STOCK MARKET WATCH, Monday January 26

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday January 26, 2009

AT THE CLOSING BELL ON January 23, 2009

Dow... 8,077.56 -45.24 (-0.56%)
Nasdaq... 1,477.29 +11.80 (+0.81%)
S&P 500... 831.95 +4.45 (+0.54%)
Gold future... 895.80 +37.00 (+4.13%)
30-Year Bond 3.33% +0.08 (+2.52%)
10-Yr Bond... 2.62% +0.03 (+1.08%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD,EURO, YEN, Loonie and Silver

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Read more: du

[ozymandius]

1. Market WrapUp

Who Needs Economists When We Have the Home Builders?
BY BRIAN PRETTI

I mean really! As you know, plenty of very highly paid Street economists at many a major brokerage or banking firm got it dead wrong over the last few years. Not just a little bit off, but dead wrong! “No one ever could have seen this coming.” How many times have you heard that one over the last few months? C’mon, anyone who is even a semi-serious student of credit and economic cycles saw “this coming” a mile away. In fact, personally over the last few years I have been relying in part on the homebuilders of this world to tell me exactly what was to come ahead, and they have obliged significantly. Thanks guys (and gals). And sure enough they have been dead right. Not close, but dead right.

Probably nine months back or more we were telling folks a very meaningful decline in consumer spending was coming full speed ahead and would not be denied. We were counseling folks that a massive cliff like drop in industrial production was just about to take the consensus by big time startling surprise. And we were expecting domestic labor market conditions to weaken very meaningfully. How were we so sure these events were to transpire? Simple, the homebuilders were telling us loud and clear. No equivocation. No on the one hand and then the other hand commentary. Loud and clear and with graphic realism. I’ll show you exactly what I’m referring to and suggest you pay attention as we move ahead. Ignore these folks at your investment peril.

As you probably know, the wonderful folks at the National Association of Home Builders put out a monthly survey directly asking those in the industry just how they feel about life in the super duper world of residential real estate. This is a diffusion index, meaning that readings above 50 tell us the preponderance of responses were positive, and vice versa. As of the latest January data that hit the tape on Wednesday of this week, this crowd is feeling pretty darn bad. In fact, as bad as they have ever felt in the entire history of this data.

http://www.financialsense.com/Market/wrapup.htm

[Hugin]

6. If I could edit my sig-line, I'd add this.

"this crowd is feeling pretty darn bad."

They should try the veal... It's very good. :/

[ozymandius]

11. Wasn't the National Association of Homebuilders referred to as the canary?

I seem to recall, from at least a year ago, some fun poked at RealtyTrak's expense over the vastly differing views and reports from these two agencies with the Homebuilders point-of-view appearing desperate. RealtyTrak, of course, shook pom-poms and waved sparklers.

[Hugin]

14. IIRC your memory serves you well. n/t

[ozymandius]

2. Today's Reports

10:00 Existing Home Sales Dec
Briefing.com 4.40M
Consensus 4.40M
Prior 4.49M

10:00 Leading Indicators Dec
Briefing.com -0.5%
Consensus -0.3%
Prior -0.4%

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[UpInArms]

64. U.S. Dec. leading economic indicators rise 0.3%

10. U.S. Dec. leading economic indicators rise 0.3%
10:00 AM ET, Jan 26, 2009

[UpInArms]

65. U.S. 2008 existing home sales fall 13.1% to 4.91 million - Dec. median home price down 15.3%

16. U.S. Dec. existing home sales rise 6.5% to 4.74 million pace
9:59 AM ET, Jan 26, 2009

17. U.S. 2008 existing home sales fall 13.1% to 4.91 million
9:59 AM ET, Jan 26, 2009

18. U.S. Dec. existing home inventories fall 11.7%
9:59 AM ET, Jan 26, 2009

19. U.S. Dec. median home price down 15.3% vs. year earlier
9:59 AM ET, Jan 26, 2009

20. U.S. Dec. home sales stronger than expected 4.36 million
9:59 AM ET, Jan 26, 2009

[ozymandius]

3. Oil falls below $46 as US warns of worse recession

SINGAPORE – Oil prices fell below $46 a barrel Monday in Asia after White House officials warned the U.S. recession will likely worsen in coming months, undermining demand for crude.

Light, sweet crude for March delivery fell 95 cents to $45.52 a barrel by afternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract rose Friday $2.80 to settle at $46.47.

The U.S. economy, the world's largest consumer of crude, will "get worse before it gets better," Vice President Joe Biden said Sunday, dampening expectations that a massive government stimulus package will quickly spur growth.

....

In other Nymex trading, gasoline futures fell 1.99 cents to $1.13 a gallon. Heating oil dropped 2.30 cents to $1.43 a gallon while natural gas for February delivery slid 12.3 cents to $4.40 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[nc4bo]

40. But it's still above the $33-36 it was just a couple months ago

is this higher per barrel price related to OPEC's promise to cut production or is there something else going on?

I don't understand why it's so "high", I'm a big dumb-dumb. The economic news is no less (it's actually worse) dreadful than the previous deep extreme.

TIA for any exclaimation and apologies from the ultra-slow (me).

[Demeter]

57. It Seems that The Suppliers Are Withholding Shipment

What with all those tankers floating around with crude, as offshore storage....

Keep the pressure on, and tax the F-ing oil companies, and you'll see those tankers come into port and the prices decline....

[FarCenter]

66. This would be for West Texas Intermediate for March delivery in Cushing Oklahoma

As traded on the Nymex. It is not necessarily indicative of what refiners around the world are paying for crude oil anymore.

Brent Blend and Dubai benchmarks have diverged significantly in the last several weeks. Plus there is the OPEC basket and several other benchmarks.

Prices in Cushing reflect the slowing demand in the US and an oversupply from Canada coming into Cushing with no where to go.

[ozymandius]

4. Economic forecasters see more job cuts ahead

WASHINGTON – It's shaping up to be another lousy year for workers, with more companies expecting to cut payrolls in the months ahead.

That's part of the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics that depicts the worst business conditions in the U.S. since the report's inception in 1982.

Thirty-nine percent predicted job reductions through attrition or "significant" layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.

The recession, which started in December 2007, and is expected to stretch into this year, has been a job killer. The economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate jumped to 7.2 percent in December, the highest in 16 years, and is expected to keep climbing.

http://news.yahoo.com/s/ap/20090126/ap_on_bi_ge/business_outlook

[ozymandius]

5. Philips to cut 6,000 jobs after loss

THE HAGUE (AFP) – Dutch consumer electronics giant Philips said Monday it would cut 6,000 jobs worldwide to cope with the global slowdown which pushed its results into the red.

The company, which employs 121,000 people globally, reported a net loss of 186 million euros (242 million dollars) for 2008 after a fourth-quarter loss of 1.47 billion euros, largely owing to an adjustment in the value of its Lumileds diode light unit.

....

The fourth-quarter loss was worse than analyst forecasts for 1.2 billion euros and reflected a 1.3-billion-euro revaluation of Lumileds. In the same period a year earlier, the company had a profit of 1.4 billion euros.

....

A company spokesman said all divisions would be affected by the job cuts after 9,000 posts went in 2008, of which 3,000 were lost in the fourth quarter alone.

http://news.yahoo.com/s/afp/20090126/bs_afp/netherlandselectronicscompanyearningsphilips

[Hugin]

7. Interesting, I'd think 'Lumileds' would be doing okay. n/t

[tclambert]

32. We are truly entering a new Dark Age.

The light makers are cutting back. Maybe the torch makers and pitchfork makers will thrive.

[FarCenter]

67. A big writedown in "goodwill".

This will happen a lot. "goodwill" is the difference between an acquisition's book value and what the acquirer paid for the acquisition. There is a lot of "goodwill" recorded as assets on various companys' books. Much of it will have to be written off.

Apparently LED sales to the automotive market are down...

Most LEDs are used for indicators, backlights for displays, flashes for digital cameras, and not for lighting.

[tclambert]

88. Right. New cars use a lot of LEDs, for brake lights, turn signals, etc.

They use banks of them in place of one old-fashioned incandescent. So you may have more than a hundred LEDs in a single automobile.

[AnneD]

49. Morning Marketeers....

:donut: and lurkers. I'm will go out on a short limb here and say a large portion of the country has slipped into a Depression. I use as evidence the growing job losses. The federal government in general and a majority of economists and the feds in particular are like cats working the wrong mouse hole. The home interest rate can be all the way to zero and we will still have foreclosures until measures are in effect to help the middle class. I mean-how difficult is this to figure out....if the consumers are 2/3rds the economy and your economy is having trouble...won't you be putting 2/3rds of your aid and effort into shoring up your middle class. They better be doing something quick because folks today aren't like they were in the 30's. Like the one buzzard said to the other buzzard-patience my ass, I'm going to kill something. The public will reach a point (and have in our not so distant past) when they run out of patience. Most folks are willing to give Obama some slack-but they eventually need to have proof that we are making headway.

It's all about the jobs baby-all about the jobs :smoke:

edited to add you want to help the middle class and working class as money spent there gets circulated quickly into the economy. I of all people am not encouraging class warfare. :evilgrin:


Happy hunting and watch out for the bears.

[DemReadingDU]

51. Did anyone happen to watch the DHL segment on 60 minutes?

DHL is near where I live. 10,000 jobs to be gone this week. Very sad.
Here is the link I created last night
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4910454

and link that malaise created
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4910542


Edit: Hi AnneD. It is, all about jobs. But they are quickly leaving Ohio. We need something in this state to keep people employed. I don't want to think about the ramifications of even more jobs leaving.

[Demeter]

56. Of Course Not, AnneD

None of us would ever advocate class warfare, just defense against it!

[AnneD]

71. Just in case you need to know.....

body weak points, unusual exploding devices, or get a document forged-I'm your gal. All those years of being in the PSYOP unit gave me well rounded training-thanks Uncle Sam.

[Demeter]

98. Don't Call Us, We'll Call You?

[Roland99]

74. It's the neocon mindset that took over our fiscal and foreign policy 30 years ago.

Just like they keep banging out the same batshit-insane war propaganda, so do they keep harping on low taxes and trickle down. Keep the rich fat and happy and all that "goodwill" will just flow like the Mighty Mississippi.


You betcha!!

[tclambert]

89. Right you are, AnneD, all about jobs.

Unemployment in Michigan has hit 10.2%. And that's the "official" number (U3), not the one SMWers like (U6), which includes "discouraged workers," "marginally attached workers, or those who would like and are able to work, but have not looked for work recently," and "part time workers who want to work full time, but can not due to economic reasons."

Arg, couldn't find U6 for Michigan, but found an estimate (from another DU post) that it might be as high as 17%.

[tclambert]

90. Oh, and the Michigan numbers do not include people who have left the state looking for work.

A brother and two nephews moved to Las Vegas to get work a few years ago. At the time it sounded like a smart move. Now, even the market for sin is drying up.

[UpInArms]

92. "not the one SMWers like (U6)"

we don't "like" the number - it is the number that is used in the monthly reports that are put out

we (the SMWers are well aware of how cooked those numbers actually are) don't have any control of the reported information

and - hey tclambert - we really are glad you're here

:hi:

[ozymandius]

8. Nationalization Gets a New, Serious Look

WASHINGTON — Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation’s banking system?

.....

But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?

.....

So far, President Obama’s top aides have steered clear of the word entirely, and they are still actively discussing other alternatives, including creating a “bad bank” that would nationalize the worst nonperforming loans by taking them off the hands of financial institutions without actually taking ownership of the banks. Others talk of de facto nationalization, in which the government owns a sizeable chunk of the banks but not a majority, with all that connotes.

