We were at 9000 Dow not too long ago.... Now at around 7,200 today... When will the domino's stop falling?
Stocks Tanking Again - Market Down Many Days in a Row
While eyes have been locked on the steep descent of Citigroup and Bank of America, financial stocks are no longer the main culprits in pulling the stock market toward 11-year lows.
Instead, manufacturers and even makers of basic consumer goods are now the biggest drags, a shift that has some investors worried.
Although the current bear market began as a housing and banking crisis, the damage has spread.
A more diverse group is leading the declines today. A look at the Dow Jones Industrial Average this year shows declines in stocks like 3M and Procter & Gamble have had more of an impact than the drop in Citigroup or American Express.
"What started as a subprime mortgage crisis became a U.S. credit crisis, then a U.S. recession, and now we are in a full-fledged, globally synchronous recession of historic proportions," says Leo Grohowski, chief investment officer BNY Mellon Wealth Management in New York. "There are very few areas that have been insulated from the decline in earnings and in stock-price performance."
During the bear market's first 13 months, beginning in October 2007, financial companies led the declines in both the Dow Jones Industrial Average and the Standard & Poor's 500-stock index. Of the six largest contributors to the drop in the Dow, three were financial stocks, even though there were just five financials among the 30 Dow companies.
The three offenders were American International Group (since removed from the Dow), AmEx and Citigroup. The other three leading losers were two industrial companies, Boeing and Caterpillar, plus International Business Machines.
Normally, makers of consumer basics such as cleaning products and diapers are resistant to bear markets because their sales are relatively stable. This time, their shares are falling regardless. In many ways, this bear market is worse than the one led by technology stocks from 2000 through 2002, which itself was unusually severe.
The pervasiveness of the current bear market has analysts worried. During the 2000-2002 bear market, the undying willingness of American consumers to keep spending was one of the few bright spots, ultimately helping turn stocks around. This time, the U.S.'s financial troubles have engulfed consumers as well, and that bodes ill.
Monday, February 23, 2009
Friday, February 20, 2009
Article on "Is it Fair to Call This a Great Depression"?
Article on "Is it Fair to Call This a Great Depression"?
Sure - it isn't as bad as 1929 yet. But people weren't as well off in general then - even when times were good.
But relative to what people are "used to" -
the foreclosure crisis - the banking crisis - stock market declines -- more and more unemployed - I'd wager to say that this can be called a Great Depression - and if you don't think so yet -- you may change your mind this year.
By the way - this domain is for sale to the highest bidder - with a reserve price of $100,000 :-)
Sure - it isn't as bad as 1929 yet. But people weren't as well off in general then - even when times were good.
But relative to what people are "used to" -
the foreclosure crisis - the banking crisis - stock market declines -- more and more unemployed - I'd wager to say that this can be called a Great Depression - and if you don't think so yet -- you may change your mind this year.
By the way - this domain is for sale to the highest bidder - with a reserve price of $100,000 :-)
Tuesday, January 27, 2009
Iceland Collapse: Riots, Suicide, and Soup Kitchens in Churches
Last week - the worst riots in Iceland since it became a founding member of Nato in 1949.
Rocks were hurled at police and the Althing. Its windows were smashed and the building set alight. Over 130 protesters received treatment after police used tear gas to disperse the crowd.
On Friday morning, human rights
campaigner and protest organiser Hordur Torfason told a chilling anecdote to illustrate the desperation many Icelanders are feeling. He had received a phone call from a man who said that four generations of his family had lost everything. “He wanted me to help them build a gallows in front of the parliament building,” says Torfason. “I asked him if this was to have some symbolic significance. ‘No,’ came the answer. ‘A member of my family wants to hang himself in public.’”
“I said I would help them but not in this way,” says Torfason. “But he killed himself two days ago.”
Red Cross employees and volunteers are working overtime to prepare for depression and desperation.
The relief agency has expanded and is setting up support groups and activities for the unemployed.
“One of the effects of long-term unemployment is depression,” says the agency’s Thor Gislason.
