Weekend Economists: The Resurrection Edition December 26-28, 2008

[Demeter]

Well, Easter came early for me in the form of a brand-new computer, and unexpected compassion from Younger Daughter, who was kind enough to force open the box, hook it all together, and get it cranking (after all, I was cooking Christmas Dinner). So, here it is: on Vista operating system, no less.

If you see something you've seen before, please forgive the duplication. I was not able to get my daily dose of DU or SMW during the blackout, and I'm way behind the curve.







I love Dilbert, because everything he says about technology jobs and the people in the high-tech corporations is completely true. One of the reasons I don't engineer for a living.

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




Bring on the Weekend!

[Demeter]

1. Wall St Santa rally small comfort after grim year By Anuj Gangahar and Alan Rappeport in New York

Nice Summary for 2008!

http://www.ft.com/cms/s/0/a3794060-d1c3-11dd-bb61-000077b07658.html


Wall Street entered the Christmas holiday in subdued mood on Wednesday, posting a modest Santa Claus rally, as investors digested more gloomy data on the economy and, with just four trading days left in 2008, began to take stock of a torrid year.

The crisis that started in the US subprime mortgage market spread this year to become a global economic and financial disaster. Governments around the world were forced to bailout some of the most recognisable names in the financial world as the credit markets seized-up and several high-profile companies including Bear Stearns and Lehman Brothers disappeared into history.

The S&P is down more than 40 per cent so far this year, its worst fall since the Great Depression. Most analysts expect that the more than year-long recession will get worse before it gets better and investors are bracing themselves for more pain in 2009.

Bright spots have been few and far between. Even the consumer staples sector is down by almost a fifth this year.

The financial sector in particular has been decimated with the S&P Financials index down almost 60 per cent so far this year. Citigroup shares have lost 77 per cent, Morgan Stanley 72 per cent and Goldman Sachs 65 per cent over the course of a year that has redefined the fundamentals of the global financial markets.

US automakers also plunged this year after it emerged that General Motors and Chrysler were insufficiently capitalised to make it through the year without government bailout funds. In spite of last week’s deal for a $17.4 bridge loan for the two, GM fell 87 per cent year to date. The troubled automaker staged a modest recovery on Wednesday, rising 8.3 per cent to $3.25, but has fallen 27.6 per cent so far this week.

............................
The latest numbers cap a grim year of job losses: the nonfarm unemployment rate jumped to 6.7 per cent in November, as the economy shed almost 2 million jobs since January.

Wary consumers are clutching tighter to their disposable income, saving 2.8 per cent compared to 2.4 per cent in October and a negative savings rate of 0.1 percent in January, the Commerce Department said on Wednesday.

But in a rare bright note, falling prices, particularly in the energy sector, left consumer spending up 0.6 per cent after adjusting for inflation, the first such increase in six months and disposable income rose by 1 per cent in November.

“Declining prices mean that consumers are spending less and buying more, while also increasing savings,” John Ryding and Conrad DeQuadros, economists at RDQ Economics, wrote in a research note. “This is a win-win situation for the US consumer.”

Before adjusting for falling prices, personal spending slipped by 0.6 per cent in November, after dropping a record 1 per cent the month before. Disposable income fell 0.1 per cent before adjusting for inflation...

[Demeter]

2. AIG moves closer to selling Filipino unit

http://www.ft.com/cms/s/0/603ec88a-d0ea-11dd-8cc3-000077b07658.html

AIG, the stricken US insurer, has moved a step closer to selling its Philippines unit after releasing a detailed information memorandum to potential buyers.

Philippine-American Life and General Insurance Co is the nation’s largest insurer and analysts believe it could fetch up to $1bn.

AIG was rescued from bankruptcy in September by the US government and is selling assets to help pay back part of a $60bn loan and ease the burden of its $150bn federal bail-out.

On Tuesday, a senior executive of Philamlife declined to disclose the recipients of the document, but said that discussions with potential buyers were being handled by Deustche Bank, which AIG has appointed to advise on the sale.

