[Aptorian]

It's not shocking that the car companies are failing. Up untill the crash people had been lending and spending like there was no tommorow. Buying new cars every 5 years or what ever, getting new company cars even more often. Then people have to save and what are they not going to do? Buy a new car that's for damn sure.

I'm more worried at the random ideas that the politicians are comming up with. The government in Denmark just announced that next year people are going to be allowed to withdraw a big chunk of cash from their pensions. We all know that people are idiots and you can bet that a lot of people are going to be blowing that money away on an easier living and vacations and what ever and a decade from now they're gonna be crying because they have little or no pension.

[Cold Iron]

This is worrying.

[Shinrei]

Am I allowed to say "I told you so" yet?



Buy gold peoples! And whiskey. Lots of whiskey. And gold.

And MORE WHISKEY! Maybe some shotgun shells. Pity all those Europeans who who will have to use rolling pins to defend their homes from the rampaging masses.

[Obdigore]

The insurance companies predict they are coming out of their hard market cycle by July of '09, which will help a lot.

The only reason it is as 'bad' as everyone thinks is because how much stocks are based on futures, and how peoples fears factor in.

And yes, now is a great time to buy stock if you have the money to do it. Buying a house that has been forclosed on right now is a great idea as well.

@Apt - my problem with the US 'social security' scheme, is that it depends on many more workers than there are retiree's. With advances in medicine and the baby boomers not all having 4+ children, I am going to be taxed quite a bit to pay for these people, and there isn't going to be anything left by the time I should be getting my money back.

Frankly, as noted in another thread, Legalizing Marijuanna is a great idea, and one helluva money maker.

[frookenhauer]

With the buying of stocks/houses and all that. Do it. The houses its fairly straightforward to see if you are getting a deal, but with stocks...You need to look for firms whose value is greater than what their shares value them at. And there are plenty that fit the bill:

Apple, Samsung, Intel...

My portfolio (held in a self select ISA i.e. no income/capita gains tax liability) for the coming tax year will be Barratt Developements, Taylor Wimpey, Apple, Samsung, Dominos, Amazon, Barclays, (Intel) and possibly HSBC once the dust settles from their issue. But I want to hit 10 or more in total (The ideal figure is 20), but will be looking at some riskier ones which need some serious research before I hand over my hard earned.

As for the whole depression. I think July 2009 is too early for the recovery and we will be in doldrums for the remainder of the year. Not saying we are going to fall any more (unless of course another calamity takes place) but if you are planning to make any investments do so with small regular sums to benefit form any falls, Cause is correct in that.

I know its a bit of a shitty time right now, but recessions / contractions are a fact of life and are in fact very useful in regulating the economy, can you imagine if the mad CDS toxic crap carried on for another year?!?

Also, an unemployment rate of 20% is unrealistic and 50% is just daft. I'll put £20 down on that bet old boy!

Yiddish proverb: If there's blood in the streets...Buy property.

[Shinrei]

I definately agree there are fantastic deals out there in the stock market. As soon as the new job starts and I can start socking money away, I'll probably start buying. I'm pretty 'fully invested' at the moment, so I don't have enough cash lying around to buy anything at the moment.

[Nicodimas]

I am a doom and gloom type. So keep that in mind.

As of right now we are F'ed. GE GM and C are worth 2 dollars or less. We are leveraged against a market that is worth something like 60 trillions dollars(CDS) and somehow we let the derivative market bloat upwards to 100s of trillions.

We are about enter the final stages of a collapse:


-Pensions will all end this year
-GE/GM/Boeing...etc bankrupt
-Dow to go into the 2000 range
-600k/month in job losses
-Bond market could dislocate *bad bad news as the govt would raid 401ks for money like Argentina did.
-States will start going bankrupt
-.gov goes bankrupt when treasuries blackhole


Chaos. War! This could happen over the next couple of months...it could take a week. The sad thing is it looking orchestrated if you keep reading that site. Protect yourselves and your family. All I ask is read the site and make your own decision as you all are intelligent people.

Greed is destroying the system.

http://market-ticker.denninger.net/
Read this..and get your bug out bag ready.

The CDS monster must be stopped NOW.

Quote

This insanity is caused by the CDS feedback loop; here's how it works.