More people are attending church, he says, not just for spiritual succour, but because food is sometimes provided for a nominal charge.
Soup kitchens, emblematic of Eastern bloc poverty, might be going too far. “We believe people will be too ashamed to stand in line publicly for food,” says Gislason, “so we will organise activities and volunteer work where food is involved instead.”
Fortunately, nobody is starving or freezing on the street. But Iceland is clearly on the brink of either a major change or some kind of collapse. Its situation should serve as a warning to other countries sunk by the financial crisis. No place is immune to this kind of upheaval.
Rocks were hurled at police and the Althing. Its windows were smashed and the building set alight. Over 130 protesters received treatment after police used tear gas to disperse the crowd.
On Friday morning, human rights
campaigner and protest organiser Hordur Torfason told a chilling anecdote to illustrate the desperation many Icelanders are feeling. He had received a phone call from a man who said that four generations of his family had lost everything. “He wanted me to help them build a gallows in front of the parliament building,” says Torfason. “I asked him if this was to have some symbolic significance. ‘No,’ came the answer. ‘A member of my family wants to hang himself in public.’”
“I said I would help them but not in this way,” says Torfason. “But he killed himself two days ago.”
Red Cross employees and volunteers are working overtime to prepare for depression and desperation.
The relief agency has expanded and is setting up support groups and activities for the unemployed.
“One of the effects of long-term unemployment is depression,” says the agency’s Thor Gislason.
More people are attending church, he says, not just for spiritual succour, but because food is sometimes provided for a nominal charge.
Soup kitchens, emblematic of Eastern bloc poverty, might be going too far. “We believe people will be too ashamed to stand in line publicly for food,” says Gislason, “so we will organise activities and volunteer work where food is involved instead.”
Fortunately, nobody is starving or freezing on the street. But Iceland is clearly on the brink of either a major change or some kind of collapse. Its situation should serve as a warning to other countries sunk by the financial crisis. No place is immune to this kind of upheaval.
Monday, January 26, 2009
Less boxed product is selling apparently...Stone Container, Chicago files Bankruptcy
Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, said Monday that it has filed for Chapter 11 bankruptcy protection as it looks to restructure a heavy debt.
"The acceleration of the unprecedented global economic recession has weakened demand for packaging, and the frozen credit markets have prevented an out-of-court refinancing of our capital structure."
"The acceleration of the unprecedented global economic recession has weakened demand for packaging, and the frozen credit markets have prevented an out-of-court refinancing of our capital structure."
Iceland Government Officials Resign
Iceland's ruling coalition resigned Monday, three months after the collapse of the country's currency, stock market and several major banks, and following months of public protests, Kristjan Kristjansson, a spokesman for the prime minister told CNN.
Of course - since my last post - GMAC got bailed out & just other bad economic news. Lots of layoffs etc.
By the way - this http://www.2009greatdepression.com/ is for sale for not less than $50,000.
Things seem to be playing out quite nicely for a Great Depression in 2009 - as I predicted several years ago.
Of course - since my last post - GMAC got bailed out & just other bad economic news. Lots of layoffs etc.
By the way - this http://www.2009greatdepression.com/ is for sale for not less than $50,000.
Things seem to be playing out quite nicely for a Great Depression in 2009 - as I predicted several years ago.
Monday, December 29, 2008
Why are we concerned about saving GMAC?
Why are we concerned about saving GMAC? Is this car and home lender really "too big to let fail?" Regulators are considering whether to give taxpayer money to prop up GMAC.
GM owns 49% of GMAC. Privately held Cerberus Capital Management owns the rest. Cerberus also owns Chrysler. Maybe the car makers would be better off without the distraction of running banking operations.
The great fear is that loans to prospective car buyers would dry up without GMAC, and that would kill any hopes of a revival for the U.S. car industry.
Hogwash. There are many credit unions, small banks and large banks that would provide such loans. The U.S. government already provided hundreds of billions of dollars to lenders such as Citigroup and Bank of America for making loans.
GM owns 49% of GMAC. Privately held Cerberus Capital Management owns the rest. Cerberus also owns Chrysler. Maybe the car makers would be better off without the distraction of running banking operations.