AIG set up Philamlife in 1947, and the local subsidiary has consistently remained the market leader. It reported premiums of 22.7bn pesos ($474m)and total assets of 170bn pesos in 2007.

A number of Filipino groups have expressed interest in buying Philamlife, and have teamed up with global and regional companies to pursue the deal...



AIG has recently announced several small divestments, including the sale of its private banking business and a stake in its Brazilian joint venture.

It this week sold the Hartford Steam Boiler Company to Munich Re, the German reinsurer, for $742m.

The insurer is also in talks to offload other assets including its US personal lines business, which analysts have valued at up to $6bn.

However, AIG’s Asian assets are regarded as the company’s crown jewels and will account for a substantial part of the loan owing to the US taxpayer.

The Financial Times reported this month that several leading global insurers are in talks to acquire American Life Insurance Co, AIG’s Japanese-focused operation, which has an estimated value of more than $10bn.

AIG is also planning to divest a large minority stake in AIA, a division with leading life assurance businesses across numerous Asian markets, which analysts say could yield up to $20bn.

Citigroup and Goldman Sachs will run the sale process, which is expected formally to begin next month.

[Hugin]

3. H'yas Demeter!

Like you, I now have a high speed network appliance to race around with...

Until I wrap it around a virtual tree or somebody takes the keys away. :D

:hi:

[Demeter]

10. Merry Merry, and a Happy Happy, Prag!

Thanks for filling in for me...it was greatly appreciated!

Now I've got to get in gear. The weather's so awful out, there's no attraction in leaving the keyboard.

[Tansy_Gold]

4. "Find us someplace warm."

After more than a week of rain and gloom and more rain and more gloom, we finally have clear skies in the shadow of Superstition Mountain, so it's gonna get a mite chilly here, maybe into the low 30s or even colder.

So it'll be a good week-end to have some heart-warming economic news, Demeter. And if you can't find heart-warming, blood-boiling will do just fine! :evilgrin:

Glad to have you back! :hi:



TG, who just polished off a small bowl of ice cream. . . .. because. . . . .

[Demeter]

13. It's Great to Be Back--I Missed You Guys

On the other hand, half the mending is done, and I can see my bedspread peeping through the diminished pile.....

[Demeter]

5. Offshoring and the Auto Industry

http://www.huffingtonpost.com/steve-clemons/offshoring-and-the-auto-i_b_149219.html

The U.S. government is about to kick $15 billion over to the U.S. auto industry. And what we have seen with all of the bailout cases thus far -- from AIG to Citibank -- is that that amount is probably just a down payment on a future bigger draw.

Michael Moore has compellingly argued that the best way to save the American auto industry is to force it to choke on its mistakes and bad management -- and change. In a public letter, Moore has offered the shocking truth that anyone could buy the entire American auto industry for less than $3 billion -- and U.S. taxpayers are about to pump 5 times that into the uncompetitive sector.

And on top of that -- there is NOTHING in the current outlines of the auto bailout package that requires the auto industry to keep jobs in the U.S. This money can go to help them manage their facilities abroad -- in lower wage countries -- while facilities continue to shut down in the U.S. with jobs shifted overseas.

In fact, despite some minor verbal, non-binding assurances from the auto chiefs that American taxpayer funds would not be applied to offshoring activities, there are no deals, no guarantees at all -- and if faced with a much higher, less efficient production base in the U.S. compared to cheaper platforms elsewhere -- this bailout money could in fact be financing a new major offshoring trend.

Even Paul Krugman alluded to this in his Stockholm remarks accepting his Nobel Prize, suggesting that gravitational forces are going to unwind Detroit's auto sector, no matter what Obama does. He said "the concentration of the industry around Detroit would disappear."

Obama's pre-government team in collaboration with Bush's outgoing economic officials are trying to diminish the sense of crisis in key sectors in the economy by guaranteeing loans and promising huge cash infusions. . .but, there are 'smart' ways to help move industry in new directions and then there is dumb spending.

Not dealing with the question of a new "social contract" inside the U.S. when taxpayer dollars are being pumped into the auto sector is a major mistake.