That has already happened; taxpayers are now the biggest shareholders in Bank of America, with about 6 percent of the stock, and in Citigroup, with 7.8 percent.

http://www.nytimes.com/2009/01/26/business/economy/26banks.html

---

About damn time this enters the mainstream dialogue! Call this bailout what it is: nationalization. When the name is finally applied to the mechanism then the taxpayer will stand in much better stead to get its money's worth.

[Demeter]

9. Mood of sobriety and self-recrimination at Davos

http://www.ft.com/cms/s/0/2325a59a-eb07-11dd-bb6e-0000779fd2ac.html


By Gillian Tett in London



In recent years, Goldman Sachs has been renowned for hosting one of the hottest parties during the World Economic Forum’s glittering annual meeting in Davos. No longer. This year, in a nod to the new mood of sobriety and self-recrimination, the US broker has quietly cancelled its party and sharply reduced its delegation to the event, which starts on Wednesday. It is far from alone. John Thain was due to host a high-profile breakfast meeting on Friday in Davos – until he was unceremoniously ousted from his post at Merrill Lynch on Thursday, in the latest casualty of the financial crisis.

Lehman Brothers, which used to send a formidable delegation to the snowy resort, has also disappeared. Vikram Pandit, the embattled chief executive of Citigroup, has withdrawn this year. So has Howard Stringer, the CEO of Sony, the media and electronics group.

Such banking drop-outs are by no means universal. Jamie Dimon, head of JPMorgan Chase, remains confident and will host a party in Davos’s iconic “Piano Bar”. Barclays appears eager to press ahead with a glittering dinner in a mountain-top restaurant, despite its slumping share price.

However, the overall numbers are actually up this year – apparently because many business leaders and policy-makers are frantically searching for ways to exit the current mess and are keen to find ways to shape the new agenda, at a time when so much of the geopolitical order is in flux.

Moreover, as the Davos organisers are keen to stress, others are replacing the banking no-shows. More than 2,500 attendees are registered this year, more than ever before, including 1,400 business leaders. There are also 41 heads of state and government, almost double the previous record, including Gordon Brown, the UK prime minister, and Angela Merkel, Germany’s chancellor.

Some observers attribute that to companies having drawn up their travel plans before the economic slump hit. One senior financier admitted that his company might withdraw next year, though it would turn up this week. “The event has become such a production that we question the value of attending. It’s violently expensive,” he said.

Davos enthusiasts, though, insist that the current crisis has left many business leaders desperately searching for new intellectual compasses at a time when the boundaries between state and business are being redrawn. “This meeting promises to be one of the most important events in the Forum’s history,” enthused Klaus Schwab, head of the WEF.

Some business leaders and policy-makers also hope to use the gathering to extend their influence. Wen Jiabao, the Chinese premier, will be one high-profile attendee this year. So is Vladimir Putin, his Russian counterpart.

Nevertheless, the debates may be tough. In recent years the proceedings have propagated the idea that a cocktail of innovation, globalisation and free-market capitalism could deliver a better world. The financial crisis, though, has shattered confidence in those ideals...Yet, the uncomfortable fact remains that some of those who will be in Davos this week are widely blamed for having created the current crisis – not least because they so notably failed to predict it. Two years ago, during the peak of the credit boom in January 2007, the mood at Davos was so exuberant that private-equity players were lauded as the new stars. Even last January, optimism was high that the financial crisis was short-lived. And this year’s event has already delivered one small embarrassment.



With additional reporting by Peter Thal Larsen and Andrew Edgecliffe Johnson

[Demeter]

10. I Posted this for the Humor==Morning Ozy! Morning Prag--I Mean Hugin

Here's how to get to the Weekend Ecomomists, for those strong enough (or buried in Real Life) to resist the lure of the computer on family time...




http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x419317


And it's a balmy 2F, again. We must be setting records around here.

[ozymandius]

12. Good morning!

:donut: :donut: :donut:

I'd read on Friday how the crowds at Davos were expected to be smaller this year. This is something of a paradox: this bodes ill for the global economy but shrinking crowds at Davos can be a good thing.

[Hugin]

13. Speaking of Thain humor...

You should also cross-post Greg Palast's piece floating around
the E&O.

[Hugin]

15. Oh, I'll do it.

"Palast: "Why An A**Hole is Always in Charge"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x419868

[DemReadingDU]

42. Thanks! Good stuff there

I'm still catching up!

[ozymandius]

16. U.S. business climate worst in 27 years: survey (For the until-recently cave dwellers)

WASHINGTON (Reuters) – U.S. firms are experiencing the worst business conditions in 27 years as the year-long recession worsens, a survey showed on Monday.

The National Association of Business Economics' (NABE) quarterly industry poll found that the economic slump worsened in the fourth quarter and the majority of respondents expected gross domestic product to contract at a faster pace in 2009.

The U.S. economy tipped into recession in December 2007 and there are worries the downturn, triggered by the domestic housing market crash, could be the worst since World War Two.

.....

The housing market collapse and the resulting global credit crisis have eroded household wealth, causing sharp cut backs in spending and severely depressing demand.

About 47 percent of respondents in the NABE survey reported a fall in demand for services and goods, which was an all-time high, while only 20 percent saw an increase. This was the lowest percentage since the survey started in 1982.

http://news.yahoo.com/s/nm/20090126/bs_nm/us_usa_economy_survey

[tclambert]

34. That title is misleading.

It makes it sound like this business climate is not as bad as the climate in 1982, when in fact, their first survey was in 1982, and this year's numbers are the worst they've ever seen. The title could just as easily say: "Worst business climate ever recorded." Still misleading. It should say: "Worst business climate in history of NABE survey."

Any way you use your Ginsu on it, though, it's bad news.

[Demeter]

17. Lights go out across Britain as recession hits home; Electricity demand falls as economy slows at

http://www.guardian.co.uk/business/2009/jan/24/recession-britain


Britain's days as the fastest growing economy in Europe were officially declared over yesterday as the deepest recession in a generation saw consumers turning off the lights and Poles returning home.

While official figures showed the economy contracting at its fastest since 1980, National Grid said demand for electricity had fallen over Christmas at homes and factories across the land, and Poland confirmed that thousands of its citizens were coming home from Britain and Ireland.

National Grid said it was cutting its forecast for electricity consumption this year because of the recession. The thousands of people being laid off each week and the hundreds of firms cutting production are reducing demand.

Industry has suffered most in this recession and made the biggest contribution to the slump in national output, which fell by a worse-than-expected 1.5% in the fourth quarter of last year compared to the third - or around 6% on an annualised basis.

... TUC chief Brendan Barber blamed bankers and previous Tory governments for the economic mess: "This recession is not bad luck or an inevitable swing of the pendulum. Its cause is irresponsible behaviour by banks and financial institutions taking advantage of the deregulation started by Mrs Thatcher and president Reagan, and continued to a greater or lesser extent ever since."

Unemployment was this week reported to have jumped to nearly two million, and analysts say it would be much higher were it not for workers from countries such as Poland returning home.

Poland's treasury minister Aleksander Grad told the Guardian that the economy there, unlike Britain's, would avoid recession. Poland's banks had been regulated tightly and had not got into the toxic derivative products that have brought down banks around the world, said Grad.

National Grid said weekly peak electricity demand would fall by 600-1,000 megawatts, the equivalent of a large power plant, over the next year. The drop will ease the strain on power stations, some of which are facing closure because of age or environmental rules. It will also reduce CO² emissions.

[FarCenter]

69. Weekly electrical demand in the US has generally been down over a year earlier.

By maybe 1 or 2 percent.

Although in the most recent week, it was up, possibly due to the cold weather.

But I'd think that industrial demand for electricity is down. Steel making is running under 50% capacity, and that is a large user of electricity.

[Demeter]

18. Bernie Madoff: The Indictment

http://clusterstock.alleyinsider.com/2008/12/bernie-madoff-the-indictment

Henry Blodget | Dec 11, 08 9:42 PM



The criminal indictment of Bernie Madoff is AVAILABLE AT THE LINK . The good stuff starts at the bottom of page 2, when the FBI agent begins talking about his interview with two of Bernie's senior employees. According to the WSJ, these two employees are Bernie's sons. Also don't miss the last paragraph, where the agent interviews Bernie himself.

[ozymandius]

22. This really demands the popcorn icon.

:popcorn:

[Demeter]

25. Forgive My Fascination with This

I guess it's all part of that Faith-based Reaganomic bullshit.

[Demeter]

24. Bernie Comes Out of the Closet

http://nihoncassandra.blogspot.com/2008/12/bernie-comes-out-of-closet.html

Not a year has gone by during the past fifteen that I have not contemplated what Bernie Madoff did (or didn't do) to make his money. Seventy to one-hundred basis-points-a-month. Net. Net. Net. During tempests, earthquakes, panics and crashes - even during the closure of the exchange itself, Bernie apparently minted coin like few others. Even Renaissance and Shaw tripped occasionally. Not Bernie. Yet no one new what he did. It was one of the best kept secrets in the world. Oh yeah, sure, split-strike conversions were the official line. But every skeptical arb trader knew this couldn't be true.

I also never came across an ex-Madoff trader the way one meets ex-Shaw, ex-Moore Cap, or ex-Citadel employees. Resumes are sent in reply to postings and guys have done the rounds, even if they weren't unhappy and making a moral statement. A spouse moves...whatever. Surely there must be disgruntled Madoffians somehwere, right?. Were they ummm underground? I mean, iterally? My friends at a large IB (who were soliciting business from them years ago) who'd been to their offices said it looked the bridge from the USS Enterprise (the Starship - The Next Generation version). Entry to the IM sub was strictly verboten. Uh huh. He said it was a paperless office. No paper trails. Hmmmm. Violators were fired. Weird. No one transgressed.

Whatever he did, he came a long way from arbing the odd-lots that were the reputed foundation of his activities. I knew his shop from London where he was one of the few to make markets in US stocks out of hours, and if my clients for whatever (mostly ill-advised) reason needed to trade instantly, Bernie would make a price. Not necessarily a good price, but a price. But one does so at their peril since the folk with material non-public information are more predisposed to want to trade outside hours, so the pick-off risk was huge. But he never complained.

Next thing I know, he's at the center of electronic trading revolution - an electronic market-maker facilitator at the center of trading universe. Yet even Timber Hill has bad hair days. Volkswagen ord-pref days. Not Bernie. Is he arbing the exchange fee structure? Is he algorithmically scalping cause he's seeing the order flow before it gets to the exchange? Maybe. Profitably? Who knows? But I didn't have a problem with an old jewish guy making markets. This is what we DO. But there are these investment funds - Fairfield Sentry and Kingate, and these are the issue. They are Madoff-only feeders reputed to be $7bn each. Are they funding his market-making? Why does he need so much capital? What the f*ck f*ck f*cking f*ck could he be doing in the equity markets with that muh capital and still keep it a secret AND deliver returns? They say they are doing these split strike conversions but I can't see how the numbers work. Nor can anyone else. The Wall Street Journal raises the red flags, in an article but it's dismissed as hyperbole disseminated by jealous competitors. But thge nagging thing is: there are lots of smart guys out there. More than sixty of them near Stonybrook with Simons focused on cracking the nut faster, better quicker, and this activity and result, I can understand. But there is no sign of such exactitude or intellectual firepower at Madoff. Just 70 to 100 bps per month, secretiveness, and dissonance.

In 2000, I advised a family-office on their alternative investments, and constructed a portfolio on their behalf. I had free rein (thanks! anon). Included in their legacy portfolio was a sizable Madoff position. As a fiduciary - and a conservative one - coming on the heels of LTCM which also lacked transparency and which made it hard for me to raiise capital - I dug, asked every well-connected equity-finance, prime-broker, electronic trader and HF allocator type I knew and it still didn't add up. The best and brightest still had no more insight than I, though the skeptical shared my suspicions. So, I strongly suggested they "dump it". "One isn't being compensated sufficiently for not knowing, and something just isn't right here. Yeah maybe its OK, but I think it's not". But they liked "it" and they liked "him". "He's always paid", they said. "We've been with him a long time". Old school they were. Trusting. What the fuck did I know anyway?