The great fear is that loans to prospective car buyers would dry up without GMAC, and that would kill any hopes of a revival for the U.S. car industry.
Hogwash. There are many credit unions, small banks and large banks that would provide such loans. The U.S. government already provided hundreds of billions of dollars to lenders such as Citigroup and Bank of America for making loans.
Lehman Brothers Post Mortum
The WSJ this morning reported that Lehman Brothers Holdings Inc's emergency bankruptcy filing in Sept (after the U.S. government declined to bail it out)- wiped out as much as $75 billion of potential value for creditors.
A more planned and orderly filing would have allowed Lehman to sell some assets outside of bankruptcy court protection and would have given it time to unwind derivatives positions.
Lehman unsecured creditors have asserted they are owed $200 billion. How much of that is collected remains to be seen.
The Lehman meltdown touched of a stock market panic and credit crisis and was quickly followed by a government rescue of American International Group Inc, once the world's largest insurer - to the tune of $152 billion - 10X the bailout of the auto industry - with little to no oversight.
Reportedly - that bailout is benefiting European Banks.
A more planned and orderly filing would have allowed Lehman to sell some assets outside of bankruptcy court protection and would have given it time to unwind derivatives positions.
Lehman unsecured creditors have asserted they are owed $200 billion. How much of that is collected remains to be seen.
The Lehman meltdown touched of a stock market panic and credit crisis and was quickly followed by a government rescue of American International Group Inc, once the world's largest insurer - to the tune of $152 billion - 10X the bailout of the auto industry - with little to no oversight.
Reportedly - that bailout is benefiting European Banks.
Thursday, December 11, 2008
Let's Call it What it Is... a Depression
Let's call it what it is Now - some are in denial - calling this just a "recession" and that we have not met the "criteria" of depression - and that we will get out of this mess soon - just like past recessions.
Sorry - but this is NOT like past recessions for many reasons. The stock market snapped back smartly from the 7000's to almost 9000 recently - as people were "afraid to miss the bottom."
Unfortunately for them - I believe that we will be headed down again - when people see more dominoes fall.
Sorry - but this is NOT like past recessions for many reasons. The stock market snapped back smartly from the 7000's to almost 9000 recently - as people were "afraid to miss the bottom."
Unfortunately for them - I believe that we will be headed down again - when people see more dominoes fall.
Friday, December 5, 2008
Great Depression Unemployment Didn't Hit 25 Percent Overnight
Great Depression Unemployment Didn't Hit 25 Percent Overnight
unemployment stats are calculated differently now. If we calculated unemployment the same way we did in the Depression, our unemployment rate would be much higher.
Second, unemployment during the Depression didn't get to 25% overnight. It got there over three years, during which most people never dreamed it would get anywhere near that high. When unemployment started its run to 25% then, it was lower than it was last year.
In 1929, unemployment was below 5%. By the end of 1930, as the New York Times reveals, it had risen to just below 10%. The following year it hit 16%. In 1932, it was 24%. And in 1933, it peaked at 25%. It then took 19 years to get back to the pre-crash low.
As today's depressing jobs report showed, unemployment is now rising rapidly. Not as rapidly as in 1930, but rapidly.
Investors Drew Out More From Mutual Funds
Investors Drew Out More From Mutual Funds Money flowed out of mutual funds last week, erasing a spike in deposits from the week before, as market volatility continued to undermine investors' confidence.
TrimTabs Investment Research said Thursday that about $12.1 billion was withdrawn from stock-based mutual funds in the week ended Dec. 3. The week before, investors had put $10.4 billion into these funds.
The bulk of the exodus happened on Monday, with modest inflows occurring on the remaining days, according to Vincent Deluard, a TrimTrabs analyst. Investors pulled out $16 billion on Monday as the Dow Jones Industrial Average dropped 680 points or 7.7%.
On Monday, The National Bureau of Economic Research made official what most Americans already believed about the state of the economy - that the U.S. has been in a recession since December 2007.
