Did Wall Street miss a total meltdown by a hair?
The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level – a 22 percent decline! – while the clang of the opening bell was still echoing around the cavernous exchange floor.
There are two types of panic on Wall Street … panic selling and panic buying … we’ve seen both as of late. We can debate meltdowns and bailouts until the cows come home … but one thing is certain … Capitalism is going through an enormous test.
Or, is it really capitalism any longer, when 5 or so firms account for fully 50% of the trades on Wall Street and the people with their fingers on the trigger circulate through the same boardrooms … and those boardrooms have tentacles latched onto one, Barry Obama?
Barack Obama has a major Wall Street and Washington problem that the media so far is refusing to acknowledge or explore. He is in the pocket of the Wall Street firms and mortgage security companies that are at the center of the collapse of the real estate bubble. He is closely tied to at least two of the Fannie Mae principals. As Ricky Ricardo would say, “Barack, you got some splaining to do.”
Let’s start with the numbers. Why is a first term Senator pulling down almost $300,000 a year from Goldman Sachs, Lehman Brothers, Bear Stearns, Fannie Mae, Freddie Mac, AIG, Countrywide Financial, and Washington Mutual? He has not even completed his fourth year in the Senate and received a total of $1,093,329.00 from these eight companies and their employees. (all data from OpenSecrets.org). John McCain’s numbers, according to OpenSecrets.org for the period 1990-2008 (i.e., 18 years worth of data) only collected $549,584.00. In other words, Barack is receiving $273,582.25 (and 2008 is not over) per year while McCain raised a paltry $30,532.44.
By the way, are you Long or Short Obama 2008?
cross-posted @ Cjunk
Yeah,but Kate wrote a couple hundred posts saying the economy’s sound and ridiculing anyone who said it wasn’t.
So that’s that.
Holy S**it. And the guy talks the talk of a Caviar Socialist. Reminds me of one of the accusations in the movie; “Fahrenheit 9/11”. Our hero, Michael Moore, accuses several key Republicans of being involved with Conico; establishing the oil-Iraq/Afghan connection. Another true documentary: “FarenHype 9/11” exposes that it was Democrats who actually were heavily involved in the company, including the big guy.
Hope someone is following this up regarding other top Dem’s.
My portfolio:
Up $4,000 today.
Up $3,000 Friday.
Up $5,500 on Thursday.
Sorry you missed the opportunities, real.
The economy’s in great shape. It’s the investment banking (stock brokerage) companies that are going into the toilet.
US unemployment is at 6%. Inflation is under control.
About the only economic fundamental out of whack is the huge debt, but hey, I’m not a US taxpayer who’s now the proud owner of nationalized stock brokerage house.
US dollar is going for a dive … bulk up on gold stocks, since that’s going to be the alternate currency.
Don’t worry about the world events you cannot control. Just profit from it.
That’s my tip for today.
Hey, real, you’re a real dumbass. Kate’s been doing that series for a LONG time now, long before the current crop of troubles surfaced. The US has been “on the brink of recession” for 7 years now, according to all the mainstream news reports. Get a clue.
More to the point, Obama’s platform of change and hope is increasingly dodgy now.
Once US taxpayers get stuck with US$700 billion in debt, you have to wonder where the appetite will be for further taxation and government spending: two things crucial to Obama’s New Deal.
And McCain doesn’t get a by either; his credibility on the economy hardly stands up either.
It’s interesting that among the snobby insinuations against Palin are her lack of “experience” and her non-Ivy League hick-college journalism degree.