-- Steve Clemons directs the Smart Globalization Initiative and is Director of the American Strategy Program at the New America Foundation. He also publishes the popular political blog, The Washington Note

[tomreedtoon]

6. My sympathy for Vista, Microsoft's Treason.

The worst operating system ever devised. Worse even than that model toy train of OS's, Linux. If I were you, I'd see if I could get a legit (or pirated) version of Windows XP Professional. You can get a pirate version and use it without worry, because Microsoft betrayed all computer users with Vista.

[Demeter]

9. Well, Other Than Being Ostentatiously Gaudy

it hasn't done anything awful to me yet. And I'm using Firefox again. Can't stand what Internet Explorer does.

[Dr.Phool]

46. I have XP on the desktop and Vista Basic on the laptop.

The only problems that I've had with it, is that I had to kick the memory up to 2 gigs. Even though the laptop has a slower processor, and half the memory, I still think it runs faster.

And I didn't like the idea of not being able to install Office on Vista. But, I downloaded OpenOffice for free. I haven't used Internet Explorer since Netscape hit the market. And I've been using Firefox and Thunderbird since they were released.

[CatholicEdHead]

54. No, that would be Windows ME as the worst ever

as bloated as Vista is, it is more stable and does most drivers better than ME (which would not even take a generic USB mouse for me).

Edit: I have been using Vista for a little of a year, while slow and bloated I have not had ME-style problems with it with Ultimate and Home Premium.

[Dr.Phool]

7. Morning all.

Has anything much happened the last couple of days?

I don't seem to remember much.

[DemReadingDU]

8. Good morning! Santa came

That's about all the news I can remember.

[Demeter]

14. And He Left Us a New President!

[Demeter]

11. A very short reckoning today...

http://www.dailyreckoning.com/Issues/2008/DR122408.html

Not that there isn’t a lot to reckon with. Never have we seen so many absurdities...such remarkable events...such sublimely moronic thinking – in such a short time! When we want to make fun of something, we’re paralyzed...spoiled for choice.

But first, let us look at the basic facts.

Yesterday, (DEC. 23rd) the Dow shed another 98 points. The dollar held steady at $1.39 per euro. Gold lost $9, bringing it back to about where it began the year.

It is amazing to us that so many people have so much faith in so much humbug.

We’re talking about the bailout...the fix...the save...the plan to revive the world economy by giving it more of what it least needs – more debt. The idea is to make the pain of the correction go away by encouraging people to act as though they had nothing to correct. They’ve borrowed too much. And they’ve spent too much. But the feds aim to make them borrow more – by bringing the cost of borrowing down to an all-time low – and make them spend more...by causing prices to rise. (When money loses its value...they’ll be glad to get rid of it.)

It’s a consumer economy, they say; all we’ve got to do is to lure people to consume. The simpletons.

Colleague Simone Wapler explains that it doesn’t work that way:

“Of course, a consumer economy requires consumption, but that’s not all it requires. Imagine an island where a fisherman, a hairdresser, a doctor and a central banker live. The fisherman sells his fish. The hairdresser cuts hair. And the doctor does whatever doctors do. They all live on their services, using shells for money. The population is stable; everybody does what he’s supposed to do. Everyone is fed. They all have nice haircuts. And they all get medical treatment. The number of shells is stable too. That’s all there is to the story.”

Simone gores on to explain that the only way people can get their hair cut two times a day...eat twice as many fish...or get sick more often and expect to get the same treatment they got before is by INCREASING PRODUCTION. And that requires saving...and investment. Otherwise, increasing consumption isn’t possible. Even if you add more shells, the productive capacity remains the same.

We don’t even know why we are pointing this out. Every fool knows it. But every fool also believes that if you mix in a little macro-economic mumbo jumbo that, somehow, central bankers can increase consumption by discouraging saving...and just getting more shells into consumers’ hands.

The whole thing is as preposterous as the bubble that went before it.

But that doesn’t make it unpopular!

And since it’s Christmas Eve...and since we’re waiting in the Limoges airport for our two daughters to arrive...

...and since we see them coming out now...

We’re going to sign off...