"Mutual fund money is performance following," Deluard said. Investors tend to pump money into mutual funds when the market advances, "when the market goes down they take their money out," he said.
The flight from bond funds was the "most striking feature" of this week's report, Deluard said.
"People normally sell equities in a bear market and buy bonds because they are supposed to be safe and that was the case up until September," he said.
But now investors are cashing out of both stock and bond funds, reflecting the market's "extreme risk aversion,"
There had actually been an inflow of $6.8 billion last week.
Comment -- The stock market traditionally falls throughout December after the Thanksgiving Holiday - perhaps due to tax loss selling.
TrimTabs Investment Research said Thursday that about $12.1 billion was withdrawn from stock-based mutual funds in the week ended Dec. 3. The week before, investors had put $10.4 billion into these funds.
The bulk of the exodus happened on Monday, with modest inflows occurring on the remaining days, according to Vincent Deluard, a TrimTrabs analyst. Investors pulled out $16 billion on Monday as the Dow Jones Industrial Average dropped 680 points or 7.7%.
On Monday, The National Bureau of Economic Research made official what most Americans already believed about the state of the economy - that the U.S. has been in a recession since December 2007.
"Mutual fund money is performance following," Deluard said. Investors tend to pump money into mutual funds when the market advances, "when the market goes down they take their money out," he said.
The flight from bond funds was the "most striking feature" of this week's report, Deluard said.
"People normally sell equities in a bear market and buy bonds because they are supposed to be safe and that was the case up until September," he said.
But now investors are cashing out of both stock and bond funds, reflecting the market's "extreme risk aversion,"
There had actually been an inflow of $6.8 billion last week.
Comment -- The stock market traditionally falls throughout December after the Thanksgiving Holiday - perhaps due to tax loss selling.
Thursday, December 4, 2008
Foreclosure Forecast and Bernanke Finally "Gets It" -- 2 Years Too Late
Lenders appear to be on track to initiate 2.25 million foreclosures this year, up from an average annual pace of less than 1 million during the pre-crisis period, he said.
To provide additional relief, Bernanke outlined a number of what he called "promising options" to reduce preventable foreclosures.
Under one plan, Bernanke called on Congress to ease the terms of a government program called "Hope for Homeowners," which lets distressed homeowners refinance into more affordable, federally insured mortgages if the lender writes down the amount owed on the mortgage and pays an upfront insurance premium.
Bernanke suggested Congress lower lender's upfront insurance premium as well as reducing the interest rate borrowers pay, which presently is quite high, roughly 8 percent. To bring down this interest rate, Treasury could buy Ginnie Mae securities, which fund the mortgage program, or Congress could decide to subsidize the rate.
Another option would ease the terms of a loan-modification plan put forward by the Federal Deposit Insurance Corp. that seeks to make monthly mortgage payments more affordable. The FDIC put this plan into effect at IndyMac Bank, a large savings and loan that failed earlier this year, and has used it to modify mortgages at other financial institutions.
Under the so-called IndyMac plan, struggling home borrowers pay interest rates of about 3 percent for five years.
Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax income on housing.
Bernanke suggested this threshold could be lowered to perhaps 31 percent of income, with the government sharing some of the cost.
Yet another option would have the government purchase delinquent or at-risk mortgages in bulk and then refinance them into the "Hope for Homeowners" or another government program that insures home mortgages.
Other options include a broader push for lenders to forgive a portion of the home loan for certain borrowers, and other permanent modifications over the longer term so that people don't fall back into distress again.
The housing crisis has driven up foreclosures and forced financial companies to take massive losses on soured mortgage investments. The housing debacle touched off the worst financial crisis since the 1930s that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to bring under control.
All the fallout has plunged the country into a painful recession.
*****Bernanke stressed the importance of curbing the foreclosure mess because it is so inter-linked with the economy's health.*****
"Weakness in the housing market has proved a serious drag on overall economic activity," he said.
(Comment - Gee Ben - no kidding. Why didn't you have the rate drop program put into place back in early 2006 - when you should have? You finally "get it" - 2 years later...)