Well it seemed to me that the "split-strike conversions" were profit shifting bookeeping tools. Money invested in the feeders did obtain split-strike conversion positions on their books that had an implied "yield" equal to their return but it seemed these were pre-arranged combinations that shifted return back to the investment vehicles and were "phantom" positions vs. Madoff securities. In the interim, Madoff presumably has use of the entire pool of capital, to do what he pleased, plus whatever that pool could command in terms of leverage from bank lines and financing sources. It could be in anything and everything. He could be doing mutual fund timing, or mutual-fund market impact trades. Credit arbitrage. Funding coiiup d'etats in Africa. or buying GSCI commodity swaps. More plausibly, he could be doing option and index-option market impact trades since he was ostensibly at the center of market flow, or he could be at the center of a loan-sharking network across America earning 50%pa, and here he was passing a paltry 9% back to investors. Either he was crooked beyond belief or he was an evil contrapreneurial genius. Who would have have thought he was both??!!

Some crimes are too perfect. Some facades too well-painted to be original or convincing. A good hustler knows he must lose sometimes in order to win. THAT is the reflection of reality that makes it believable, and gives confidence to the punter who will shortly be taken out. THAT was what was wrong with Bernie Madoff's ponzi. The people who were taken - like the Family Office and many other investors who in time will go public on their fleecing - wanted badly to believe they were onto to something that was so good that they ignored the most obvious signs of bogusness. It just didn't make sense. It just didn't add up. Even Jim Simons earns it. There is no free lunch.

There is something fitting and just in the timing of this. It is emblematic of America since Reagan and the Great Leveraging. Something for nothing. Thank you Mr Laffer. But as a philosophy and modus operandi it is quite literally, bankrupt and without merit. And Laffer has since been proven to be full of shit. Now, Americans will have to confront this, the premise that greed is good and self-guiding and somehow omnisciently beneficial for it has had repercussions down to the core of our society and values. "Sorry everyone....what you've been pursuing has all been a lie, a big ponzi, a rat-hole to nowhere....". Re-boot.

[Demeter]

26. Madoff Charged in $50 Billion Fraud at Advisory Firm (Update3) (Bloomberg Must Be Embarrassed)

This is an early-days report, you can see how far off from the truth they were:


http://www.bloomberg.com/apps/news?pid=20601087&sid=anWXzISP4XCg&refer=home

By David Glovin and David Scheer

Dec. 11 (Bloomberg)

Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court. Charged in a criminal complaint with a single count of securities fraud, he was released on $10 million bond guaranteed by his wife and secured by his apartment. Madoff, wearing a white-striped shirt, dark-colored pants and no tie, looked down as he left the courtroom with his wife, declining to comment. (WHERE DID SHE GET THE $10M?)...

Madoff faces as much as 20 years in prison and a $5 million fine if convicted. (ONLY $5M! WHAT ABOUT RESTITUTION?) His New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. (OH REALLY? HIS NUMBERS OR THEIRS?) It specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.

‘One of The Pioneers’

“He’s one of the pioneers of modern Wall Street,” said James Angel, an associate business professor at Georgetown University in Washington. Madoff’s firm was among the first to automate market-making, in which a dealer continually buys and sells stock. The company was among the largest to offer “payment for order flow,” or paying to handle customer orders.

“The exchanges didn’t like the practice and questioned whether customers got the best price,” Angel said.

Madoff was also sued today by the U.S. Securities and Exchange Commission.

“Bernard Madoff is a longstanding leader in the financial services industry,” said defense lawyer Dan Horwitz. “We will fight to get through this unfortunate set of events. He’s a person of integrity.”

Fix Asset Management in New York, which had at least $400 million with Madoff, said it was checking with its lawyers regarding its holdings.

“We are very shocked,” John Fix, the son of founder Charles Fix, said by telephone from Greece. “We put in redemptions in the past few months and got our money back no problem. We are just so surprised about all this.”

‘Accelerating Their Redemptions’

Thomas Ajamie, a securities lawyer in Houston who won a $429 million arbitration award against Paine Webber Group in 2001, speculated that Madoff “couldn’t keep the Ponzi scheme going because investors were accelerating their redemptions.”

New York-based Fairfield Greenwich Group runs the $7.3 billion Fairfield Sentry Ltd., a fund that invested in Madoff. Andrew Ludwig, a spokesman for Fairfield, declined to immediately comment.

The SEC in its complaint, also filed in Manhattan federal court, accused Madoff of a “multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm.”

The agency said it’s seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm. Ira Sorkin, another defense lawyer for Madoff, couldn’t be immediately reached for comment.


Madoff said he had about $200 million to $300 million left and planned to distribute money to select employees, family and friends before surrendering to authorities in about a week, the government said.

....
The Madoff firm had about $17.1 billion in assets under management as of Nov. 17, according to NASD records. At least 50 percent of its clients were hedge funds, and others included banks and wealthy individuals, according to the records.

Madoff started his firm in 1960 with $5,000 of savings and took advantage of securities-law changes in the 1970s designed to spur competition in U.S. stock markets, according to a profile posted on the Web site Finance Tech.

75 Percent Owner

Madoff, who owned more than 75 percent of his firm, and his brother Peter are the only two individuals listed on regulatory records as “direct owners and executive officers.”

Peter Madoff was a board member of the St. Louis brokerage firm A.G. Edwards Inc. from 2001 through last year, when it was sold to Wachovia Corp.

Bernard Madoff served as vice chairman of the National Association of Securities Dealers, a member of its board of governors, and chairman of its New York region, according to the SEC Web site. He was also a member of Nasdaq Stock Market’s board of governors and its executive committee and served as chairman of its trading committee.

He was chief of the Securities Industry Association’s trading committee in the 1990s and earlier this decade, where he represented brokerage firms in discussions with regulators about new stock-market rules as electronic-trading systems and networks gained prominence.

He was an early advocate for electronic trading, participating in roundtable discussions at the SEC as regulators weighed trading stocks in penny increments. His firm was among the first to make markets in New York Stock Exchange listed stocks outside of the Big Board, relying instead on Nasdaq.

‘Third Market Makers’

“These guys were one of the original, if not the original, third market makers,” said Joseph Saluzzi, the co-head of equity trading at Themis Trading LLC in Chatham, New Jersey. “They had a great business and they were good with their clients. They were around for a long time. He’s a well-respected guy in the industry.”

[AnneD]

53. Still waiting for them to mention that....

His parents ran a Ponzi scheme too....now if we can just get folks to trace the Bush family tie to crime....:think:

[Demeter]

58. Do Tell! I Hadn't Heard About That!

[AnneD]

75. I am assuming you mean Madoff.....

Madoff's mother tangled with the feds
The late Sylvia Madoff was registered as a broker-dealer in the 1960s but left the business after being cited for failing to file reports.

NEW YORK (Fortune) -- Accused Ponzi schemer Bernard Madoff was not the first person in his close-knit family to run afoul of federal authorities. A broker-dealer firm registered in the name of Madoff's mother, Sylvia, was effectively forced to close by the U.S. Securities & Exchange Commission more than 40 years ago.

In August 1963, the SEC announced it was "instituting proceedings...to determine whether" 48 broker-dealers, including "Sylvia R. Madoff Gibraltar Securities," had "failed to file reports of their financial condition...and if so, whether their registrations should be revoked."

An SEC litigation release a month later announced hearings in the case of Madoff and many of the other firms in question.

Then, in January 1964, the SEC dismissed administrative proceedings against a number of the firms, including Madoff's, in what appeared to be a deal: No penalties if you promise to stay out of business.

more...

www.money.cnn.hu/2009/01/16/magazines/fortune/madoff_mother.fortune/index.htm

Don't piss on my leg and tell me it's raining. They were in this for a long time.:eyes:

[Demeter]

97. Thanks for the Post! Don't Know How I Missed It

[AnneD]

113. Don't feel bad....

you weren't the only one.

[ozymandius]

19. BofA played role in $4 bln Merrill bonuses - FT

PHILADELPHIA, Jan 25 (Reuters) - Bank of America (BAC.N: Quote, Profile, Research) played a role in Merrill Lynch's controversial decision to pay $4 billion in bonuses in December, the Financial Times reported on Sunday.

Bank of America had said the payment of $4 billion in compensation in a fourth quarter in which Merrill suffered $15 billion in losses was sanctioned by John Thain, Merrill's chief executive.

http://uk.reuters.com/article/marketsNewsUS/idUKN2535538120090126

[radfringe]

20. Bush Latest GOPer to Show Democrats Better for the Economy

Bush Latest GOPer to Show Democrats Better for the Economy
By Jon Perr Sunday Jan 25, 2009
http://crooksandliars.com/jon-perr/bush-latest-goper-show-democrats-better-e

On Friday, the New York Times provided a jaw-dropping analysis of the dismal state of the economy under George W. Bush. Just days after the Washington Post documented that Bush presided over the worst eight-year economic performance in the modern American presidency, the Times charted his historic failure in expanding GDP, producing jobs and fueling stock market growth. As it turns out, Bush is just the latest Republican to confirm the maxim that Wall Street and the economy overall almost always do better under Democratic presidents.

As the Times revealed (article here, charts here), the only bright spot for the first MBA president's economic mismanagement was the low inflation rate during his tenure:

During his administration, the country grew at the slowest overall pace of any recent president, whether measured in gross domestic product or employment. The last president to preside while the stock market did worse was Herbert Hoover...

...President Bush's administration was marked by a recession that began two months after he took office and another downturn in his final year of office. In the end, the economy during his term added enough jobs to employ only 14 percent of the added number of working-age Americans, the lowest proportion of any postwar administration. Employment grew at a compound annual rate of only 0.3 percent, half the 0.6 percent rate that his father had recorded in what had previously been the worst post-World War II performance.

[tclambert]

91. Those are great charts. Yet another reason to bookmark a Stock Market Watch discussion.

[ozymandius]

21. Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds

Jan. 26 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another.

Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.

The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices -- and long-term interest rates -- as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington.

....

Poole, who was then at the St. Louis Fed, was critical at the time of what he called the central bank’s “miscommunication.” He now sees the Fed making the same mistake with its latest suggestions that it might buy longer- dated securities.

“If they do it, it’s going to be disruptive to the market,” says Poole, who is a contributor to Bloomberg News. “If they don’t do it, it will impair the Fed’s credibility and erode the confidence the market has in the statements that the Fed makes.”

http://www.bloomberg.com/apps/news?pid=20601068&sid=aZ0bwWpcnFaM&refer=home

[fedsron2us]

94. As an 'expert' on the Great Depression Bernanke will know what is coming next for US treasuries

and other government bonds round the world.



Since the bailouts these are the primary 'assets' propping up the banks.

I dont even want to think about what is going to happen if we get a rerun of the 1930-32 US Long Bond collapse.

[Festivito]

23. Debt: 01/22/2009 10,618,718,703,374.78 (DOWN 6,334,840,935.01) (**: 4.89T$.)

(Obama's first day and second day the debt goes down. Highlighted today is **'s 4.89T$ addition to the debt. Note that that addition does not include the mess he left that will take more trillions just to restart the economy and then more trillions to pay for problems he created, e.g. the cost of treating soldiers harmed by the wars for decades to come, bridge repairs, and more.)

= Held by the Public + Intragovernmental(FICA)
= 6,296,701,346,374.02 + 4,322,017,357,000.76
DOWN 10,383,446,466.83 + UP 4,048,605,531.82

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.81, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 305,659,286 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $34,740.38.
A family of three owes $104,221.13. And that is IN ADDITION to their mortgage.