And yet none of the establishment DC or Wall Street hot-shots and Poindexters – for all their Princeton, Yale and Harvard MBAs and inside-the-beltway nous – seem to have acquitted themselves any better than the rest of us rubes on this…
http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html
Top Recipients of Fannie Mae and Freddie Mac
Campaign Contributions, 1989-2008
Name Office Party/State Total
1. Dodd, Christopher J
S
D-CT
$133,900
2. Kerry, John
S
D-MA
$111,000
3. Obama, Barack
S
D-IL
$105,849
4. Clinton, Hillary
S
D-NY
$75,550
5. Kanjorski, Paul E
H
D-PA
$65,500
6. Bennett, Robert F
S
R-UT
$61,499
7. Johnson, Tim
S
D-SD
$61,000
8. Conrad, Kent
S
D-ND
$58,991
9. Davis, Tom
H
R
$55,499
10. Bond, Christopher S ‘Kit’
S
R-MO
$55,400
11. Bachus, Spencer
H
R-AL
$55,300
12. Shelby, Richard C
S
R-AL
$55,000
13. Emanuel, Rahm
H
D-IL
$51,750
14. Reed, Jack
S
D-RI
$50,750
15. Carper, Tom
S
D-DE
$44,389
16. Frank, Barney
H
D-MA
$40,100
17. Maloney, Carolyn B
H
D-NY
$38,750
18. Bean, Melissa
H
D-IL
$37,249
19. Blunt, Roy
H
R-MO
$36,500
20. Pryce, Deborah
H
R-OH
$34,750
21. Miller, Gary
H
R-CA
$33,000
22. Pelosi, Nancy
H
D-CA
$32,750
23. Reynolds, Tom
H
R-NY
$32,700
24. Hoyer, Steny H
H
D-MD
$30,500
25. Hooley, Darlene
H
D-OR
$28,750
So it appears Fannie Mae was donating across the political spectrum with a decided Democratic tilt.
The Mortgage business gets a good going over here:
http://affordablehousinginstitute.org/blogs/us/2006/02/gses_greenspans.html
As Alan Greenspan knew about this:
February 16, 2006
….
The rate spread compression (cheaper loans) occurs at origination and initial securitization. Buying and selling existing portfolios doesn’t help the consumer. It does make Fannie Mae a ton of money, and it puts taxpayers at risk:
“They do add systemic risk to our financial system, which normal market forces are unable to resolve.”
But, Mr. Greenspan thinks you may say, the GSEs are very clever. Can’t they watch the markets and react the instant there’s a flicker of a problem?
Well no, he answers, because they’re too big:
In the current system of mortgage financing, the prepayment and interest rate risks associated with mortgages …
Prepayment risk is that the holder of a high-rate loan may pay it off even as the securitizer can’t prepay its matching instrument. If so, all that favorable spread vanishes in an instant.
… are concentrated in Fannie’s and Freddie’s large portfolios rather than being more widely dispersed across a broad range or market participants, including the overwhelming number of financial institutions that are significantly less leveraged than the GSEs (such as commercial banks and insurance companies).
Unlike the typical financial institution, which is as a fish in the sea, each GSE is like a whale in a swimming pool. It’s so big that it soaks up disproportionate space, and any move, any tremor, any twitch, sends shock waves throughout the pool, scattering the fish.
As Fannie and Freddie increase in size relative to the counterparties [The other half of any transaction. — Ed.] for their hedging transactions, their ability to quickly respond to changing market conditions and correct the inevitable misjudgments inherent in their complex hedging strategies becomes more difficult,
This is how crapulence happens. The regulators were taking donations, ensuring that the train had no brakes.
Translation: Congress and Senate did not provide proper limiting oversight. End result: taxpayer bailout.
Of course they all knew about the elephant in the room but failed to act back in about 2005/06.
Where is my air sickness bag?
A billion here, a billion there, pretty soon it adds up to real money!
Cheers
Hans-Christian Georg Rupprecht, Commander in Chief
Frankenstein Battalion
2nd Squadron: Ulanen-(Lancers) Regiment Großherzog Friedrich von Baden(Rheinisches) Nr.7(Saarbrucken)
Knecht Rupprecht Division
Hans Corps
1st Saint Nicolaas Army
Army Group “True North”
Good one JJM. SP isn’t in their pockets yet. I for one hope they get in and house clean, the USA sure needs it.
Help me out here:
Liquidity, defined as what the feds just did, was to inject cash into the system, allowing financial institutions the wherewithal to meet their short term market commitments.
From whence came this cash? Did it just appear, as a national mortgage on the future? Has the gross amount of cash now increased? Or is this a bookkeeping trick to keep up with the “velocity of money”? Have the goods and services changed at all?
A really naive question here: Is there not a link between an increase in the monetary supply and inflation? May I invoke Friedman?