Paulson and his colleagues within the Bush administration have come under fire by Democrats and some Republicans for not doing enough to help Americans at risk of losing their homes.
Paulson has been opposed to tapping the bailout pool to fund a mortgage-relief program championed by FDIC chief Sheila Bair. The $24 billion FDIC plan would use some of the rescue money to help back refinanced mortgages that would lower monthly payments.
To provide additional relief, Bernanke outlined a number of what he called "promising options" to reduce preventable foreclosures.
Under one plan, Bernanke called on Congress to ease the terms of a government program called "Hope for Homeowners," which lets distressed homeowners refinance into more affordable, federally insured mortgages if the lender writes down the amount owed on the mortgage and pays an upfront insurance premium.
Bernanke suggested Congress lower lender's upfront insurance premium as well as reducing the interest rate borrowers pay, which presently is quite high, roughly 8 percent. To bring down this interest rate, Treasury could buy Ginnie Mae securities, which fund the mortgage program, or Congress could decide to subsidize the rate.
Another option would ease the terms of a loan-modification plan put forward by the Federal Deposit Insurance Corp. that seeks to make monthly mortgage payments more affordable. The FDIC put this plan into effect at IndyMac Bank, a large savings and loan that failed earlier this year, and has used it to modify mortgages at other financial institutions.
Under the so-called IndyMac plan, struggling home borrowers pay interest rates of about 3 percent for five years.
Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax income on housing.
Bernanke suggested this threshold could be lowered to perhaps 31 percent of income, with the government sharing some of the cost.
Yet another option would have the government purchase delinquent or at-risk mortgages in bulk and then refinance them into the "Hope for Homeowners" or another government program that insures home mortgages.
Other options include a broader push for lenders to forgive a portion of the home loan for certain borrowers, and other permanent modifications over the longer term so that people don't fall back into distress again.
The housing crisis has driven up foreclosures and forced financial companies to take massive losses on soured mortgage investments. The housing debacle touched off the worst financial crisis since the 1930s that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to bring under control.
All the fallout has plunged the country into a painful recession.
*****Bernanke stressed the importance of curbing the foreclosure mess because it is so inter-linked with the economy's health.*****
"Weakness in the housing market has proved a serious drag on overall economic activity," he said.
(Comment - Gee Ben - no kidding. Why didn't you have the rate drop program put into place back in early 2006 - when you should have? You finally "get it" - 2 years later...)
Paulson and his colleagues within the Bush administration have come under fire by Democrats and some Republicans for not doing enough to help Americans at risk of losing their homes.
Paulson has been opposed to tapping the bailout pool to fund a mortgage-relief program championed by FDIC chief Sheila Bair. The $24 billion FDIC plan would use some of the rescue money to help back refinanced mortgages that would lower monthly payments.
Wednesday, December 3, 2008
Kimball Hill Homes announced today that it was going out of business.
Kimball Hill Homes announced today that it was going out of business.
Kimball Hill Homes, the Rolling Meadows Illinois based home builder that has operated under Chapter 11 bankruptcy protection since April, said late Tuesday that it would wind down its operations after failing to find a buyer.
The 400-employee company, which has been a prominent player in the west and northwest suburban Chicago housing market, has a significant presence in California and four other states. Kimball pulled out of the troubled Florida market earlier this year. A year ago, it had 1,100 employeesIt will refund the earnest money to buyers with whom it has written contracts but has not started construction.
Some 700 homes are in various stages of completion around the country. Locally - 150.
On a side note - Bally's Fitness declared BK today
Kimball Hill Homes, the Rolling Meadows Illinois based home builder that has operated under Chapter 11 bankruptcy protection since April, said late Tuesday that it would wind down its operations after failing to find a buyer.
The 400-employee company, which has been a prominent player in the west and northwest suburban Chicago housing market, has a significant presence in California and four other states. Kimball pulled out of the troubled Florida market earlier this year. A year ago, it had 1,100 employeesIt will refund the earnest money to buyers with whom it has written contracts but has not started construction.
Some 700 homes are in various stages of completion around the country. Locally - 150.