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 2,442,346,392.22.
The average for the last 30 days would be 1,709,642,474.55.
The average for the last 31 days would be 1,654,492,717.31.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 2 reports in 2 days of Obama's part of FY2009 averaging -0.32B$ per report, -0.17B$/day so far.
There were 77 reports in 114 days of FY2009 averaging 7.71B$ per report, 5.21B$/day.

PROJECTION:
There are 1,459 days remaining in this Obama 1st term.
By that time the debt could be between 12.6 and 18.2T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/22/2009 10,618,718,703,374.78 BHO (UP -8,158,345,538.30 so far since Obama took office.)
(                 NOTE: That is up a negative amount. That's actually DOWN.)
Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 593,993,806,462.30 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
12/31/2008 +046,553,280,763.13 ------------**********
01/02/2009 -049,252,670,832.20 -
01/05/2009 -000,912,747,082.07 --- Mon
01/06/2009 -000,344,326,906.71 ---
01/07/2009 -000,314,429,077.84 ---
01/08/2009 -027,599,431,464.26 -
01/09/2009 -000,568,123,287.98 ---
01/12/2009 -001,098,982,842.59 -- Mon
01/13/2009 -000,038,769,243.84 ----
01/14/2009 -000,515,208,818.51 ---
01/15/2009 +020,470,437,698.93 ------------**********
01/16/2009 -000,579,761,204.80 ---
01/20/2009 -001,254,116,733.01 -- Tue
01/21/2009 -000,225,946,840.81 ---
01/22/2009 -010,383,446,466.83 -

-26,064,242,339.39 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $954,086,900,115.71 in last 126 days.
That's 954B$ in 126 days.
More than any year ever, except last year, and it's 94% of that highest year ever only in 126 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 126 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3702913&mesg_id=3702963

[Dr.Phool]

41. 18.2 fucking trillion dollars!

The repukes are right. We need more, bigger tax cuts.:silly:

At this pace, we can hit 30 trillion by the end of Obama's first term.

[Festivito]

84. The Great Race Part Deux.

A race to the bottom. "We're in last place and we're the Imperialists?!"

[DemReadingDU]

46. debt could be between 12.6 and 18.2T$

PROJECTION:
There are 1,459 days remaining in this Obama 1st term.
By that time the debt could be between 12.6 and 18.2T$.
It could be higher. It could be lower.

:wow:


Nah, I don't think this can happen, there will some kind of an epic crash first. Something will occur that everyone will talk about for centuries...

Stock Market Crash in 1929
http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

Panic of 1873
http://en.wikipedia.org/wiki/Panic_of_1873

South Sea Bubble in 1720
http://en.wikipedia.org/wiki/South_Sea_Bubble

Tulip mania in 1637
http://en.wikipedia.org/wiki/Tulip_mania

[Demeter]

59. Obama Will Start To Raise Taxes On Those With Money

and get the piles moving again. Money is like manure--it only does good if you spread it around.
When it sits in piles it causes bad odors, pollution, health problems, and cranky neighbors.

[Tansy_Gold]

79. well, I'll believe THAT when I see it. . . . ..

And I ain't holdin' my breath. . . . . .



Tansy Gold

[Festivito]

86. I'd bet that Obama will add just over half what Bush added.

Want to start a betting pool?

[Demeter]

100. What Would Be The End Point?

Can't have a pool without a deadline....

[Festivito]

82. Debt: 01/23/2009 10,620,397,126,433.52 (UP 1,678,423,058.74) (Mixed)

(Debt still going down, FICA side was up.)

= Held by the Public + Intragovernmental(FICA)
= 6,296,581,792,932.27 + 4,323,815,333,501.25
DOWN 119,553,441.75 + UP 1,797,976,500.49

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.81, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 305,665,458 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $34,745.17.
A family of three owes $104,235.5. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 886,942,106.02.
The average for the last 30 days would be 620,859,474.21.
The average for the last 31 days would be 600,831,749.24.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 3 reports in 3 days of Obama's part of FY2009 averaging -0.39B$ per report, -0.20B$/day so far.
There were 78 reports in 115 days of FY2009 averaging 7.64B$ per report, 5.18B$/day.

PROJECTION:
There are 1,458 days remaining in this Obama 1st term.
By that time the debt could be between 11.5 and 18.2T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
01/23/2009 10,620,397,126,433.52 BHO (UP -6,479,922,479.56 so far since Obama took office.)
(                 NOTE: That is up a negative amount. That's actually DOWN.)
Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 595,672,229,521.10 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
01/02/2009 -049,252,670,832.20 -
01/05/2009 -000,912,747,082.07 --- Mon
01/06/2009 -000,344,326,906.71 ---
01/07/2009 -000,314,429,077.84 ---
01/08/2009 -027,599,431,464.26 -
01/09/2009 -000,568,123,287.98 ---
01/12/2009 -001,098,982,842.59 -- Mon
01/13/2009 -000,038,769,243.84 ----
01/14/2009 -000,515,208,818.51 ---
01/15/2009 +020,470,437,698.93 ------------**********
01/16/2009 -000,579,761,204.80 ---
01/20/2009 -001,254,116,733.01 -- Tue
01/21/2009 -000,225,946,840.81 ---
01/22/2009 -010,383,446,466.83 -
01/23/2009 -000,119,553,441.75 ---

-72,737,076,544.27 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $955,765,323,174.45 in last 127 days.
That's 956B$ in 127 days.
More than any year ever, except last year, and it's 94% of that highest year ever only in 127 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 127 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3706710&mesg_id=3706756

[tclambert]

93. So Bush added about 4.9 TRILLION dollars to the debt.

Thanks. That's the number I was looking for the other day. So applying the "Thinking in Billions" approach, I get app. $16,333 per American, or $65,333 per family of four. I used family of four because that's what President Obama did recently when he talked about the national debt. How cool is it that the President is following your lead?

[Festivito]

111. I guess Obama really is a smart man. 4.9T$ Bush -- not so much.

Thanks back at you.

[Demeter]

27. "Deflation has become inevitable"

http://www.nakedcapitalism.com/2008/12/deflation-has-become-inevitable.html



...London Banker's arguments are two-fold: first, deflation is more likely than inflation because the underlying messes have not been cleaned up. Therefore investors will be leery of putting funds into risky investments. Note this differs from the commonly-held view that deflation can be cured without addressing institutional arrangements. Second, he argues that punitively low yields will lead foreign investors eventually to retreat even from government debt. He argues that they will tire at throwing good money after bad, and will prefer to seek returns closer to home.

This claim is hard to prove (one can argue that the high risk spreads are due to deleveraging, not distrust) but it is a serious issue if true. One of the things that worked for years in favor of the US is that it had the most liquid, deepest capital markets, That was due not just to the size of its economy, but also the fact that it had high standards for financial disclosure and generally strong investor protection. If investors come to doubt the fairness of the markets, or think that the rot in its economy is not being cleared out and will undermine growth, that will hold investment back. As Brad Setser has pointed out, foreign capital flows have consisted almost entirely of central bank purchases of Treasuries and Agencies for quite some time, hardly a vote of confidence.

We also have the question of how long the high dollar/low Treasury interest game can go on. Bernanke wants rates low to try to stimulate economic activity and has even broached the idea of long bond purchases to keep yields on the long end of the curve down. But the poster child of deflation and low interest rates is Japan, which due to its high savings rate, was not dependent on external funding. The US should want the dollar cheaper to boost exports, but that risks the ire of our creditors, who would take big losses on their FX reserves (many economists argue this idea is specious, but try explaining the loss in paper wealth to a populace not schooled in such niceties. FX losses, when the dollar was weakening earlier in the year, produced a lot of ire in China, including among bureaucrats). Similarly, even if you subscribe to the deflation outlook, 3%ish 30 year bonds is a pretty risky bet independent of the currency risk. So it looks like our friendly funding sources are likely to get burned one way or another, perhaps both. There is a real risk of a disorderly fall of the dollar, and it is hard to tell what the collateral damage would be.

Now to my doubts about the proposed remedies, namely monster stimulus and monetary easing. First, as mentioned before, the analogy is to the US in the Depression, which we have said repeatedly before is questionable. The US in the 1920s was the world's biggest creditor, exporter, and manufacturer. Our position then is analogous to China's now. Indeed, Keynes in the 1930s urged America to take even more aggressive measures, and argued that it was not reasonable for the US to expect over-consuming, debt-burdened countries like the UK and France to take up the demand slack. So even though most economists are invoking Keynes, it isn't clear he's prescribe such aggressive stimulus for the US and UK now.

Second, the argument is that the US in the 1930s and Japan in its post bubble era failed to engage in sufficiently large stimulus. That is mere conjecture; there is no way to prove that argument (we cannot go back in a time machine and test different remedies in both economies).

In the US, the claim generally made is that the US did not emerge conclusively from the Depression until it engaged in massive wartime spending starting in 1939-40, and therefore a stimulus of perhaps that large a magnitude is required. However, quite a lot happened between 1930 and 1939, including going off the gold standard, the securities law reforms of 1933 and 1934, the creation of the FDIC, refinancing homeowner debt to longer-term mortgages via the Homeowner's Loan Corporation, and the closure of a lot of business, some of which were probably victims of circumstance, but others probably deserved to be put out of their misery.

There is another huge extenuating circumstance with the war spending that observers choose to forget. The US's problem in 1929, like China's appeared to be (at least in part) overproduction, that there might be too much global capacity relative to consumer demand (that is certainly true for the auto industry now, which had managed to forestall the day of reckoning by converting consumers to leases that had them trading in cars after 3 years, when buyers generally keep them longer, Decreasing the effective life of cars was tantamount to increasing demand). In addition, the US suffered a fall in GDP of 11% in 1946 and 1% in 1947 in transitioning off a wartime economy.

But perhaps more important, at the end of WWII, productive capacity in the next two biggest industrialized nations, Germany and Japan, had been destroyed. The US had effectively no competition for its bulked up industrial capacity.

Had the US in 1930 tried monster stimulus, without the painful adjustments of the 1930s, would it have worked? Probably narrowly, in keeping unemployment from rising to horrific levels and containing the fall in GDP. But I question whether it would have been a panacea. The New Deal, contrary to popular opinion, did produce a lot of good results with its workfare, such as the building of parks and roads, the electrification of rural America. if the US had attempted something at twice that scale, would it have been productive? Some argue that it didn't matter, the important thing is to get money into the economy, but I wonder. Japan did engage in pretty heavy infrastructure spending (a lot of bridges to nowhere) and it does not seem to have done them much good.

Note my sophisticated investor buddies disagree, saying this is backwards looking, confident that a US budget deficit of 10% of GDP next year will do the trick, and think inflation/hyperinflation is the bigger risk (note some consider hyperinflation to be operative at 20% per annum; you do not need to get to Weimar scenarios for inflation to start distorting economic decisions in a very serious way).

From London Banker:

For a while now I have been on the fence on the inflation/deflation issue .... I’m now coming down on the side of deflation for a very simple reason: there is no longer any incentive to save or invest, and so debt and investment cannot increase much beyond current bloated levels.

In Lombard Street, Bagehot’s seminal tome on fractional reserve central banking, Bagehot advises any central bank facing a simultaneous credit crisis and currency crisis to raise interest rates. By raising rates they will ensure that foreign creditors remain incentivised to maintain the general level of credit available while the central bank resolves the local liquidity crisis through liquidation of failed banks and temporary liquidity support of stressed banks.


Yves here. For the UK, the currency crisis issue is a real concern. Recall that the pound has taken a huge dive in recent months, and Willem Buiter has taken to comparing Britain to Iceland. Back to the post:

The very opposite policies have been pursued by central banks in the US, Europe and UK ...They have cut policy rates drastically, and as the crisis escalated and spread, the yield on government debt has dropped to negative territory. Meanwhile they have shielded those responsible for the creation of record levels of bad debt from any regulatory accountability, relaxed transparency of accounts, and provided massive taxpayer-funded financial infusions to prevent failure and liquidation.