Can someone explain why inflation is not going to seriously kick us in the a@@ in about 12 months?
The question of total meltdown…
There are THREE types of panic on Wall Street :
Panic Selling … Panic Buying and Panic Journalism.
My prediction is a total meltdown on Oct 15-2008!! Got it from a woman with a crystal ball and a gypsy look in her eyes!! God she was cute!!
Tenebris at 9:40 PM
Tenis, they took FUTURES of people taxes, and electronicaly transfered them to the accounts of the non liquid CO s so that they could pay the dividends to the people so that the people could pay the taxes on which the FUTURES had been drawn, thusly these banks could pay out the accounts of those whom would with draw their moneys to further pay taxes so tha…………..:-))))
Where’s Kate lately? I want her to keep telling us what great shape the US economy is in. I guess 700 billion dollar bailouts are just a bunch of hype from the main stream media. 😛
Tenebris-
It would be Inflation if prices were static or rising at the moment of intervention, however, asset prices were collapsing, mortgage back securities, housing, and, to boot, some equity prices. That, is deflationary, and is far more entrenchant than inflation, just look at what 25 YEARS of deflationary tendencies has done to Japan. Zero growth no matter what they do.
So, yes, in ordinary circumstances, this sort of infusion would be inflationary, but what they are trying to stop is worse, deflation.
The easiest way to picture deflation is as such, when you know the price of something is falling, and it’s definitely not the last one, it’s not that big a deal to wait for the price to fall a little bit. Once you make that delaying decision the first time, it’s not too hard to do it again, and again, and so on…
You are not the only one putting off that decision and, therefore, the lack of activity causes the market almost stop, hence, the Japan analogy.
how about first we made Canada indepent and step back more from import and export
instead more focuse to produce inside tofeed people
next made Cnadain stock
next design the how to buy and how we sell that we get profit
how finacial statment of that give us more plus not recession
cut wrong
think inside increase health benefit
and bring anyting from out with contract
like if immigrant in first 5 years do crime msut leave under contract agreement
or even citizen who live if do certain wrong get punish
or so on
if we get who we have as population in Cnada in highest
then take look at import as hire more skill hiring people to who is in and who is out
made all circulate of canda from politic to children to education to old aga as link together for best of each group every year
and have fun not worry about so many and so many other and if we have more we pay help outside canada as donation if we do not we jsut say sorry we can not help you
this stock is kind of only made rich company is richer
may be stock market can be ehange by goverment investment instead of only private sectore spending
may be time f stock and investment need to change to new shape of business
tell economist to think and think may some thing new may come in their head adn thier brain
we need balance money investment for security and money for saving for any purpose
what else we want
having all the money of the world is not give people happiness
ask Mr. Rogers he will tell us the truth
find the real way for happiness and reduce stress of stock market
stock market is like gambeling
up down up down like you gambling and blood pressue go up and down
find better healtheir way to made money
still I am waiting our professional economist creat new ideas in helpful for all
let them think think they took so many course for god sake butthey can not use it for themselve
let ask Mr. harper and mr. Mayor Miller
what they think to do for best econmoy and mor saving and less strees adn more secuity in city
hwo they creat more money and how peopl who breach their contract must pay thier money back
Hey, I made a killing on the Loto 6/49 last week.
Bot at $2 and sold for $5.
🙂
Ah; Foobert, but how many did you bot at $2 and sold for $5? That is the question.
Looking into this guys background it gets shadier all the time. I never really started with much of any opinion on him, except him being a democrat. Which while bad does not make a fair minded or action orientated individual full of malevolence.
Saying the sea will fall & the planet heal because of him is outrageously egotistic if not pseudo-messianic. Than there is the means he used to became a Senator. With no rivals his lawyers having eliminated them by technicalities, including his mentor.
25 lawyers sent to dig dirt on Palin flown in on Obama’s account.
Than of course there is the Churchinaity hating America group he belonged to for 20 years. Besides his great friend the weatherman terrorist. Than the community leader shtick with manuals that read like Communist cell manuals.
How did this nobody who claims not to be Muslim &admits it on TV than confidently switches religion again while being coached by a commentator? I never seen the likes of that in my life till then.