I buy a CDS on GE (a few weeks ago) for a couple hundred basis points ($200,000 per $10 million)

The SELLER of that CDS protects against possibly having to pay by shorting whatever he can against that short credit position. This means he buys PUTs, he shorts the common, he does whatever he needs to in order to lay off that risk. He does this because if GE goes bankrupt their stock would presumably go to zero; therefore, if he has a potential $10 million exposure on the CDS he will short $10 million face value of the common stock, or buy enough PUTs to pay him $10 million if the stock goes to zero.

The PUT writer (assuming he buys PUTs), being a market-maker, will in turn short the common to lay off the risk as well.

This hammers the stock price which then reflects into the pricing models for the CDS, driving them higher.

This cycle repeats; unfortunately credit rating models include market cap as one of their inputs, which causes a credit downgrade (eventually.)

That in turn adds more pressure.

This cycle is repeated until the company is destroyed.

Why is this not a problem with options and straight short sales?

Because with both straight short sales and PUT purchases the short side is required to post margin every night, and if the price goes the wrong way they get an immediate margin call and are required to buy that position back at a loss. That in turn puts pressure UPWARDS on share price and arrests the slide.

As such the people selling short (whether stock or listed options) do not dare short in unlimited amounts, because if they get caught on the wrong side of a squeeze they are dead.

The enforcement of risk against the people betting on a bankruptcy through regulated instruments puts a natural limit on their activity and prevents an unwarranted "death spiral".

But in the CDS world there is no mark-to-market margin supervision, because there is no central counterparty supervising exposure and demanding it.

As a consequence it is only the counterparty and the written document that can demand collateral posting and usually that is either on an infrequent schedule (monthly, quarterly, annually or on an "event") or in some cases not at all provided the writer maintains some specific credit rating criteria themselves!

Without nightly margin supervision on CDS short positions these vehicles have turned into the means to launch monstrous focused attacks on specific companies; the buyer has limited risk and virtually unlimited reward.

This is exactly like me buying fire insurance on your house, and in addition I can name the amount of insurance I want to buy, even exceeding the house's value!

How nervous will you get if I buy $10 million in "fire insurance" against your $100,000 bungalow and then start stacking up gasoline cans in my driveway?

As a direct and proximate cause of this ability to distort the market it becomes possible to create self-fulfilling prophecies almost on demand, with the people doing it profiting handsomely - at the expense of American workers and otherwise-sound companies.

This form of exploitation of the market must stop.

As I have repeatedly noted "The Bezzle" will be removed from our financial system one way or another. The problem with what we're doing now - refusing to address this issue - means that we will see companies dismantled one-by-one using this "tool" until huge parts of our corporate structure are laid waste, whether they deserve it or not.

Had CDS been "common" during the 2000-03 tech wreck Cisco and many other sound firms (Amazon anyone?) would not now exist as a public company as they would have been driven to zero by this very same vehicle.

President Obama: You can stop this with the stroke of a pen. Issue an executive order today that says:

"Naked", that is, CDS that are not insuring an actual bond, which are not traded on a public exchange with nightly margin supervision, are uncollectable as contrary to the public interest.
ALL CDS, covering a bond or not, are uncollectable six months hence unless they are traded on a public exchange with nightly margin supervision.
This will force all CDS onto a public exchange and stop OTC dealing in these instruments. It will stop dead the writing of these instruments without the capital behind them to pay. It will stop the speculative attacks right now, resolve most of the AIG issue immediately, and within six months put a stop to all abuse of the CDS marketplace.

If President Obama fails to do this imminently we may not have a functioning capital market for long enough for Congress to act and put these provisions into a statute.

Yes, I know the ISDA's members and some others would likely sue the government immediately claiming a "taking". Nonsense; this executive order would only delay collection until the contract is posted to a public exchange and both sides net against the central counterparty, not prevent collection, provided the writer is solvent.

If the writer is not solvent then the money isn't there to pay in the first place and the arguing over "takings" is academic since the agreed actions in the contract cannot be performed.

A contract to do an impossible thing is not a contract.

Let 'em sue - doing so will force discovery of the solvency of the writer of these contracts along with the identification of exactly who owes who what. THAT isn't something that the "market participants" want out in the public, is it?

The insanity must stop now before the capital markets literally consume themselves, destroying not only the guilty firms but those that are otherwise solvent and able to operate through these rough economic times.

If you're looking for a scenario where the shotguns could come out if the CDS insanity is not stopped that's one of the ways it can happen.

<<The bad part is the largest companies are doing this to each other...market cannilibism.