While in the short term these policies have expediency and the maintenance of market “confidence” on their side, in the longer term these policies must undermine any confidence a rational and objective saver or investor might have that savings or investment in the US, EU or UK will be fairly remunerated at an above-inflation rate, or that savings and investments will be protected by effective oversight and regulation from the sorts of executive debasement and outright misappropriation and fraud that are beginning to colour our perceptions of the past decade...

If US, EU and UK had substantial domestic savings to fund their banks (as in Japan in 1990), then perhaps the consequences would not be so imminently disastrous. Lacking sufficient domestic savings, however, their actions will likely make foreign creditors in Japan, China, the Gulf and elsewhere question whether it is worthwhile to keep pumping scarce savings into such flawed and reckless economies...

The determination to avoid any accountability for failed banks, failed business models, failed regulatory systems and failed academic rationales for all the above invites anyone with spare cash – an increasingly select crowd – to withhold it from further depredations. It is this instinct, more than confidence in the government, which is driving so many to seek the temporary safety of short-dated government securities.

The result of discouraging domestic and foreign creditors and investors must be inevitable deflation as debt levels become increasingly hard to finance and ultimately contract. Irresponsible central banks and governments can try to bail out the failed banks, businesses and municipalities at the centre of every popped bubble, but the bubble economies are ever more certain to deflate with each bailout. Each bailout further undermines the market discipline which is bedrock to a saver or investor’s decision to part with hard-earned cash by trusting it to the intermediation of the management of a bank or business.

It’s this simple: I won’t invest in a country that bails out failure and punishes savers. I won’t invest in the US or UK until they change course and protect savers and investors, ensuring a reasonably predictable positive return. In the EU, I will be very selective, preferring those conservative states like Germany that never embraced the worst excesses, although sadly still have fall out from individual banks' stupidity in buying into foreign excess. I will know when it is safe to reinvest when policy interest rates, bank/intermediary oversight and accounting standards give me confidence I am better protected than the corporate or financial elite.

While it may take the Asian and the Gulf State investors longer to embrace my analysis, I have no doubt that they too will eventually conclude that parting with their savings under the terms now on offer will only deepen their losses. They would be better off keeping the money at home, investing locally under local laws and vigilance, and letting the US and UK implode.

The argument against this has always been that with trillions already invested in the US during the deficit years, the Chinese and Gulf States would suffer even more horrible losses from a collapse of the western economies. This is accurate, but not complete, as it ignores the relative value of cash investment at the top and bottom of a bursting bubble. Once the collapse has bottomed out, so long as a globalised economy survives, there will be even better opportunities for those with savings to invest selectively in businesses with clearer prospects and more certain profitability under regulatory frameworks which have been restored to a proper balance of investor protection and intermediary oversight.

Right now survival of businesses in the West depends largely on political pull and access to regulatory forbearance and central bank or treasury finance. The market has failed, and officialdom is collaborating in perpetuating that failure...

I think it took me so long to feel confident about predicting deflation because the floating currency system under dollar hegemony and Bretton Woods II distorts the workings of both inflation and deflation. Despite the US being the epicentre of all the failed debts, failed securitisations, failed credit derivatives, failed rating agencies, failed banking businesses, failed corporate governance, failed accounting standards, failed capital adequacy models, and failed regulatory forbearance, the US dollar has recently strengthened as deflation globalised. The US exported inflation in the boom years, and now exports deflation in the bust years.

Since spring 2008, as US investment banks sold off assets, imposed margin calls, and used access to unsegregated wholesale assets in custody in the rest of the world to upstream liquidity to their US-based parents and affiliates, the dollar has strengthened relative to other currencies. The media reports this as a “flight to quality”, but it is more like a last looting of the surrounding countryside before dangerous brigands hole up in their hilltop fortress. The brigands appear temporarily wealthy compared to the peons left stripped and penniless and facing winter. When the brigands have eaten all the stolen grain and livestock, however, they will have no means to replenish except to use force to raid the countryside again. The peons can always hunt, forage, farm and carefully husband a surplus to gradually increase their wealth. If the brigands raid too thoroughly or too regularly, the peons have no incentive to grow crops or keep herds (negative savings returns) and everyone starves (deflation).

In the meanwhile, the peons just might wise up, hide any surplus more securely and organise mutual defense against further attacks to ensure that their peon children prosper and the brigands die off. That would be the end of Bretton Woods II, and the rise of China, India, the Gulf and other productive and/or resource rich states which invest surplus in domestic productivity and regional growth...

Only when that deflation has played out and rational policies that reward market-based management and returns are restored will it be worthwhile to invest again. In the meanwhile, any wealth saved securely from state seizure will "swell" to buy more assets in future - a key aspect of deflation and a key means of restoring the control of the economy into the hands of more farsighted savers and investors.

I have quoted Mr John Mill before, but it bears repeating: ““Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.” The extent to which capital has been betrayed in the past quarter century under Bretton Woods II, bank deregulation and the Basle Capital Adequacy Accords is unrivalled in the history of fiat banking. The bankers, lawmakers, regulators and academics who collaborated in the betrayal still hold power, like the well-armed brigands in the fortress, and their continued collaboration to prevent accountability must inevitably discourage honest savers from risking further loss. Even so, it is the savers/peons who hold the ultimate power as they can starve the brigands.

Some day soon savers will revolt at financing further depredations. They will refuse to buy even government securities, gagging at the quantities of issue forced upon them under terms of only negative return. When that final massive bubble bursts, deflation will follow its harsh corrective course and clean out deficit-financed “unproductive works”.

When that happens, if reason is restored in markets with effective oversight, I might consider investing again, very selectively, in whatever productive works might then be on offer and only when secure in realising - and retaining - a positive yield.

[Demeter]

29. 8 really, really scary predictions

http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html

Nouriel Roubini:

Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it's going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.

SEVEN OTHER PREDICTIONS FOLLOW HIS, SEE LINK

[Demeter]

30. Another Prognosticator Speaks at Length: Nassim Nicholas Taleb

http://www.charlierose.com/guest/view/6133

It's all video....this is the Black Swan guy

[Roland99]

63. doom and gloom all over

[Demeter]

101. Remember, Economics is the "Dismal Science"

Mostly because the greedy can't win, no matter how hard they try---economics is the "play fair and share" lesson drummed into little tots in kindergarten, and then completely overwritten by increasing competitiveness for the rest of their lives.

[spotbird]

77. He has a long list of things to avoid

but what is left?

[Demeter]

102. Cash. Paying Off Debt. Cultivating Friends Like AnneD

truck farming for yourself. Solar energy and getting off the grid. Learning first aid and beyond. Learning how to sew, can food, fix small electrical appliances, etc. etc.

The von Trapps learned how to make shoes when they emigrated to Vermont. They had a lot of feet to shoe.

[radfringe]

28. "Dollar stores" and Factory closeout stores

As part of our saturday shopping - we stop at the "dollar store" for pet food and other items. Occassionally, we stop in at "Ollies" - a factory closeout store, for other items like linens, rugs, tools etc.

This weekend we went to Ollies to get a new bathmat - WHOA, was it crowded, and there was no big sale, price slashing event or anything like that.

We've noticed the Dollar stores are more crowded too.

People are cutting back even from shopping at "walmart"

[Demeter]

31. It's So Bad in Michigan, One Dollar Store Went Out of Business 2 years ago

The others are hanging on, but there's not much stock.

Here in Ann Arbor, which is the least affected place, we've still had numerous business failures, starting with 9-11-2001. It shows no signs of stopping, either.

[Demeter]

33. The Best and the Brightest Have Led America Off a Cliff

By Chris Hedges, Truthdig
Posted on December 9, 2008, Printed on January 26, 2009
http://www.alternet.org/story/111376/

The multiple failures that beset the country, from our mismanaged economy to our shredded constitutional rights to our lack of universal health care to our imperial debacles in the Middle East, can be laid at the feet of our elite universities. Harvard, Yale, Princeton and Stanford, along with most other elite schools, do a poor job educating students to think. They focus instead, through the filter of standardized tests, enrichment activities, advanced-placement classes, high-priced tutors, swanky private schools and blind deference to all authority, on creating hordes of competent systems managers. The collapse of the country runs in a direct line from the manicured quadrangles and halls in places like Cambridge, Mass., Princeton, N.J., and New Haven, Conn., to the financial and political centers of power.

The nation’s elite universities disdain honest intellectual inquiry, which is by its nature distrustful of authority, fiercely independent and often subversive. They organize learning around minutely specialized disciplines, narrow answers and rigid structures that are designed to produce certain answers. The established corporate hierarchies these institutions service -- economic, political and social -- come with clear parameters, such as the primacy of an unfettered free market, and with a highly specialized vocabulary. This vocabulary, a sign of the "specialist" and of course the elitist, thwarts universal understanding. It keeps the uninitiated from asking unpleasant questions. It destroys the search for the common good. It dices disciplines, faculty, students and, finally, experts into tiny, specialized fragments. It allows students and faculty to retreat into these self-imposed fiefdoms and neglect the most-pressing moral, political and cultural questions. Those who defy the system -- people like Ralph Nader -- are branded as irrational and irrelevant. These elite universities have banished self-criticism. They refuse to question a self-justifying system. Organization, technology, self-advancement and information systems are the only things that matter.

MAJOR SLAMS OF BUSH, SCHOOLS, AND THE LIKE

Barack Obama is a product of this elitist system. So are his degree-laden cabinet members. They come out of Harvard, Yale, Wellesley and Princeton. Their friends and classmates made huge fortunes on Wall Street and in powerful law firms. They go to the same class reunions. They belong to the same clubs. They speak the same easy language of privilege and comfort and entitlement. They are endowed with an unbridled self-confidence and blind belief in a decaying political and financial system that has nurtured and empowered them.

These elites, and the corporate system they serve, have ruined the country. These elite cannot solve our problems. They have been trained to find "solutions," such as the trillion-dollar bailout of banks and financial firms, that sustain the system. They will feed the beast until it dies. Don’t expect them to save us. They don’t know how. And when it all collapses, when our rotten financial system with its trillions in worthless assets implodes, and our imperial wars end in humiliation and defeat, they will be exposed as being as helpless, and as stupid, as the rest of us.

Chris Hedges, a Pulitzer Prize-winning reporter, is a senior fellow at the Nation Institute. His latest book is Collateral Damage: America's War Against Iraqi Civilians.

View this story online at: http://www.alternet.org/story/111376/

[Tansy_Gold]

37. "As stupid as the rest of us"? Speak for yourself, Hedges

:grr:

Obviously, he don't read SMW.


What an asshat.


Hi, everyone! :hi:




TG

[Demeter]

39. I Knew you Would Read That One

You are so predictable, Tansy Gold!

So, how do we the anonymous reorganize the society that the elite created to shield themselves and their descendants from "reality"?

I guess they did it for us, by destroying their world and consequently ours.

The good thing about lowly status is: there's nowhere to go but up. And there's nothing left to lose except life, which might at times feel like a relief. Hence the strong belief in a glorious afterlife.

I have to laugh at the shrinking endowments, sometimes. U of M went through a big campaign not so long ago to boost its endowment through new donors. I think the Markets have destroyed all that gain.

The University jealously guards two points: the number of seats in its stadium, compared to all other schools, especially its rivals; and the salary of its president.

This idea that salaries escalate automatically disappeared in the 80's for us plebes, when Inflation magically vanished from the National Database. But certain high-prestige jobs still are full of the hot air.

I'm geting far too philosophical for a Monday, when I ought to be out earning a pittance...