On a side note - Bally's Fitness declared BK today
Monday, December 1, 2008
Citi Spends Bailout Money on an Acquisition!
(Sidenote - As I predicted - the stock market is down today. It ran up too many days (in a head fake) -- from 7500 to 8800. I think it is due to go back down to 7500 again (for a bounce off of that again) - and could go lower next year.._
Treasury Secretary Henry Paulson gave Citi $45 billion in taxpayer money to keep it afloat and get it to pump some money into the emaciated U.S. lending system and what does Citi do?
Buy a Spanish highway operator.
Yes, you heard right. A Citigroup infrastructure fund agreed to take over Spain's Itinere from Sacyr Vallehermoso in a deal valued at about $10 billion, which includes about $6.3 billion in debt that Citi will take on.
Just what Citi needs: more debt.
Of course, Citi officials will tell us this is good debt, unlike the $306 billion in risky assets U.S. regulators agreed to backstop last week as part of a $20 billion taxpayer-funded cash injection to shore up Citi. That's on top of the $25 billion in federal bailout money Citi received earlier this year.
I'll bet Paulson just can't wait to hand over another $10 billion to Citi when the bank complains that the global recession is eating into the tolls it thought it would be collecting in Spain.
Treasury Secretary Henry Paulson gave Citi $45 billion in taxpayer money to keep it afloat and get it to pump some money into the emaciated U.S. lending system and what does Citi do?
Buy a Spanish highway operator.
Yes, you heard right. A Citigroup infrastructure fund agreed to take over Spain's Itinere from Sacyr Vallehermoso in a deal valued at about $10 billion, which includes about $6.3 billion in debt that Citi will take on.
Just what Citi needs: more debt.
Of course, Citi officials will tell us this is good debt, unlike the $306 billion in risky assets U.S. regulators agreed to backstop last week as part of a $20 billion taxpayer-funded cash injection to shore up Citi. That's on top of the $25 billion in federal bailout money Citi received earlier this year.
I'll bet Paulson just can't wait to hand over another $10 billion to Citi when the bank complains that the global recession is eating into the tolls it thought it would be collecting in Spain.
Wednesday, November 26, 2008
Citi President and Directors Feel No Pain or Remorse
Citi board member and former Treasury Secretary Robert Rubin received over $100 million in compensation from Citi in 10-plus years, according to the New York Post.
"I don't feel responsible, in light of the facts as I knew them in my role," Rubin told the New York Times back in April. "In hindsight, there are a lot of things we'd do differently. But in the context of the facts as I knew them and my role, I'm inclined to think probably not."
Rubin is one of several directors, including current chairman Sir Win Bischoff, who've been on Citi's board for at least 10 years.
Not one of the directors has been fired, stepped down or even had the decency to apologize to shareholders or U.S. taxpayers.
There's billions of losses at Citi but no one willing to take any responsibility. And all the top brass are still getting paid mega-bucks.
There's something wrong with this picture...
"I don't feel responsible, in light of the facts as I knew them in my role," Rubin told the New York Times back in April. "In hindsight, there are a lot of things we'd do differently. But in the context of the facts as I knew them and my role, I'm inclined to think probably not."
Rubin is one of several directors, including current chairman Sir Win Bischoff, who've been on Citi's board for at least 10 years.
Not one of the directors has been fired, stepped down or even had the decency to apologize to shareholders or U.S. taxpayers.
There's billions of losses at Citi but no one willing to take any responsibility. And all the top brass are still getting paid mega-bucks.
There's something wrong with this picture...
Tuesday, November 25, 2008
Believe it or Not - Inflation Threat is Coming
They Say Equities Have Bottomed
My opinion is.... well - perhaps they did temporarily last week.... but this is an uptick that won't last for more then another few days - and at max - a week.
I tend to agree with the other comments in this article though..
The government's bailout plan is not working, said Bianco Research's James Bianco. At some point, though, it will start to work — and there will be massive inflation at least as bad as the 1980s. Bianco said the Fed's challenge in withdrawing the liquidity it has pumped into the system will be bigger than anyone suspects.