This post has been edited by Nicodimas: 07 March 2009 - 12:38 AM

[HoosierDaddy]

You seriously need to give us the actual words for the acronyms, because I don't know what CDS stands for and thus can't figure out the entire damned thing.

Also, "the sky is falling!"

[Nicodimas]

CDS= Credit Default Swaps.

http://en.wikipedia....it_default_swap


To figure it out takes a bit of reading. I think of it as passing along the risk to the next guy. Fine unless the market goes to shit as the last guy holds the bomb. Bearsterns/Lehman/AIG

Citi/GE financial holds most of the ALT-A stuff! ALT-A starts next year. GE financial could be as deep as 2 trillion into ALT-A...so that 54 Billion of money they have on hand looks rather useless with 11% of people deliqiuent...200 billion dollar loss....

Nobody knows as they don't have to say anything right? As they can keep a different set of books for that type of stuff until it is to late....

http://en.wikipedia.org/wiki/Alt_a


more graph on these loans and "reset" days. We are in for a long haul and @ 6600 Stock market as of 3/09 just looks ugly

http://www.irvinehousingblog.com/wp-conten...gage-resets.jpg

This post has been edited by Nicodimas: 06 March 2009 - 05:43 AM

[HoosierDaddy]

Okay. Completely over my head. I'll leave it to financial types to talk about in, hopefully, a layman vernacular.

However, I will say this: After all my research on the internet about this guy, it seems as though he is a favorite of conservatives (Republicans), and I generally don't listen to people who receive awards at conservative political action committee's meetings (just being upfront and honest about my bias)... I'll give him a chance though if you can explain what he is saying.

This post has been edited by Inigo Montoya: 06 March 2009 - 06:10 AM

[Satan]

We've got one for the record books now! AIG managed to write up a loss of $62 billion! We can only hope that this will reflect on Manchester United in some way.

[dktorode]

Cold Iron, on Mar 4 2009, 11:53 PM, said:

Will you feel like paying your taxes when you also have to support your parents because their pension checks aren't arriving? What happens when people don't feel like paying taxes? Black market trade. Government revenue plunges and they can't afford things like hospitals and police force.

What happens when you don't have a job, your dad dies waiting for a hospital bed, your mum is living in your kids bedroom, your car just got stolen and spam goes back to being a food product and not an internet product?

Sounds like home...

[Obdigore]

Frookenhauer, on Mar 5 2009, 06:03 PM, said:

As for the whole depression. I think July 2009 is too early for the recovery and we will be in doldrums for the remainder of the year. Not saying we are going to fall any more (unless of course another calamity takes place) but if you are planning to make any investments do so with small regular sums to benefit form any falls, Cause is correct in that.

I know its a bit of a shitty time right now, but recessions / contractions are a fact of life and are in fact very useful in regulating the economy, can you imagine if the mad CDS toxic crap carried on for another year?!?

Also, an unemployment rate of 20% is unrealistic and 50% is just daft. I'll put £20 down on that bet old boy!

Yiddish proverb: If there's blood in the streets...Buy property.

I didn't say we would recover in 2009. I said the insurance industry would. Despite it being a single facet of the market, it is bigger than most people realize, and a stable section of the market can do nothing but help.

And yes, 20% unemployment is not going to happen, unless you listen to the people on fox news.

@Inigo - What Nicodemas is saying is basicly this:
Bush Sr or Raegen(I can't spell his last name) removed the law that did not allow financial institutions to trade or sell 'debt' that other people owe them.
The companies started doing it, for instance, one gives out a 30k loan, expecting to make 45k on it with interest. They then sell that debt marker to a fellow lending intitution for over 30k cash money, not dept.
This system only functions when there is a large surpless of money in the system, when there isn't, the few that have overextended themselves, generally the biggest lenders, then cannot pay for their buisiness, and so will go bankrupt and be destroyed unless they can get help from somewhere.
Spoilers from MT/RG

Spoiler

It is what Tehol did in Lether, but based purely on greed.

It is more complicated than that, but it is the gist of the situation. While the economy is good and everyone is spending/purchasing with credit, it works fine. When that stops, we have some troubles.

His thoughts that there will be a civil war and military power grab when everything crashes into nothing is disturbing, but I do not see that happening.

[Anomander]

We've been talking about the state of things in my economics class a lot, obviously. My prof was showing us a graph in stock trends and while this situation is bad the market hits really low points almost like clockwork. It's bad, but I have hope it'll rebound.