Have a good one, everybody. I'm down to my last old email...I'll try to save the stuff for tomorrow...

[DemReadingDU]

44. Thanks Demeter!

Appreciate all these articles, some I missed reading, and some I need to re-read!

[Tansy_Gold]

45. "Earning a pittance."

Ah, ain't it the truth, ain't it the truth.


And yes, I'm sooooo fucking predictable. It's scary. :evilgrin:


I have many friends who are retired and living off what they thought were fat investment portfolios. A good portion of them are watching those portfolios dwindle far more rapidly than they expected. Well, that's one worry I don't have!

One is also concerned that her "wealthy" daughter and s-i-l and grandkids may very quickly lose everything and find themselves buried under a mountain of debt. They, too, have counted on steady income from investments and from the labor of others. In the past year, she told me yesterday, they've seen their investment income drop by 50%, their business income drop by 20% even though they laid off working people to maintain their own non-working income. But, she says, they haven't changed their lifestyle. . . . . . . . . .

I looked at her with no sympathy in my eyes at all and said, "They will. Don't worry. They will. Eventually."

And now, back to the pittance.


Tansy Gold of the lightning fingers

[DemReadingDU]

50. Mountain of Debt

That will get everyone, even if they have no investment portfolio. Lots of young folks have saved nothing, but have good recession-proof jobs, big lovely house (huge mortgage), 2 new vehicles (car loans), and have cute kids who have every toy imaginable (via credit cards). Their lifestyle is going to change too, even by keeping keep those good jobs.

oops, spelling

[Tansy_Gold]

52. Yes. I worry about my kids

Son, daughter. Both married. Each with one child. Each with two cars. One has big new house, other has small but much renovated older home. Good jobs, traditionally "secure" jobs (teaching, health care, etc.) Fortunately, they don't go into debt with the other shit, but it's still worrisome.

My debts, except for student loans (ouch) are minimal and I'm doing the best I can to eliminate even those -- in part to set a good example for my kids.

We'll see how well it works out.


TG

[Birthmark]

73. "how do we the anonymous reorganize"?

For my part, I'm going to declare independence as much as is possible.

I'm toying with the idea of getting a small group of people together to buy a piece of property consistent with that goal. Ideally, it would be self-sufficient (or nearly so) and cost people a few tens of thousands of dollars to get started. With proper planning, everyone should be able to generate their own household electricity and other utilities.

Yes, I'm copying the monks who headed for the hills during the (previous) Dark Age...without so much self-flagellation.

[AnneD]

80. At first I thought you wrote...

self flatulation. If it made them head for the hills-I can only imagine how bad those times were.

[Demeter]

104. Which State?

Can I recommend my own? Michigan which has just about everything except iodine in the salt, has lots of land for sale these days. Lots of water, and up until this winter, moderate climate.

[specimenfred1984]

76. Another "Obama is an elitist" bunch of BS

And the wimp Chrissyboy never mentions how to change the system, which would mean he'd have to put in print that criminals need to be jailed and he'd have to name the criminals.

[Demeter]

105. Good Point about the Criminals

I'm not worried, it will happen. Those wheels of Justice will grind mighty fine.

[Demeter]

35. The hottest recessionary activity in town (Remove the Kids, this is XXX)

http://www.ft.com/cms/s/0/148959c4-c31f-11dd-a5ae-000077b07658.html


Over the past month, I have picked up 247 men. Fast work in just four weeks but I’ve been putting my back into it. During my sabbatical from the Financial Times, I have obsessively e-mailed strangers on an adultery website, thereby taking part in what I find is the hottest recessionary activity in town.

Among my new boyfriends are a formerly powerful hedge fund manager, scores of newly idle bankers, a few entrepreneurs, various company directors, a well-known musician, some corporate lawyers, a couple of barristers and a rather dishy builder.

I doubt if this was what the FT had in mind when it decided that journalists should be given a four-week break every four years for self-development. Neither, come to that, was it what I had had in mind when I embarked on my sabbatical: my intention was to write a novel.

So when I first joined Illicit Encounters, the most upmarket of extra-marital websites, it was for research on internet adultery for my book. But, within the first half an hour of posting my details on the site (under the pseudonym of Sophie Scribe), I had acquired 20 boyfriends and, within an hour, I was hooked. Four weeks later, I have emerged, feeling slightly soiled and more than slightly cross at the way that real life is so much more exciting than the novel I’m writing.

Illicit Encounters is a Turkish bath of a place in which 230,000 mainly professional, married people leer at each other through virtual steam searching for anyone who might be a suitable lover.

While I was on the site, I noticed business seemed particularly brisk among those citing financial services as their occupation. Over and over again, I was approached by men using names such as “Alpha123”, or “Civilised1” or “CityGent”, each telling the same story: I’m a successful banker, now with time on my hands, looking for excitement/love/romance/casual sex, etc.

Curiosity aroused, I contacted the site’s owners to find out what was going on. They told me that, since September, the number of London-based males in the financial sector registering had risen by nearly 300 per cent. It seems the colder the market for jobs, the hotter the market for adultery.

If the sheer numbers surprised me, the men themselves surprised me even more. The ones I talked to weren’t lotharios, and didn’t seem sleazy either. They were often adulterers for the first time and more the balding-banker-next-door type than anything more alluring.

For those readers who don’t already know from personal experience, I should perhaps explain a little about how the site works. To maintain secrecy, everyone uses false names and members release their pictures only to other members they like the sound of. This presented a ticklish problem for me, given the high density of FT readers who turn out to be online. At the briefest glimpse of my picture, various of them fled in fright, saying: “Oh God, are you Lucy Kellaway?” As well as meeting people who read the FT, I even came across one who used to write for it. This took me into a whole new area of office etiquette: what is the correct way to behave when you stumble on someone you know on an adultery website? I daresay it happens more and more. Indeed, one result of my four-week infiltration into the lives of adulterers is that I now suspect every man of living a double life on Illicit Encounters.

Last week, I had lunch with John Quelch, professor of marketing at Harvard Business School, and asked what he thought it all meant. Why is it that so many senior business people are responding to recession with adultery?

He said that, in a recession, people wanted hugs. This struck me as a pretty feeble explanation. Surely there are easier ways of getting hugs than putting one’s marriage on the line? Hugging one’s children or – if one is desperate – even one’s spouse might seem easier and safer.

He said that this was just the point: that the risk was the lure. That bankers are suffering from a risk deficit: their working lives have been derisked compulsorily and this could be a way of compensating by adding risk to their private lives.

If this is true, one wonders what the macro upshot will be. If there has been a mass shift from taking risks in financial markets to taking risks in the domestic market, will it mean mass domestic instability with surging divorce rates and so on?

The founders of the website like to argue that, by providing a well-behaved marketplace for adultery, they are actually creating domestic stability. Seventy per cent of Illicit Encounters’ clients claim to be attracted to adultery as an alternative to divorce, not as a precursor to it. This may not be altogether laughable but it seems a little early to draw any conclusion one way or another.

However, it’s not too early to draw three other conclusions from my month on the site. The first is that people who are still in work seem to have an inordinate amount of spare time from nine to five. Second is that everyone lies: they understate their ages and overstate their attractiveness, gym attendance, good humour and so on.

The last lesson is one we knew already: more men are interested in adultery than women. The website tries to correct this by differential pricing, charging men £119 a month while women go free. Yet even so, the imbalance persists, and I now find my 247 suitors may not have been entirely due to my own charms. I told a female friend about the site and she signed up. Her boyfriend tally after just one week: 295.

[e-mail]

Read and post comments at www.ft.com/kellaway

[InkAddict]

43. Is this what they mean by "networking"?

Then a little bulldog entered
His name we have learned was Benny
And although he once had principles
he abandoned them to live as a lapdog
to a wealthy daughter of the
revolution

- Apologies to Rent - "Over the Moon"

[Demeter]

36. Krugman: Concentration Of US Auto Industry Will Probably Disappear

http://www.huffingtonpost.com/2008/12/07/krugman-us-auto-industry_n_149082.html

STOCKHOLM, Sweden — Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.


THIS IS ONE PREDICTION I HOPE TO BE EXAGGERATED.

[FarCenter]

72. Three automakers worldwide would be the reasonable outcome

The economies of scale in automaking drove consolidation in the '40s, '50s, and '60s to the "Big Three" automakers in the US.

Three is a magic number since it conforms with anti-monopoly law, and it allows the weaker two to form coalitions against the stronger for longer term stability. With price leadership by the stronger, some of the monopoly profits are available to all.

With globalization it would be natural for the process to continue until there are three global automakers. This is already the approximate situation for high technology goods such as commercial airliners, jet engines, and computer processor chips.

However, protectionism driven by national/regional interests may be strong enough to prevent consolidation to 3 automakers world wide.

[tclambert]

95. That's an interesting hypothesis. Unfortunately,

during the 40s, 50s, 60s, and 70s, the American automakers were known as the Big Four. Chrysler bought American Motors in the late 1980s. Jeep was their big brand name, and is the only part still surviving of the #4 American carmaker. But if you shift the timeline of your argument, it does have merit. The reason Chrysler bought out AMC was because the #3 and #4 carmakers were getting a regular thrashing from GM and Ford, and they felt a bigger, stronger #3 could benefit from some economies of scale and compete better with the others.

Unfortunately, Toyota had a string of hits and ate everybody's lunch.

[Demeter]

99. What Happens When Globalism Collapses, and Shipping Costs Exceed Profit Margins?

[FarCenter]

110. All three would produce locally in each part of the world

Only high-value components would be shipped, while most of the others would be sourced from local suppliers. This is what is done now. The Japanese transplants source components for their US plants from suppliers in North America, with engines, transmissions, and a few other components from Japan. Similarly, GM in Europe sources locally in Europe.

The really expensive part, that drives economies of scale, is the R&D and production of the equipment that goes into the various factories. The production technology is the really high-tech part of the business. Technology of the product itself -- not so much.

[Demeter]

38. Deflation virus is moving the policy test beyond the 1930s extremes

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3629806/Deflation-virus-is-moving-the-policy-test-beyond-the-1930s-extremes.html

By Ambrose Evans-Pritchard

We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking.

You cannot drop below zero. So what next if the credit markets refuse to thaw? Yes, Japan visited and survived this policy Hell during its lost decade, but that was a local affair in an otherwise booming global economy. It tells us nothing.

This time we are all going down together. There is no deus ex machina to lift us out. Certainly not China, which is the most vulnerable of all.

As the risk grows, officials at the highest level of the British Government have begun to circulate a six-year-old speech by Ben Bernanke – at the time of its writing, a garrulous kid governor at the US Federal Reserve. Entitled Deflation: Making Sure It Doesn’t Happen Here, it is the manual of guerrilla tactics for defeating slumps by monetary means.

“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.

Critics had great fun with this when Bernanke later became Fed chief. But the speech is best seen as a thought experiment by a Princeton professor thinking aloud during the deflation mini-scare of 2002.

His point was that central banks never run out of ammunition. They have an inexhaustible arsenal. The world’s fate now hangs on whether he was right (which is probable), or wrong (which is possible).

As a scholar of the Great Depression, Bernanke does not think that sliding prices can safely be allowed to run their course. “Sustained deflation can be highly destructive to a modern economy,” he said.

Once the killer virus becomes lodged in the system, it leads to a self-reinforcing debt trap – the real burden of mortgages rises, year after year, house prices falling, year after year. The noose tightens until you choke. Subtly, it shifts wealth from workers to bondholders. It is reactionary poison. Ultimately, it leads to civic revolt. Democracies do not tolerate such social upheaval for long. They change the rules.

Bernanke’s central claim is that the big guns of monetary policy were never properly deployed during the Depression, or during the early years of Japan’s bust, so no wonder the slumps dragged on.

