Don't worry, it's not a line-item that you'll see anywhere, they don't like to tell you when they are bending you over.
But don't worry, the banks say "thank you".
Mervyns Department stores going bankrupt, Bennigans filing too. They've been around since '76 - these aren't ticky-tack companies disappearing on us. The list is quite large - which is a lot of unemployed people.
Annual CPI numbers up the most in 26 years. The Fed is no longer of consequence, as they can't raise AND lower rates. But we've known that for a while...
Case/Shiller house price declines come in horrid again this month.
So how long has it been since I wrote, we've already had Wave A of the correction, Wave B back down, and now Wave C up looks to be starting. When that ends (S&P 1320 to 1340), we have a long deep flush heading our way.
Chalk one up for Technical Analysis. I've been saying for months we are heading to 1220 on the S&P. We close at 1217 last week and the bounce the next day was epic (Financials up 13%! Double financials up...you can do the math). We hit 1291 eventually and fall right back to just below my 1240 target and now a bigger bounce begins. As I said above, this one will likely last about 2 weeks (give or take) and at that point I'd advise not being very long at all!
2 more banks go down over the weekend. 7 on the year. Many to follow. The only people who seem to care are the ones who lost money in their account - bailouts are more newsworthy these days I guess?
On to the links....
The best 25-point summary around - if you only read one link in this Replay, this is it.
http://tinyurl.com/6prwvh
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Barry at his absolute finest. I just said it for the last one, but read this!
ttp://tinyurl.com/6zgv38
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John Stewart in a hilarious description of how things work - great vid!
http://tinyurl.com/6s4avr
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Don't fight the Fed? It's been uttered plenty of times. This chart shows how things turned out when people were still believing that. Imagine what will happen now that they realize it's a farce, and the Fed is powerless over what is about to happen.
http://tinyurl.com/662vsh
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Keith at HousingPanic put it best:
Americans have $6.8 trillion deposited in institutions. $4.2 trillion is FDIC insured. And the FDIC only has $52 billion tucked away to back the entire system. One more time, the FDIC only has 1% put away to back the entire thing. And Americans stupidly have $2.6 trillion sitting out there at naked risk. In the end, after the banks fail, and the tiny little FDIC kitty is swiftly blown away, the 'insured' deposits will still be backed up. But you-know-who will be called upon to cut the check. You and me. The taxpayer. And once again, if this happens, Bennie and the Inkjets would just get those printing presses going. And the US currency emergency would go into high-gear.
Here's a more complete view:
http://tinyurl.com/6mct67
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Why Fannie and Freddie Have Doomed Housing Prices, Regardless of Bailouts - good read
http://tinyurl.com/5vs4b3
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Jim Bunning (yes, the former Tiger pitcher turned Senator) is looking to be the one Senator who gets it – I wrote him a while back congratulating him, he seems to be taking all the support to heart.
At congressional hearings this week - on the bailout of Fannie/Freddie - great exchange between him and Paulson:
The strongest criticism came from Republicans.
“When I picked up my newspaper yesterday, I thought I woke up in France,” Senator Jim Bunning, Republican of Kentucky, said at the hearing. “But no, it turns out socialism is alive and well in America.”
Mr. Bunning complained that Mr. Paulson would be gone in January, while most lawmakers “will be sitting at the table” left paying the bill.
“You want an unlimited amount and some of us at this table don’t like an unlimited amount of federal dollars,” Mr. Bunning said in a particularly testy exchange. “Do you really think we can believe exactly what you are saying, Secretary Paulson?”
“I believe everything I say,” Mr. Paulson replied. “I’ve been around markets for a long time.”
“So have I,” Mr. Bunning angrily responded. “Where will the money come from if, in fact, we have to use the backstop?”
After Mr. Paulson replied that he did not think any money would be needed, Mr. Bunning said, “That doesn’t answer my question. Where is the money going to come from?”
“From the government,” Mr. Paulson said.
“And who is the government?” Mr. Bunning asked.
“The taxpayer,” Mr. Paulson said.
Mr. Paulson suggested that if Mr. Bunning did not like the plan, he should vote against it.
“I will do everything I can to stop it,” Mr. Bunning said, referring to the Treasury’s plan.
“And maybe you can come up with a better plan,” Mr. Paulson tartly replied.
Senator Chuck Hagel, Republican of Nebraska, asked why the management of the two companies should not be held accountable.