Something is terribly off here & its just not the election propaganda. This appears like a Government take over by insurgents of a different kind using the Election to crown there patsy. Only this one will not be played, he’s using them instead.
The Vatican finances are less mysterious than this dudes operations, back ground, or even any accomplishments . How did he get this far?
new @ 11:06 pm: Too long, didn’t read.
kev:
Something about people are too stupid to be trusted to make decisions on how to spend their own money. Only the greater jihad, whose adherents are much smarter than those in the western world, can save us from ourselves.
And how America is to blame whenever some idiot suicide bomber blows himself up.
Add a bit of anger and hatred, then you’ve about got it figured.
I haven’t read many of his posts either, but that’s the general headspace this buffoon usually occupies.
pete, Tenebris, GYM, Porter:
First, as I’ve posted repeatedly, the official US CPI figures are a joke, a sham, and a canard. If you believe that inflation in the US is less than 3%, I’ve got some shares in a Wall St. investment bank to sell you. By undercounting inflation, the US government saves billions in cost-of-living adjustments to Social Security, pensions, and government wages.
Undercounting also makes negative GDP growth look positive; remember that REAL GDP is calculated as NOMINAL GDP – CPI. So, 4.8% Nominal growth – 3% Fake CPI yields a 1.8% rise in GDP. Except CPI should be around 7%, and real GDP should have fallen by 2.2%. This is why I’ve maintained the US has been in recession for a long time, but it’s been covered by officials.
Tenebris, the money for all the bailouts has been created the old fashioned way – they printed it. The US dollar index is a trade-weighted measure of the US dollar vs. other currencies, including the Euro, C$, pound, yen, and ren-min-bi. You can see a chart of it here: http://www.fxstreet.com/rates-charts/usdollar-index/ (it takes a while to load; select “500” periods and “weekly” to get a ten year chart). You’ll see that the index has declined from 120 when GWB was elected to 72 – nearly cut in half – before undertaking one of its periodic rallies (see late 2004 for example) in the last few months. However, since the Friday announcement, the dollar index has plunged, as traders have moved out of the dollar for other currencies (including the loonie, which is up almost 3 cents). Currency traders aren’t stupid (the forex market is the largest and most liquid market in the world, BTW), and as it becomes increasingly clear that the US is going to try to print its way out of trouble, they’re going to abandon the dollar. Which is also a reason why gold, the one currency governments can’t debase, has jumped from $740 to $900 in the last three trading days, a nifty 21% jump.
I have a friend who’s a sales director at the Royal Canadian Mint. He tells me he can’t get his hands on any physical gold to sell – no Maple Leaf coins, no bars, no ingots. The US Treasury stopped selling gold Eagles a few months ago. He expects to see gold go up from now until the next Chinese New Year due to seasonal demand for gifts, and investment demand. He sees gold jumping way past the $1047 peak it hit earlier this year. (Note: that’s gold in US$; a chart of gold vs. the Euro is much less dramatic.) Also note that people who buy the gold ETF’s in Canada and the US (XGD and GLD) have the effect of removing physical gold from the market, again raising the price.
The near month contract in oil jumped from $90 to $120 before expiring today; the November contract is a more sedate $110. The CRB index, which tracks 23 different commodities, rose dramatically on Friday, and for the first time ever, ALL 23 commodities rose. These include energy (oil and natural gas), metals (industrial such as lead and zinc), foods (butter, wheat, soybeans), and fibres (burlap, cotton, wool, etc.). Commmodities have been drifting lower since June, which was about the time the US$ started to rally. Now that the US$ has started to fall again, expect to see the commodities rally.
It’s all about the US$, my friends, which is basically doomed. The slide will be slow and controlled, but it’s going to happen. Protect yourself now!
PS For a series of interesting columns on these issues, google “Fleckenstein MSN Money”. Bill is one of the sharpest tools in the drawer, and he is ruthless when skewering the guilty.
Gee, my investment consultant wants to see me this morning… should I be afraid or glad he is still in the country?
IMOHO the media have more of an effect on this panic than most people realize.
Obahma became RICH during the Bush presidency.
Terrible years those.
KevinB – You are, regretably, very likely correct.
