday, April 14, 2008
Sunday, April 13, 2008
A blunt former Fed chairman takes on Bernanke
From the Globe and Mail
A few days ago an unusual event took place: Paul Volcker, the mythical U.S. Federal Reserve Board chairman from the Reagan years, criticized the policy of the current Fed chairman, Ben Bernanke, in a speech to the Economic Club of New York.
Just so you grasp how extraordinary this was, you should first understand that normally a past Fed chairman scrupulously avoids saying anything at all about current Fed policy - for the simple reason that the current Fed chairman's words are one of his most important tools: They can sway markets.
This ability does not fade entirely when a Fed chairman leaves.
So when a past Fed chairman speaks, his words can clash with those of the present one and make that one's job difficult. Out of professional courtesy, past Fed chairmen therefore keep quiet; Mr. Volcker especially - the man who hiked interest rates to 20 per cent to kill inflation, at the cost of a deep recession. But last week Mr. Volcker spoke his mind bluntly. He said, in effect, that the current Fed is not doing its job.
This would have been unusual enough. But Mr. Volcker went further. Not only is the Fed not doing its job, he said, but it is doing the wrong job: It is defending the economy and the market, instead of defending the dollar. And just to stick the knife in, Mr. Volcker added that this bad job now will make the real job - defending the greenback - much harder later. It'll cause even greater economic suffering.
In plain words, Mr. Volcker implied that the current Fed is not only incompetent, but that its actions are dangerous.
There is no record of Mr. Bernanke's reaction, nor that of anyone else inside the Fed. But there was plenty of buzz in the market because what Mr. Volcker said amounted to a rousing call to raise interest rates. Yes, raise rates, and do it now.
Can you imagine what this would do to the market? I sure can, which brings me to the gap between physical economic reality as we witness it every day in our physical investigations, and the surreal market chatter we see and hear on TV. This gap has never been wider - but it will inevitably close as markets catch up to reality - as just forecast by former president Ronald Reagan's Fed chairman. Let me cite three items, then go back to Mr. Volcker.
First, commercial real estate. You surely have read about the residential real estate problems - subprime loans syndicated and resold, causing the implosion of several U.S. financial institutions. The writeoffs and damage here total close to a trillion dollars, said the IMF recently. That's about one-seventh of the U.S. gross domestic product, or more than three years of growth.
But what of commercial real estate? I heard recently from some savvy private real estate investors that although commercial real estate fell by 20 per cent, it should fall by a further 20 to 30 per cent before it provides a reasonable rate of return. So whatever economic damage was done to the economy by residential real estate speculation may eventually be equalled by commercial real estate. Say another 10th or seventh of GDP erased, or another two-three years of growth gone.
Second, there's also the war in Iraq. Some U.S. economists recently estimated it has cost about two trillion dollars to date - another two-sevenths of U.S. GDP. That's five more years of GDP growth gone.
And third, we haven't even begun to tally the private equity blowups that are surely coming.
Taken all together, the economic damage spells a very bad and long recession. How to fix it? No problem, say the actions of Mr. Bernanke's Fed. Let's print the missing money - and it doesn't matter if it causes inflation and tanks the dollar. Because that's not our job.
Up to now Mr. Volcker kept quiet, but no more. In his speech he just said, in effect, that the recession is not the Fed's problem. It's the government's. The Fed's job is to defend the currency and fight inflation - exactly the opposite of what this Fed is doing. The solution? Raise interest rates, Mr. Volcker practically said, no matter the consequences now, because if you don't, you'll have to raise them even more later, with even more awful consequences.
Will rates indeed rise? I have no doubt they must. Not now, perhaps, but at the end of this year or the beginning of 2009, with a new president in the White House. The stock market, which usually looks six to nine months ahead, already understands this and may soon react. In fact, when Mr. Volcker's words sink in, the markets are likely to sink as this bear market rally ends.
For surely you understand we are still in a bear market - and only in the beginning of it? Yes, we are experiencing a rally, and like most bear rallies, it is sharp and spiky. But when bear rallies end, they leave a lot of spiked bulls behind - and this rally should be no different. When it is over - in the next few weeks, methinks - the waterfall could continue, as the market begins to digest the inevitability of higher inflation and higher interest rates ahead.
Against all protocol, Mr. Volcker just went out on a limb and warned you of this. I urge you to heed his words.
A few days ago an unusual event took place: Paul Volcker, the mythical U.S. Federal Reserve Board chairman from the Reagan years, criticized the policy of the current Fed chairman, Ben Bernanke, in a speech to the Economic Club of New York.
Just so you grasp how extraordinary this was, you should first understand that normally a past Fed chairman scrupulously avoids saying anything at all about current Fed policy - for the simple reason that the current Fed chairman's words are one of his most important tools: They can sway markets.
This ability does not fade entirely when a Fed chairman leaves.
So when a past Fed chairman speaks, his words can clash with those of the present one and make that one's job difficult. Out of professional courtesy, past Fed chairmen therefore keep quiet; Mr. Volcker especially - the man who hiked interest rates to 20 per cent to kill inflation, at the cost of a deep recession. But last week Mr. Volcker spoke his mind bluntly. He said, in effect, that the current Fed is not doing its job.