The Fed can create money out of thin air and mop up assets on the open market, like a sovereign sugar daddy. “Sufficient injections of money will ultimately always reverse a deflation.”

Bernanke said the Fed can “expand the menu of assets that it buys”. US Treasury bonds top the list, but it can equally purchase mortgage securities from US agencies such as Fannie, Freddie and Ginnie, or company bonds, or commercial paper. Any asset will do.

The Fed can acquire houses, stocks, or a herd of Texas Longhorn cattle if it wants. It can even scatter $100 bills from helicopters. (Actually, Japan is about to do this with shopping coupons).

All the Fed needs is emergency powers under Article 13 (3) of its code. This “unusual and exigent circumstances” clause was indeed invoked – very quietly – in March to save the US investment bank Bear Stearns.

There has been no looking back since. Last week the Fed began printing money to buy mortgage debt directly. The aim is to drive down the long-term interest rates used for most US home loans. The Bernanke speech is being put into practice, almost to the letter.

No doubt, such reflation a l’outrance can “work”, but what is the exit strategy? The policy leaves behind a liquidity lake. The risk is that this will flood the system once the credit pipes are unblocked. The economy could flip abruptly from deflation to hyper-inflation.

Nobel Laureate Robert Mundell warned last week that America faces disaster unless the Bernanke policy is reversed immediately. This is a minority view, but one held by a disturbingly large number of theorists. History will judge.

Most central bankers suffer from a déformation professionnelle. Those shaped by the 1970s are haunted by ghosts of libertine excess. Those like Bernanke who were shaped by the 1930s live with their Depression poltergeists.

His original claim to fame was work on the “credit channel” causes of slumps. Bank failures can snowball out of control as the “financial accelerator” kicks in. The cardinal error of the 1930s was to let lending contract.

This is why he went nuclear in January, ramming through the most dramatic rates cuts in Fed history. Events have borne him out.

A case can be made that Bernanke’s pre-emptive blitz has greatly reduced the likelihood of a catastrophe. It was no mean feat given that he had to face down a simmering revolt earlier this year from the Fed’s regional banks.

The sooner the Bank of England tears up its rule books and prepares to follow the script in Bernanke’s manual, the more chance we too have of avoiding a crash landing.

Monetary stimulus is a better option than fiscal sprees that leave us saddled with public debt – the path that nearly wrecked Japan.

Yes, I backed the Brown stimulus package – with a clothes-peg over my nose – but only as a one-off emergency. Public spending should be a last resort, as Keynes always argued.

Of course, Bernanke should not be let off the hook too lightly. Let us not forget that he was deeply complicit in creating the disaster we now face. He was cheerleader of Alan Greenspan’s easy-money stupidities from 2003-2006. He egged on debt debauchery.

It was he who provided the theoretical underpinnings of the Greenspan doctrine that one could safely ignore housing and stock bubbles because the Fed could simply “clean up afterwards”. Not so simply, it turns out.

As Bernanke said in his 2002 speech: “the best way to get out of trouble is not to get into it in the first place”. Too late now.


HE DIDN'T BLAME THE BOOMERS THIS TIME, AT LEAST. I THINK IT'S ALL WET, THOUGH

[gristy]

109. from the article: "The economy could flip abruptly from deflation to hyper-inflation."

This is a no-brainer to me. Can anyone here argue that this will not happen?

[UpInArms]

47. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 84.940 Change -0.642 (-0.83%)

US Dollar Trend Hangs On The Outcome Of 4Q GDP And FOMC Decision

http://www.dailyfx.com/story/currency/eur_fundamentals/US_Dollar_Trend_Hangs_On_1232769073124.html

The market will have to make a critical decision on the primary fundamental function of the US dollar within the next few weeks; and the ultimate verdict could finally put the world’s reserve currency back on pace. Bringing the greenback one giant step closer to a definable trend in the week ahead are two key drivers: risk sentiment and economic activity. Should global financial markets seize and credit vanish, the US dollar will fall back on its role as liquidity provider and capital guarantee for international investors trying to preserve their funds. However, without the overwhelming influence of fear, genuine economics could otherwise deflate the currency backed by perhaps the worst economic outlook in the developed world. With the stakes waged, let’s take a closer look at how these factors may play out.

Considering the market-moving potential behind the busy docket for the coming week, it is best to take score of the economic health of the US economy. There are more than a few, first-tier indicators scheduled for release throughout the week that will alter the course of the country’s overall health. Among the notables are the new and existing home sales, durable goods orders and consumer confidence – covering three key sectors of the world’s largest economy. However, where these individual indicators only represent a piece of the whole, the government’s GDP report will set the benchmark for the entire economy. This will be the advanced (or first) reading of activity through the final quarter of 2008. Even from a cautious standpoint, the number is expected to be dismal. The consensus of economists polled by Bloomberg forecasts the recession to accelerate to a startling 5.0 percent on an annualized basis. A slump of this magnitude would surely put the US in the running for the worst performing economy among the industrialized world. Looking more closely at the components of the aggregate report, speculators may further get a better handle on the pace the recession will keep into the first quarter and half of 2009. A drop in construction and business activity is fully anticipated; but as the largest component of growth, consumer spending will determine whether momentum is behind the slump or an end is in sight. What’s more, traders around the world will be watching this report to gauge the health of the global economy. As the largest nation in the world, the US could exacerbate or ease the global pain.

In preparing for this notable and foreseeable piece of event risk, we should also consider that this release will be vying for influence over the dollar with a fundamental driver that is constantly in the background – risk. Since July, the greenback has found significant strength through fear and deleveraging that has diverted capital into US Treasuries and thereby the dollar. Recently, these trends have waned; but necessary rescues of multiple banks, downgrades in debt ratings for entire nations and an accelerated recession are providing traction for the definitive safe have once again. On the other hand, we should not simply assume the dollar will always hold this role in the market. The FOMC is going to hold rates near zero on Wednesday and is unlikely to present any helpful policy to stabilize the economy. What’s more, the US government is flirting with nationalizing the financial sector with recent rescues of institutions like Bank of America and Citi. These policy moves will discourage investors and could ultimately threaten the nation’s solvency.



...more...

Morning Slices: Barclays News Infuses Much Needed Confidence

http://www.dailyfx.com/story/dailyfx_reports/daily_forecasts/Morning_Slices__Barclays_News_Infuses_1232976920996.html

Fundys – The markets are looking up into the early stages of the week with all risk sensitive currencies showing better bid on a resumption in risk appetite. The leader on the day has been Sterling with the single currency rallying across the board on the news that local bank Barclays would be reporting a 2008 profit well ahead of expectations. This helped to bolster local equity prices as well with the performance filtering over into the broader markets. While oil prices are slightly lower, gold has continued to show impressive gains with the commodity rallying back above $900 thus far. The higher gold price serves as a reminder that despite mild global equity gains today, market participants are still somewhat uncertain about the prospects for the global economy. Lack of event risk elsewhere, along with a quiet Asian session resulting from the Chinese New Year and Australia day leaves investors more keenly focused on price action in the US session today. Key event risk today comes in the form of Existing Home Sales (-2.0% expected) and Leading Indicators (-0.2% forecast) at 15:00 GMT. Also seen propping investor sentiment across the board has been the announcement of economic stimulus out of Norway which helps to further solidify global efforts to deal with the ongoing market turmoil.

Techs - EUR/USD remains well propped ahead of the key 78.6% fib retracement off of the major 1.2330-1.4720 move. The market continues to show well bid on any dips and while the overall structure remains grossly bearish, a break back above 1.3100 would delay additional setbacks and open the door to a more significant corrective rebound. Key levels to watch above and below come in at 1.3100 and 1.2860 respectively. USD/JPY is showing good follow through from Friday’s doji close and the pair could be looking to carve out a major short-term base at 87.15. Look for a break back above 89.60 to strengthen recovery prospects. Key level to watch below comes in at 88.00 which guards against 87.15. GBP/USD looks to be finally attempting to base with price action showing the potential for a bullish reversal day today after the market cleared Friday’s high. The 1.3500 23-year trend lows set Friday are still intact and setbacks have stalled out ahead of the latter today. As such look for gains to now extend back towards a minimum of 1.4025 over the coming session. Key levels to watch above and below come in at 1.4025 and 1.3500 respectively. USD/CHF continues to show signs of exhaustion after any intraday rallies over the past few days consistently stall out. Friday’s gravestone doji-like formation should now open the door to deeper setbacks over the coming days. A break below 1.1500 will confirm and accelerate. Only back above 1.1715 negates.

Flows – Price action over the past several days has seen a continued flight to quality and safety of the USD and Yen in the overnight sessions followed by some selling of these currencies in the US session of trade. Finally today we have begun to see some appetite for risk in the overnight session which could help to reinforce a growing propensity for some form of a relief rally in the broader markets (i.e. broad base USD selling and Yen selling). Various CTAs, Russian names, a German bank and US investment house have all been big buyers of Sterling, USD/JPY and commodity currencies overnight. Euro 1.2900 option expiries reported at New York cut. USD/JPY option expiries touted at 88.75.

Trade of the Day – GBP/JPY: On Friday we were buyers of Cable after the major collapsed to a 23-year low of 1.3500. Today we recommend looking to play a long Sterling position through the GBP/JPY cross. Daily studies are oversold and with the price action finally showing some willingness to base out after taking out Friday’s high, the broken sequence of consecutive lower highs should now open a more significant short-term recovery. Look to buy a break back above 124.15 (today’s high) with a stop-loss firmly in place just below 118.80 (Friday historical low). Setbacks have been unable to close below the psychological support of 120.00 and we view the current area as a formidable spot for a counter-trend long.

...more...

[DemReadingDU]

48. Chris Martenson: UK banks nearly collapsed

1/24/09 from Chris Martenson...
Every so often an article will shed some light on what was going on while I was busy writing in the gloom of semi-darkness. I live out here in the cheap seats relegated to reading tea leaves, and squinting into the mist so it's nice to get confirmation from time to time as to how close to, or far from, the mark I was.

Here's an interesting article that just came out:

Revealed: Day the banks were just three hours from collapse
Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.
http://www.dailymail.co.uk/news/article-1127278/Revealed-Day-banks-just-hours-collapse.html


more at Martenson's link
http://www.chrismartenson.com/blog/uk-banks-nearly-collapsed/12171


Chris Martenson Crash Course videos
The Crash Course, What is it?
The Crash Course seeks to provide you with a baseline understanding of the economy, energy, environment so that you can better appreciate the risks that we all face. This is an excellent series of 20 video chapters, each video is between 3 and 18 minutes in length, meaning that all 20 chapters should take about 3 hours, but they need not be watched all at the same time. Try an hour a day for 3 days.
http://www.chrismartenson.com/crashcourse


About Chris Martenson, PhD.
Executive summary: Father of three young children; author; obsessive financial observer; trained as a scientist; experienced in business; has made profound changes in his lifestyle because of what he sees coming.
In his bio, Martenson goes into detail how he arrived at his conclusions and opinions, and why he's dedicated to communicating them via this excellent series of videos and additional articles.
Please click the link to read the rest of his bio...
http://www.chrismartenson.com/about

[radfringe]

54. 10:32am - OBAMA - STIMULUS Package - live

http://www.msnbc.msn.com/id/21134540/vp/22887506#22887506

[DemReadingDU]

55. Martin Weiss: Warning: Megabanks Could Fail Despite Federal Aid

1/26/09
The time has come to issue one my sternest warnings to date: Bank of America and Citigroup could fail despite the most radical government rescues of all time.

Right now, after recent close calls with instant death, these two megabanks are on life support, receiving massive transfusions of government capital. But they’re still hemorrhaging, and no one in Washington has found a cure.

Already, they have received capital injections of $90 billion ($45 billion each).

Already, this bailout is larger than the total combined capital of PNC Bank, Suntrust Bank and State Street Bank — all among America’s ten largest.