[Obdigore]

Anomander, on Mar 6 2009, 08:47 AM, said:

We've been talking about the state of things in my economics class a lot, obviously. My prof was showing us a graph in stock trends and while this situation is bad the market hits really low points almost like clockwork. It's bad, but I have hope it'll rebound.

It is just another swing in the market. They happen to greater or lesser degrees all the time.

But since we have a Democrat president, of course certain news sources are going to do some fearmongering to the best of their ability.

[Nicodimas]

The Derivates market:

http://www.occ.gov/f...e/2008-152a.pdf

According to the last Page-

Quote

JP Morgan Chase: Eighty-seven trillion, six hundred eighty-eight billion, eight million dollars.

Bank of America: Thirty-eight trillion, six hundred seventy-three billion, nine hundred sixty-seven million dollars.

Citibank: Thirty-five trillion, six hundred forty-five billion, four hundred twenty-nine million dollars.

Total notional value for the all commercial banks and trust companies is:

One hundred seventy-five trillion, four hundred three billion, two hundred two million dollars.

The assests to derivatives is the spookiest part:
8 Trillion dollars on hand to cover 160 trillion on the market. So a 5% Collapse is bad news. How big of a crash it it? How much is America's GDP then...

--------------

Anytime throughout history a economic crash such as this happens it will spring the Blame game. Nationalism will crop up over the next couple of years and the a big war in ten unless the crash is averted.

It still can be, but we are getting close to the event horizon where it all goes downhill real quick. A bond market dislocation would cause this, or a pension/bond collapse.

--------------------


The economy is now in Obamas court...

I think he is making a play for power the way I look at it. Let it all crash and he will come to rescue. Thats not how this crash works sadly..Him doing nothing is not good, or putting all the pet project through to the market.

Did you all see that article how the Bailout created sixty jobs last month? Didn't anyone get real depressed on that note. Hey we only lost 600k!


-----------------

Quote

It appears that Mr. Market is singularly unimpressed with the unemployment situation, which is actually showing a slowing in the rate of change in U-6, which is in fact positive.

However, "The Bezzle" remains unaddressed by government, and therefore, irrespective of anything else, the market will sell off.

The Nasdaq is down more than 2% at this point, and here's the chart of today's /ES thus far:



This will not stop until "The Bezzle" comes out. One way or another, it will come out.

That's more than a 3% move downward today in the first hour and a half from the top today - more than 20 S&P points.

Either Government will force The Bezzle out, or the market will force it out, and if The Market forces it out the consequence will be the destruction of millions of jobs that would otherwise not need to be destroyed, along with trillions of unnecessary wealth destruction.

The Government is incapable of keeping The Bezzle from being removed from the system, no matter what people in DC, including lobbyists and politicians would like.

This simply isn't up to them - they are not in control.

President Clinton discovered during his first term that The Bond Market in fact controlled his agenda, not the other way around. He was forced to abandon his audacious health care agenda when the bond market threw up all over it.

President Obama is in a much more precarious situation, in that this is not just about whether he can execute his agenda or not - it is about whether we will have an economy (and likely a republic) left in another year or so, and if he does not pull the cotton out of his ears in the very near future the answer will be "no", as we are approaching a point where we will suffer enough damage to the capital markets that a reply of at least the 1930s - if not the 1870s - will become inevitable.

Be warned Mr. President - we are on the precipice of a tipping point from which you and our economy cannot recover for a decade or more, if at all.

Protecting those who have stolen the wealth of millions of Americans, along with their homes and jobs, is going to become singularly unpopular in very short order.

Yes, George W. Bush was responsible (along with President Clinton before him and the Congress over the last 20 years) for the economic and market conditions that got us here. I've said that repeatedly.

You, however, are personally responsible for refusing to address the issues and continuing to foment and cause what is now turning into an all out economic and market collapse.

President Obama claims that he wants to create new jobs and save existing ones. He cannot do so as long as The Market continues to do the job that he refuses to - that is, cleaning out "The Bezzle" from our financial and market systems; that proces sis destroying jobs at an ever-accelerating rate, and has resulted in a loss of nearly 10% of the market's value this week alone.

This loss will continue and in fact accelerate until The Bezzle is gone, and if President Obama is going to fulfill his promise to "save or create" jobs, he is going to have to step up and put a stop to The Bezzle himself, because if he does not, the market's actions will not only negate his efforts but totally run over them, destroying the wealth, prosperity and jobs of Americans.