Michael Darda of MKM Partners said we're in for a long string of ghastly economic figures. They point the way to "the collapse of the consumer." He sees a return to frugality, with households holding back 8 to 9 percent of disposable income, an $800 billion hit to the economy.
Comment - whether the govt's plan works or not is irrelevant to inflation. When you pump the equiv of 7 trillion into bailouts - inflation eventually has to come out the other end... That is almost the amount of all debt the govt has run up for the last 80 years!
In the meantime - there might be deflation.... (which will be followed by hyper-inflation)
My opinion is.... well - perhaps they did temporarily last week.... but this is an uptick that won't last for more then another few days - and at max - a week.
I tend to agree with the other comments in this article though..
The government's bailout plan is not working, said Bianco Research's James Bianco. At some point, though, it will start to work — and there will be massive inflation at least as bad as the 1980s. Bianco said the Fed's challenge in withdrawing the liquidity it has pumped into the system will be bigger than anyone suspects.
Michael Darda of MKM Partners said we're in for a long string of ghastly economic figures. They point the way to "the collapse of the consumer." He sees a return to frugality, with households holding back 8 to 9 percent of disposable income, an $800 billion hit to the economy.
Comment - whether the govt's plan works or not is irrelevant to inflation. When you pump the equiv of 7 trillion into bailouts - inflation eventually has to come out the other end... That is almost the amount of all debt the govt has run up for the last 80 years!
In the meantime - there might be deflation.... (which will be followed by hyper-inflation)
OECD warns of worst recession since early 1980s
OECD warns of worst recession since early 1980s -- Hilarious -- try the early 1930's.....
In its half-yearly economic outlook, the Paris-based organization said economic output will likely shrink by 0.4 percent in 2009 for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008.
Comment - I think their forecast for shrinkage - is much more optimistic than what will play out in reality...
In its half-yearly economic outlook, the Paris-based organization said economic output will likely shrink by 0.4 percent in 2009 for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008.
Comment - I think their forecast for shrinkage - is much more optimistic than what will play out in reality...
Monday, November 24, 2008
Bailout of GM Won't Work...
GM is burning through cash to the tune of $4 to $5 billion per month.
At that rate, even if they were to snag the entire $25 billion from Uncle Sam, the company could remain solvent only through Q1 2009.
Does any reputable economist think the economy will be markedly better by April? Unlikely.
So it begs the question: Rather than treat the American public to another horror story, why don't you help show us how you plan to build better cars? Cars that can compete with their German and Japanese counterparts?
At that rate, even if they were to snag the entire $25 billion from Uncle Sam, the company could remain solvent only through Q1 2009.
Does any reputable economist think the economy will be markedly better by April? Unlikely.
So it begs the question: Rather than treat the American public to another horror story, why don't you help show us how you plan to build better cars? Cars that can compete with their German and Japanese counterparts?
Why Citi Was Bailed Out
The fact is - they made a lot of bad loans.... subprime loans /// no doc interest only 100% financing loans for people upsizing to McMansions etc.
So - the government is rewarding them for their screw ups..... Yet the people who got screwed by these loans - are...well....screwed....
Why Citi Was Bailed Out
Whether the government's rescue of Citigroup Inc., announced late Sunday, will ultimately prove a good deal for taxpayers is hard to tell. In part, that's because no one seems sure what Citi's troubled assets are actually worth.
If the gamble pays off, Citigroup would be back on firm footing, unhinged financial markets would recover and taxpayers would turn a profit. If it doesn't, taxpayers would take a hit. And they would possibly have to rescue still more huge financial institutions, digging the bailout hole even deeper.
The case for rescuing Citigroup, a company with 200 million customers and operations in more than 100 countries, may be more persuasive than the case for smaller banks whose reach doesn't extend so far. Still, the government action makes other financial companies more likely to seek federal aid.
Citigroup was hit especially hard by the meltdown in risky subprime mortgages made to people with tarnished credit or low incomes.