Yet, ironically, that $90 billion is still a drop in the ocean compared to their massive exposure to risky assets.
.
.< lots more>
.
My Forecast: Washington Will Ultimately Lose This Epic Battle!

No matter what the government does, it cannot patch back together the busted market for mortgages, derivatives and especially credit default swaps.

It cannot stop a pandemic of loan losses among large AND small banks as the economy sinks and traditional bank lending goes bad.

It cannot stop the contagion of falling confidence, fear and panic. It cannot outlaw gravity or stop investors from selling. Nor can it turn back the clock and reverse years of financial sins.

So don’t count on Uncle Sam to save your bank, your business, or the economy.

Keep up to 90% of your money in cash.

Avoid bank deposits as much as possible, using mostly short-term Treasury bills or equivalent.

Above all, focus on building up your own resources and finding alternative sources of income or profits. For specific instructions on precisely how, click here for our free one-hour video, “7 Startling Forecasts for 2009.” But you don’t have much time; it goes offline tomorrow.

Good luck and God bless!

Martin

http://www.moneyandmarkets.com/warning-megabanks-could-fail-despite-federal-aid-2-29412

free one-hour video, “7 Startling Forecasts for 2009”
http://webcast.streamlogics.com/audience/index.asp?eventid=81655519&stage=2

[Demeter]

62. Pull the Plug on Citi and Chase and BoA and AIG

That will scare people straight. Mortgages will have a market again, once they've been detoxed.

The structured finance securities will be outlawed just like any other Ponzi scheme, and life will resume at a saner, more livable level.

[NMDemDist2]

60. 50,000 job cuts just this morning.

Mon Jan-26-09 09:12 AM
ING Group to Cut 7,000 Jobs

Mon Jan-26-09 07:38 AM
Home Depot to cut 7,000 jobs, exit Expo business

Mon Jan-26-09 06:28 AM
Pfizer to buy Wyeth for $68 billion, cut (8000) jobs

Mon Jan-26-09 06:25 AM
Sprint to eliminate 8,000 jobs

Mon Jan-26-09 06:12 AM
Caterpillar Moves to Cut 20,000 Jobs

That's the list on LBN just since this thread started this morning

:scared:

[DoBotherMe]

61. Should SMW have a benchmark?

Ozy, since we've lost our benchmark of the day "Bush took office" should we have a new one, maybe the day "Obama took office?" Just a thought. It was helpful for me to see the daily fluctuations. Thanks! Dana ; )

[antigop]

68. Time: Citibank: Teetering since 1812 (interesting history here, imo)

http://www.time.com/time/magazine/article/0,9171,1873125,00.html

City Bank of New York was founded in 1812 by a group of merchants hoping to fill the void left by the demise of the first Bank of the United States, the sort-of central bank whose charter Congress had allowed to expire the year before. City nearly went under in the Panic of 1837 but was bailed out by the country's richest man, fur magnate John Jacob Astor. Astor's associate Moses Taylor built City into a bulwark of sound finance--big capital reserves, stingy lending standards--that bankrolled the Union during the Civil War and easily withstood the first postwar financial panic, in 1873.

Thus began a pattern of alternating conservatism and risk-taking, success and near failure, that has marked the banking enterprise now known as Citigroup--and the American financial system--ever since. James Stillman, who became City's president in 1891, combined prudence with great ambition. City Bank cruised through the Panic of 1893, thanks in part to the huge stash of gold that Stillman had acquired--gold being the backing for credit then--because he sensed trouble. City joined J.P. Morgan in bailing out the nearly bankrupt Federal Government in 1895 and soon grew to be the country's biggest bank. Its growth went international in 1914, after City lobbied Congress to tweak the Federal Reserve Act and allow branches abroad. (See the best business deals of 2008.)

With that growth came near disaster, as big loans to Cuban sugar planters went bad. What saved the bank was the salesmanship of Charles E. Mitchell, head of City's securities arm, who repackaged the bad Cuban debt--and went on in the 1920s to find ever more creative ways to sell securities and lend to the burgeoning middle class. Mitchell, who became president of the bank in 1921, built City into the first financial supermarket. When everything financial turned toxic in the early 1930s, he became the most prominent scapegoat for the disaster. He was the main target of the famous Pecora hearings in Congress, was arrested for--but not convicted of--tax evasion and resigned in disgrace. The Glass-Steagall Act of 1933 put an end to the blending of banking and securities businesses that Mitchell had championed. City lived on as a chastened, smaller bank.

[tclambert]

96. "fur magnate John Jacob Astor" just sounds so funny.

and kind of dirty.

[antigop]

70. Will memo from Rahm freeze out controversial pension proposal

http://financialweek.com/apps/pbcs.dll/article?AID=/20090126/REG/901229963

Last week, White House Chief of Staff Rahm Emanuel asked all executive branch agencies to put last-minute Bush administration regulations on hold.

Now, it turns out that the request from the White House could delay or lead to a revision of a Department of Labor proposal that would set ground rules for providing investment advice to defined contribution plan participants, ERISA attorneys said.

The Bush administration’s investment advice rule was published in the Federal Register on Tuesday, January 20, but it isn’t scheduled to go into effect until March 23.

Mr. Emanuel’s memo asked agencies to consider putting off the effective date of last-minute regulations for an additional 60 days to give Obama administration executives an opportunity to review the rules.

The investment advice rule has the support of House Minority Leader John Boehner (R-Ohio). It is vehemently opposed, however, by House Education and Labor Committee Chairman George Miller, (D-Calif.).

If Boehner supports it, then I'm against it.

[Dr.Phool]

78. Who took a dump in the punchbowl?

The Dow was up in triple digits, I left for a little while, and now it's in the red.

I gotta go out for a little while again, I wonder what will happen this time. I'd better hit the liquor store on the way home, just in case.

[JFKfanforever]

114. BUMP to the top

Excellent thread!

[Robbien]

81. UBS is trying to pay off the Feds in order to avoid indictment for helping the rich avoid taxes

Sources say U.S. prosecutors are expanding their tax case against UBS (UBS), and that the number of U.S. clients that UBS helped to avoid taxes is potentially much higher than the previously disclosed estimate of 17,000. Investigators are also looking into assisted tax evasion in other parts of the bank besides for the wealth-management unit.

UBS is said to be in talks with the Justice Department to avoid a possible felony indictment by admitting to criminal conduct and paying a $1.2B penalty. UBS has publicly denied any wrongdoing.

http://online.wsj.com/article/SB123292885691013921.html

[Robbien]

83. John Thain to repay $1.2 million for $87,783 rug and other office decor

According to my brother William D. Cohan's article in Fortune, Thain contributed mightily to his efforts to get himself fired following the takeover of Merill Lynch by Bank Of America (NYSE: BAC). Now Thain is trying to salvage his reputation by offering to repay Bank of America for the $1.2 million he spent to decorate his office.

http://www.bloggingstocks.com/2009/01/26/john-thain-to-repay-1-2-million-for-87-783-rug-and-other-offic/


The guy lives in a bubble if he believes this will help his image.

[Tansy_Gold]

85. yeah. Just shows how effing filthy rich he is that he can throw his

"own" money around like $1.2million is chump change.

ass hat.

ass hole.

wanker.


Tansy Gold, needs some new words

[UpInArms]

87. ...

crapweasel is one of my faves

assweasel works almost as well

assclown never fails to bring a smile to my face

:hi:

[ozymandius]

103. the closing bits

Dow 8,116.03 Up 38.47 (0.48%)
Nasdaq 1,489.46 Up 12.17 (0.82%)
S&P 500 836.57 Up 4.62 (0.56%)
10-Yr Bond 2.643% Up 0.021
NYSE Volume 6,124,349,000
Nasdaq Volume 1,875,928,625

4:35 pm : Financials threatened to undercut the broader market's gains, but stocks still posted a healthy advance amid a heavy flow of headlines Monday.

Financial stocks finished the session as the worst performing economic sector. They had been up more than 4% in the early going, but finished with a 2.1% loss. The initial advance seemed to come on the back of a rebound in European financial stocks, which have been dogged by profit concerns and fears of nationalization. Still, the gains proved unsustainable and as finacials slipped so, too, did the broader market.

Health care (-0.2%) stocks finished modestly lower, weighed down by Pfizer (PFE 15.65, -1.80). The pharmaceutical giant is acquiring Wyeth (WYE 43.39, -0.35) for $68 billion, or $50.19 per share. The offer comes as a 29% premium to where WYE shares closed before The Wall Street Journal first reported the companies were in talks. Pfizer is looking to fund the offer with a mix of cash, stock, and debt.

Though the deal will help Pfizer bolster its portfolio and further develop its drug pipeline, investors were disappointed when the company announced that in connection with the transaction it will halve its quarterly dividend to $0.16 per share. Coupling that with downside guidance sent shares of PFE to new January lows. As for the latest quarter, Pfizer topped earnings expectations, but Wyeth fell short of the quarterly consensus earnings estimate.

Despite Pfizer's announcement, tight credit conditions are weighing on merger activity elsewhere. Dow Chemical (DOW 13.24, -1.09) announced this morning that it does not intend to close the pending acquisition with Rohm & Haas (ROH 57.10, -8.72) on or before tomorrow. The announcement wasn't a total surprise, though. Tighter credit and a severed deal between Dow and a Kuwaiti petrochemicals outfit put have had the deal on tenuous footing for weeks. Shares of DOW and ROH weighed on the materials sector (-1.5%), as did DuPont (DD 23.18, -0.98). DuPont, which is a Dow component, reports its latest results ahead of tomorrow morning's opening bell.

Caterpillar (CAT 32.28, -3.38) fell to a new multiyear low after reporting dissapointing earnings and issued downside guidance. Challenging macro conditions have the firm looking to cut roughly 20,000 jobs.

One bright spot for the session, McDonald's (MCD 58.51, +0.49) bested the consensus quarterly earnings forecast and indicated that global comparable sales continue to be strong in January. Same-store sales increased more than 7% in the fourth quarter. However, many investors continue to question how long McDonald's can continue logging strong comparables.

Stocks began the session in a relatively quiet manner, but quickly climbed to a gain of 2.5% after it was announced December existing home sales increased 6.5% to an annualized rate of 4.74 million units. The December number was better-than-expected (consensus was 4.40 million). Though the headline alone qualifies as relatively good news, it was supported by a 9.3% drop in median home prices. That is the biggest drop since the 1930s. The month's supply of unsold homes at the current sales rate fell to 9.3 in December from 11.2 in November.

The Federal Open Market Committee begins its two-day meeting tomorrow. It will announce its latest monetary policy decision Wednesday. Tomorrow's focus, then, will be on earnings results from Verizon (VZ 30.99, +0.55), Bristol Myers Squibb (BMY 22.25, -0.14), Yahoo! (YHOO 11.17, -0.15), and a raft of other reports, which are tomorrow morning.DJ30 +38.47 NASDAQ +12.17 SP500 +4.62 NASDAQ Adv/Vol/Dec 1659/1.85 bln/1039 NYSE Adv/Vol/Dec 1983/1.27 bln/1076

[Demeter]

107. Great Thread Today, Ozy!

Lots of new names showing up, lots of banter and lots of news. Of course, it would be better if it were good news, but at least we're not living in George Bush's Bubble anymore. And the election and inauguration were the best of news. My heart feels so much lighter these days!

So, what happened at 2 PM to send the chickens to flight?

[RUMMYisFROSTED]

106. Where will Chimp's market bottom?

:freak:

[Demeter]

108. Can't go any lower than Zero.

I'm hoping Obama gets up to speed and started turning the ship of state around in the economy as well as the other things he's undoing.

[Tansy_Gold]

112. Yeah, I'm hoping, too. But I thinks we might better have a . . .

contingency plan.





Tansy Gold