President Obama has had plenty of time to:

Issue an Executive Order to defang the CDS monster, as I noted in the Ticker yesterday.
Direct the FBI (an Executive Department) to start going after the crooks who caused this mess, and make a very public statement to that effect.
Stop appointing tax cheats to the cabinet, stop backing those who are already in, and replace them. Volcker would make an excellent Treasury Secretary and I bet he paid his taxes.
And more.
The first job of a new manager, where he is brought in to clean up the mess made by the old manager, is to fire and replace all the incompetent people responsible for the mess, to sweep the floors down to the bare wood if necessary, and to lay down the law publicly that there is a new boss in town and the "old way" of doing things will no longer be tolerated.

President Obama has failed to do any of the above and as such his claim that he intends to "save or create" jobs is a lie.

President Obama owns this reality, whether he wants to or not, and the market, as of this point, is now down more than 20% from his inaugeration date and more than 30% from the date of the election, with nearly a 10% loss in the last week.

This will continue until President Obama acts or every company with financial exposure of any sort is destroyed.

This post has been edited by Nicodimas: 07 March 2009 - 12:37 AM

[HoosierDaddy]

Nic... if you are going to basically copy/paste someone else, here it's Denninger, at least post the link to cite it. Otherwise you are plagiarizing.

Also, if you are going to claim things like this:

Quote

The economy is now in Obamas court...

I think he is making a play for power the way I look at it. Let it all crash and he will come to rescue. Thats not how this crash works sadly..Him doing nothing is not good, or putting all the pet project through to the market.

I have no idea what to say to you. Most Republicans are bitching about the size of the economic bailouts that Obama is doing (and they did just 6-9 months ago) and you say he is doing NOTHING and making a power grab... that is what is called a zero-sum situation.

Power grab. Jesus. Where do these people get this crap?

[Stradivarius]

Fezzik, on Mar 5 2009, 02:01 PM, said:

Am I allowed to say "I told you so" yet?



Buy gold peoples! And whiskey. Lots of whiskey. And gold.

And MORE WHISKEY! Maybe some shotgun shells. Pity all those Europeans who who will have to use rolling pins to defend their homes from the rampaging masses.

ah ha! not me shotgun and firearms licence! the percs of being a farmer! plus farming always does much better in recessions! woop! everything is cheaper yet every one pays more for your livestock and crops! about bloody time. not fun working in an industry thats been on its arse for 15 years! tho saying that i do have a lot of sypathy for those going through tough time. a hell of a lot more than they showed us when we were down.

[Nicodimas]

If this type of crash Gold isn't doing you any good. People will just take what they need from you...


I am hoping Obama does this change we heard so much about. Unlikely. Never trust the politicians as there goals do not represent our best interests. This is being clearly demostrated by the spending they have done these last couple of months alone. I am talking piles and piles of it. The fact that they won't tell us where two TRILLION went should send alarm signals through you.

Quote

Apparently Bernanke, that wonderful bipartisan soul who is so competent and wonderful that everyone in the village thinks Obama should leave him in charge is refusing to identify who got almost 2 trillion dollars of Fed cash. Bloomberg News is suing to find out. Personally I really, really, really want to know. What exactly is Bernanke hiding?

Source:http://thinkbridge.blogspot.com/2008/11/wheres-ben-bernankes-missing-2-trillion.html

We are living in a corporate fascism atm and not a republic. All the wrong messages are getting to Obama as he is surrounded by Crooks.

[frookenhauer]

Nic mate, your enthusiasm is awesome, but calm down dear. Every time that there has ever been a serious downturn in any part of any financial system or pretty much every facet of our lives...Every toad, every slithering doom mongering hack comes to the fore peddling their shite. They show graphs they show polls and they sling enough mud at the wall that some of it sticks and makes other people take notice. Don't be one of these people. The few companies that re making some real money right now are the news agencies. Reuters (one of the good guys) has announced massive profits for the year. And what do you think makes paper sales? Its not stories about kittens being rescued from trees by firemen that's for sure.

Like I said, times are shit, but nowhere near as bad as some are making out. If anyone is engineering the economic collapse its the press and those toads who spout their bile. If we were really in a corporate fascist state, those doomsayers would have been red smears on the back wall of the firing line by now!