Under the loss-sharing arrangement, Citigroup Inc. will assume the first $29 billion in losses on the risky pool of assets, which stays on its books. Beyond that amount, the government would absorb 90 percent of the remaining losses and Citigroup 10 percent. Money from the $700 billion bailout and funds from the FDIC would cover the government's portion of potential losses. The Federal Reserve would finance the remaining assets with a loan to Citigroup.
In exchange for the guarantees, the government will get $7 billion in preferred shares of Citigroup.
As a condition of the rescue, Citigroup cannot pay quarterly dividends to shareholders of more than 1 cent a share for three years unless it obtains consent from the three federal agencies. The bank is now paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter.
The agreement also restricts executive pay, including bonuses. But it doesn't get rid of Citi's top management as the government did with AIG.
So - the government is rewarding them for their screw ups..... Yet the people who got screwed by these loans - are...well....screwed....
Why Citi Was Bailed Out
Whether the government's rescue of Citigroup Inc., announced late Sunday, will ultimately prove a good deal for taxpayers is hard to tell. In part, that's because no one seems sure what Citi's troubled assets are actually worth.
If the gamble pays off, Citigroup would be back on firm footing, unhinged financial markets would recover and taxpayers would turn a profit. If it doesn't, taxpayers would take a hit. And they would possibly have to rescue still more huge financial institutions, digging the bailout hole even deeper.
The case for rescuing Citigroup, a company with 200 million customers and operations in more than 100 countries, may be more persuasive than the case for smaller banks whose reach doesn't extend so far. Still, the government action makes other financial companies more likely to seek federal aid.
Citigroup was hit especially hard by the meltdown in risky subprime mortgages made to people with tarnished credit or low incomes.
Under the loss-sharing arrangement, Citigroup Inc. will assume the first $29 billion in losses on the risky pool of assets, which stays on its books. Beyond that amount, the government would absorb 90 percent of the remaining losses and Citigroup 10 percent. Money from the $700 billion bailout and funds from the FDIC would cover the government's portion of potential losses. The Federal Reserve would finance the remaining assets with a loan to Citigroup.
In exchange for the guarantees, the government will get $7 billion in preferred shares of Citigroup.
As a condition of the rescue, Citigroup cannot pay quarterly dividends to shareholders of more than 1 cent a share for three years unless it obtains consent from the three federal agencies. The bank is now paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter.
The agreement also restricts executive pay, including bonuses. But it doesn't get rid of Citi's top management as the government did with AIG.
Sunday, November 23, 2008
THIS JUST BROKE (12 PM EST) ON GOVT BAILOUT OF CITIGROUP
The federal government agreed Sunday to take unprecedented steps to stabilize Citigroup Inc. by moving to guarantee close to $300 billion in troubled assets weighing on the bank's books, according to people familiar with details of the plan.
Citigroup must absorb the first $37 billion to $40 billion in losses from these assets. If losses extend beyond that level, Treasury will absorb the next $5 billion in losses, followed by the FDIC taking on the next $10 billion in losses. Any losses on these assets beyond that level would be taken by the Fed.
Citigroup would also agree to work to modify -- if possible -- troubled mortgages held in the $300 billion pool, using standards created by the FDIC after the collapse of IndyMac Bank.
Taxpayers could be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.
The government and Citigroup had hoped to unveil the plan Sunday evening, but the negotiations appeared to drag on longer than expected.
Depending on the structure of Citigroup's deal, government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.
"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"
Citigroup must absorb the first $37 billion to $40 billion in losses from these assets. If losses extend beyond that level, Treasury will absorb the next $5 billion in losses, followed by the FDIC taking on the next $10 billion in losses. Any losses on these assets beyond that level would be taken by the Fed.
Citigroup would also agree to work to modify -- if possible -- troubled mortgages held in the $300 billion pool, using standards created by the FDIC after the collapse of IndyMac Bank.
Taxpayers could be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.
The government and Citigroup had hoped to unveil the plan Sunday evening, but the negotiations appeared to drag on longer than expected.
Depending on the structure of Citigroup's deal, government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.
"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"
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