This would have been unusual enough. But Mr. Volcker went further. Not only is the Fed not doing its job, he said, but it is doing the wrong job: It is defending the economy and the market, instead of defending the dollar. And just to stick the knife in, Mr. Volcker added that this bad job now will make the real job - defending the greenback - much harder later. It'll cause even greater economic suffering.
In plain words, Mr. Volcker implied that the current Fed is not only incompetent, but that its actions are dangerous.
There is no record of Mr. Bernanke's reaction, nor that of anyone else inside the Fed. But there was plenty of buzz in the market because what Mr. Volcker said amounted to a rousing call to raise interest rates. Yes, raise rates, and do it now.
Can you imagine what this would do to the market? I sure can, which brings me to the gap between physical economic reality as we witness it every day in our physical investigations, and the surreal market chatter we see and hear on TV. This gap has never been wider - but it will inevitably close as markets catch up to reality - as just forecast by former president Ronald Reagan's Fed chairman. Let me cite three items, then go back to Mr. Volcker.
First, commercial real estate. You surely have read about the residential real estate problems - subprime loans syndicated and resold, causing the implosion of several U.S. financial institutions. The writeoffs and damage here total close to a trillion dollars, said the IMF recently. That's about one-seventh of the U.S. gross domestic product, or more than three years of growth.
But what of commercial real estate? I heard recently from some savvy private real estate investors that although commercial real estate fell by 20 per cent, it should fall by a further 20 to 30 per cent before it provides a reasonable rate of return. So whatever economic damage was done to the economy by residential real estate speculation may eventually be equalled by commercial real estate. Say another 10th or seventh of GDP erased, or another two-three years of growth gone.
Second, there's also the war in Iraq. Some U.S. economists recently estimated it has cost about two trillion dollars to date - another two-sevenths of U.S. GDP. That's five more years of GDP growth gone.
And third, we haven't even begun to tally the private equity blowups that are surely coming.
Taken all together, the economic damage spells a very bad and long recession. How to fix it? No problem, say the actions of Mr. Bernanke's Fed. Let's print the missing money - and it doesn't matter if it causes inflation and tanks the dollar. Because that's not our job.
Up to now Mr. Volcker kept quiet, but no more. In his speech he just said, in effect, that the recession is not the Fed's problem. It's the government's. The Fed's job is to defend the currency and fight inflation - exactly the opposite of what this Fed is doing. The solution? Raise interest rates, Mr. Volcker practically said, no matter the consequences now, because if you don't, you'll have to raise them even more later, with even more awful consequences.
Will rates indeed rise? I have no doubt they must. Not now, perhaps, but at the end of this year or the beginning of 2009, with a new president in the White House. The stock market, which usually looks six to nine months ahead, already understands this and may soon react. In fact, when Mr. Volcker's words sink in, the markets are likely to sink as this bear market rally ends.
For surely you understand we are still in a bear market - and only in the beginning of it? Yes, we are experiencing a rally, and like most bear rallies, it is sharp and spiky. But when bear rallies end, they leave a lot of spiked bulls behind - and this rally should be no different. When it is over - in the next few weeks, methinks - the waterfall could continue, as the market begins to digest the inevitability of higher inflation and higher interest rates ahead.
Against all protocol, Mr. Volcker just went out on a limb and warned you of this. I urge you to heed his words.
Friday, April 11, 2008
Tuesday, April 08, 2008
IMF Says Financial, Economic Losses May Swell to $945 Billion
Institutional Panic May Fuel Recession
IMF to Sell 12.5% of Gold Stake - 403 Tons!
Asian Inflation Begins to Sting US Consumers
Jim Rogers: The Failure of the Federal Reserve
Greenspan: Credit Crisis Worst in 50 Years
Clif Droke: Now We Know the Real Reasons For the Credit "Crisis"
Monday, April 07, 2008
Jim Rogers - 'Bernanke Is an Idiot'
Jim Rogers is back with advice on investing in commodities and avoiding the U.S. Dollar. The "money" quote is at the end of the interview.
Sunday, April 06, 2008
81% of Americans Say Nation on Wrong Track
US Employers Cut Most Workers Since 2003
Mish: The Fed Uncertainty Principle
Mass State Treasurer: "No matter how bad this year was, 2009 is going to be worse."
Congress Bails Out the Homebuilders
Food Prices to Rise For Years, Thanks to Biofuels
Reuters: Hungry Crowds Spell Trouble for World Leaders
US Employers Cut Most Workers Since 2003
Mish: The Fed Uncertainty Principle
Mass State Treasurer: "No matter how bad this year was, 2009 is going to be worse."
Congress Bails Out the Homebuilders
Food Prices to Rise For Years, Thanks to Biofuels
Reuters: Hungry Crowds Spell Trouble for World Leaders
Friday, April 04, 2008
Quote of the Day
Clearly, the recession that hasn't begun yet is over. At least, that's what all the folks who never saw the recession coming, then decided we were going to have one, and who now say it's over, believe. I know because I heard them say so on TV, time and again.-Helene Meisler
Thursday, April 03, 2008
Tuesday, April 01, 2008
The Great Depression - The First Headline
Note: This is not an April Fool's Joke, although I wish that it was.
We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.
The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.
Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.
Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. "We have seen a dramatic increase in recent years, but we have also seen it climbing more in recent months," Maureen Sorbet, a spokeswoman for Michigan's programme, said. "It's been increasing steadily. Without the programme, some families and kids would be going without."
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