...wishing you a Merry Christmas, Happy Hanukah...Joyeuses Fetes...Feliz Navidad...Super Kwanza...whatever...

And since France Telecom seems to have cut off our phone service...we will not be able to reckon tomorrow...

[Name removed]

12. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Hugin]

23. Isn't this kind of a long winded way of saying "Economy is Freedom"?

I'm also disturbed by the comparison of Social Security to a Madoff scheme. (Maybe it's time
to retire Ponzi as he wasn't even in the same league with these modern day crooks.)

But, of all the programs the Author of this piece could have pointed to... Social Security
isn't a true scam. Because, contrary to the Author's assertions, it isn't -yet- an entitlement
program or an 'Investment' strategy. People only expect to get out of it what they put in.
I've heard it said, and I agree that if Social Security was a private, but, widely available
pension fund... People would be crazy not to get into it.

We of the SMW have long maintained that at the root of the current financial crisis was a
desire on the part of the Right-Wing crowd to break the Social Security system and convert
it into a give-away to Wall-Street. Although, they've very nearly succeeded, the Social Security
safety net remains largely intact.

I can only think the 1%ers see Social Security as yet one more Pension Fund, just laying there
waiting to be raided.

[Demeter]

25. Social Security is a Wealth Redistribution Program

The only way it differs from a Ponzi scheme is everybody knows what goes in, what comes out, and they agreed to it.

In a Ponzi scheme, everything is opaque, and one operates on hope and reaps disaster.

[Demeter]

27. Bears on the Loose!

http://www.dailyreckoning.com/Issues/2008/DR121508.html

The ground is giving way beneath our feet: Sell the dollar...Sell Treasuries.

People still stand their ground...they do not panic. They do the right thing. But then, they go into work – but find they have no jobs. They look at their pension account – wisely invested in a diversified portfolio – and find that it has lost half its value. And their houses lose 20% of their value. In places such as San Diego, Las Vegas and Miami, the losses are more like 30%- 40%.

The ground gives way...and they find themselves in Hell...But what MUST happen, WILL happen. Fish gotta swim. Birds gotta fly. And bubbles gotta pop. The bubble in private debt has popped already. And now, the bubble in public debt has to pop too. And the dollar’s got to go down. That’s when the ground will really give way... For many people, the collapse of the dollar will wipe out what is left of their assets. Pension funds and insurance companies will be devastated. Savers will be unsaved.

Investors have rushed from risky investments of all sorts – emerging markets, mature markets, real estate, commodities – into the strong, welcoming arms of the U.S. Treasury market. “Give me your tired, your poor huddled masses of dollars...yearning for protection from capitalism,” says Uncle Sam. “And I’ll give you 2.58% return over 10 years. Give me your money for 91 days, and I’ll give you nothing.”

Is that a good deal, dear reader? It depends on how solid the ground is under the U.S. Treasury market. So far, as the ground gives way under other asset classes, the Treasury market has held solid.

But here is why the word “must” was invented. When something’s gotta happen, it’s gotta happen. The U.S. federal government already has an official national debt over $10 trillion. The deficit for next year will likely exceed $1 trillion...and could reach up to $2 trillion by 2010 – or more than 4 times the biggest deficit the country has ever run...and more than the entire U.S. budget only seven years ago. At this rate, in a couple of years, U.S. debt will exceed US GDP.

Is it likely that the feds can so greatly increase the quantity of U.S. debt without reducing the quality of it? Is it likely that the last IOU issued by the federal government will be as valuable as the first? No, it’s not likely. Something’s gotta give.

And we are talking about big money. A business or a small government can sometimes borrow more than its annual revenues. It’s borrowing can be funded by a small percentage of the world’s reckless savers. Lending to U.S. government on such a scale is another matter. It takes up a large percentage of the world’s total savings, effectively shouldering other borrowers out of the way, and actually reducing the world’s capacity for economic growth.

Everybody, except bankers of course, knows that lending large amounts to a small country is extremely speculative. But lending to the United States for ten years at 2.58% has a nasty stink of certainty about it. You can’t borrow that kind of money without some consequences...and the consequences of that much debt are bound to be bad.