Porter – I don’t buy the deflation boogyman. This is an attempt to keep the party going. The Japan illustration is invalid. That a country in demographic collapse continues to do so well is actually quite impressive.
So, interest rates – up or down. Place your bets.
I too see the deflation scare as just that. Under a fiat monetary system there is no limit to how much money a government can create. When they create too much the value of the money falls relative to other goods. The most likely outcome for the US now is a hyper inflationary depression developing over the next several years.
What people are confusing is asset price deflation with real deflation (No one said inflation was rampant when the stock market bubble and housing bubble were taking place).
Inflation is an increase in money supply pure and simple.
When a country accumulates as much debt as the US has now there is only one way out. Print money and pay off your creditors with worthless dollars.
Kevin,
A better way would be to reduce their debt would be to cut spending. Like we did.
The US’s debt now is still less than Canada’s was at its peak and is less than most European country’s debt/GDP ratio.
As for inflation, it really doesn’t matter how you measure it so long as your methodology is consistent. In the mean time, the short rates are negative (like Japan’s has been for over a decade.)
The drop in the US dollar is what is going to save their economy. It makes exports more comptetitive and imports more expensive. This should go a ways to fixing their trade deficit.
The US needs to get out of Iraq, bomb Iran’s nuke plants (but do NOT invade or put boots on the ground,) pull out of Afghan and let the lot of them kill each other till the cows come home.
It’s a waste of time, money, and lives to try to civilize people who don’t wish the be civil. That alone will eliminate their deficit.
The other problems are structural and will not be helped until its too late. If you are a US boomer, be prepared to receive little to nothing in state handouts cause the cupboard will be bare…
I guess I’m the odd man out – my concern for the U.S. economy is stagflation.
“Capitalism” is industry, trade, and commerce. The financial sector is useful to the extent that it raises money to finance the above. The limited-liability publicly traded corporation may be
the greatest invention in human history.
However, when the financial sector starts making money for itself by churning assets in various clever ways then it becomes deleterious.
Real companies, that generate wealth through manufacture or trade, should not need mergers and acquisitions groups for purely defensive purposes.
Real companies should be able to run healthy surpluses, as prudence would demand, without being subjected to buyouts and other forms of takeover.
Warwick: “As for inflation, it really doesn’t matter how you measure it so long as your methodology is consistent.”
Nice try. Google the terms “hedonic adjustment”, and “CPI substitutions” (in particular, google hedonic aj. with “Bill Gross PIMCO” to find out what the man who runs the *largest* bond fund in the world thinks of this. Hint: it’s not favourable.) Apparently, you are unaware that many US government obligations are linked to the official CPI figures – government pensions, Social Security payments, contract wages, etc. This is not a question of it not really making a difference if official inflation is 2.4% or 4.4%; it makes a huge difference to a government that’s already broke.
As to the US cutting spending: hahahahahahahahaha.
What’s next? Jack Layton promising a balanced budget? Elizabeth May buying a Hummer? Stephane Dion uttering a comprehensible English sentence? The reality is US federal government spending has not fallen year-on-year since the end of the Vietnam War. Even while Bill Clinton was enjoying the peace dividend in the early 90’s (and federal spending fell slowly as a % of GDP, it’s true), the absolute level of spending never dropped. And with an ever greater share of US federal spending being eaten up by Social Security, Medicare, and Medicaid, which aren’t discretionary programs, it’s not likely to drop in the future, either.
Ben Bernanke, who has oft been quoted as saying he’d “drop money from helicopters” (which he never actually said) to forestall a depression, DID actually say that the US “possessed a technology” which could prevent a depression – “the printing press”. He’s studied both the Great Depression and the Japanese depression in detail, and he’s prepared to inflate as necessary to stop the balloon from collapsing. As Richard Russell, the author of the “Dow Theory Letters” says, the US’s situation is “inflate or die”.
According to Reuters: “The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust GLD, said its gold holdings rose 30.2 tonnes or 4.4 percent to a record 709.62 tonnes on September 22.
The trust, which issues securities backed by gold, has seen its holdings rise 15.5 percent in the week to Monday as the unfolding financial crisis has spurred safe-haven buying of gold.”