Mr. Paulson responded that since the companies were in one line of business and had not been lax in their lending standards, there was no reason to take it out on the executives.
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From the Economist:
Separately, the Federal Reserve said Fannie and Freddie could get financing at its discount window, a privilege previously available only to banks. The absurdity of this situation was highlighted by the way the discount window works. The Fed does not just accept any old assets as collateral; it wants assets that are “safe”. As well as Treasury bonds, it is willing to accept paper issued by “government-sponsored enterprises” (GSEs). But the two most prominent GSEs are Fannie Mae and Freddie Mac. In theory, therefore, the two companies could issue their own debt and exchange it for loans from the government—the equivalent of having access to the printing press.
So the stuff that nobody on the entire planet wanted (so the taxpayers will now have to purchase) will now be used as their way of stabilizing themselves – which will ALSO go on the taxpayer WHEN, not if, it eventually blows up.
Cash will be king. No matter how much they devalue it.
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"Gov. Arnold Schwarzenegger plans next week to slash the pay of more than 200,000 state workers to the federal minimum of $6.55 per hour to deal with the state's budget crisis"
"The governor also will order an end to overtime pay for all but critical services, a freeze on state hiring and the immediate layoff of 22,000 temporary, seasonal and student workers."
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I don't even recall who said this now - but they are GOOD!
This rescue plan isn't about mitigating today's housing difficulties. Nothing in the plan gets a mortgage paid that wouldn't otherwise be paid.
Nor is the rescue really about today's credit crunch, except for the minor effect a doubt about the reliability of Fannie and Freddie guarantees might have on the capital of other financial institutions.
Instead, it's about enabling Fannie and Freddie to continue to do even more of the same in the future, and that's a bad idea. The rescue plan makes an implicit federal guarantee for Fannie and Freddie explicit. This would give them an even greater competitive advantage, enlarging their already dangerously overlarge presence in the secondary mortgage market.
The Bush administration and Congress are moving toward a much larger federal role in the housing market. Congressional Democrats propose that the federal government refinance some $300 billion in mortgages, while the Bush administration wants to open the federal checking account to Fannie and Freddie and perhaps invest in them.
Meanwhile, the Fed's balance sheet is getting corrupted with junk that others won't buy or lend against.
All this is to keep the housing market propped up at a time in which the market is screaming, about as loudly as it can: THERE'S BEEN AN OVERINVESTMENT IN HOUSING.
What the politicians propose to do about our economic problems has been consistently more troubling than the problems themselves.
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SEC banning shorting on 19 "important" companies?! Looking to expand it to other stocks now too?! It's like they want a crash to happen. When stocks go down, it's the shorts covering and taking profits that puts a floor under the price - with no shorts, no floor. HINT to the F'ing clueless - the shorts DID NOT CAUSE THIS PROBLEM.
I hope communism is gonna be fun.
Mish on the topics
http://tinyurl.com/6z4h3a
http://tinyurl.com/6fhrnq
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In an interview with RTT News, Nouriel Roubini, Professor of Economics and International Business at NYU's Stern School of Business and Chairman of RGE Monitor stresses that we are in the middle of a "severe recession that is deepening" and will cause "at least a couple hundred small banks," to go "belly up," a third of regional banks to be in "severe trouble" and "at least a couple" major national banks to become "insolvent."
Roubini says there is "no doubt" that the FDIC's reserve will be "drained 100-percent" and stresses that there is "nothing that can be done" to prevent this financial crisis and recession.
In addition, Roubini predicts that Lehman Brothers "won't be able to survive" as an independent broker dealer.
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Items of lesser importance:
Yep, it's the bloggers that caused this. My fault. Nothing to do with Greenspan, greed, corruption. Have fun with that theory FDIC.
http://tinyurl.com/6hmulq
The never-ending destruction of value – and the lies.
http://tinyurl.com/57cwm4
Indymac pics of people wanting their money
http://tinyurl.com/676enq
People will care when WaMu leaves a giant crater in the financial system the likes of which nobody has ever seen:
http://tinyurl.com/58zdex
Great summary from the NYT – not too much should surprise you, but still kept me interested throughout:
http://tinyurl.com/5ou6n2
Great Fleckstein piece on why the shenanigans won’t work.
http://tinyurl.com/5tmy5s
HELOC exposure for later use
http://tinyurl.com/5z9c3b