To us, it seems almost inevitable that it will turn out to be a bad place to put your money. Because the ground is almost sure to give way beneath the feet of Treasury-market investors. How so? Ben Bernanke has already told us. When the borrowing gets tough, the Fed will turn to other forms of liquidity – buying U.S. Treasury bonds itself. In other words, instead of borrowing from savers – thus leaving the net money supply unchanged – the Treasury will borrow from the Fed. Where will the Fed get trillions of extra dollars? It will create them out of thin air.

That’s why the dollar has turned down.

“Greenback’s haven status thrown into doubt,” reported the Financial Times .The dollar is Hellbound, dear reader. Sell it. And sell Treasuries too. We might be early with this advice. But we won’t be wrong.

*** If you want to own gold coins, you’ll pay $870-$890 an ounce. Coins are scarce. People are looking for something solid to hold onto. Coins are solid. They are portable. They have no hidden liabilities.

And you won’t pick up the paper and find that a crook like Bernard Madoff has stolen away the value of your gold coins. The latest Wall Street desperado took investors for some $50 billion. And now the FBI, SEC and all the gumshoes and hacks are making a big deal of it.

Of course, in purely financial terms it is a big deal. The press has labeled it a “ponzi scheme.” But Charles Ponzi took in only $10 million. Peanuts compared Madoff’s scheme.

Another important difference. Ponzi took money from ordinary investors, widows and orphans. But Madoff went for bigger game – hedge funds, banks, and professionals. Today’s news tells us that the world’s largest bank – HSBC – was a victim. Banks in Geneva said they were out $4 billion. The Fairfield Greenwich Group said it had invested $7.5 billion with Madoff.

[Demeter]

28. Because Certain Grumpy Old Men Cannot Conceive of Actually Taxing the Wealthy For Their Sins

they cannot see any way out of the box.

We are going to have major tax reform, and people with the ready are going to take a major hit, because anyone with modest savings has been wiped out by fraud, inflation, and job loss. It must happen, because otherwise, the country goes belly up. And We the People do not want to go belly up.

The Rich can hide, they can flee, but if they want to be Americans, they have to PAY.

[Tansy_Gold]

32. It must be said, it had to be said, someone's gotta say it

That's where all the money went, Demeter. You know it and I know it and most SMWers and SMWlurkers know it.

The trick is to get it back.

So-and-so lost $10 billion. Bank of Such-and-Such lost $3.5 billion. I have a funny, funny, funny feeling that if we add up all the admitted "losses" to BM (pun of course intended) we'd find out that the total is voilà! way more than $50 billion! How did that happen??? How???

Several years ago, my neighbor had some wind damage to his patio cover, so he filed an insurance claim. He found out the insurance company would pay him, sight unseen, $2500 to replace the awning. He took their check for $2500 and put up a $1000 replacement. The $1000 replacement wasn't very sturdy, so two years later it, too, was lost in a spring wind storm. He filed the claim and got another check for $2500. He didn't bother to replace the awning. He waited three years before filing another claim, and sure enough, a few days later he got the check in the mail for $2250 -- after three years it had "depreciated" in value, though of course if he'd been replacing it, it would have cost much more than the original $2500. Last spring he changed his tactic and claimed the weather had destroyed a storage building. By the end of the following week, he was waving a check for $3000. He never had any such storage building.

Point being that when people know there is hand-out coming, they're quite eager to proclaim how stupid they were to have invested in someone as obviously crooked as Bernie Madoff. If there were no hand-out, they'd never admit to being suckered in.

Will TPTB investigate? Will they discover that some of those claiming losses never even invested with BM but were, like bystanders who lie down at the scene of an accident and claim to have been hit by flying debris, still claiming they're entitled to restitution?

The American Empire will come to an end, sooner or later, but it will not be by way of foreign invasion as one of the posted essays suggest. It will be by internal collapse. First the "territories" will declare independence, and then the internal viable economies will coalesce and fracture the whole. The mountain and Pacific states will form a regional pact; the Midwest industrial and agricultural union will establish a similar federation; the Northeast will, much like England, remain a cultural and financial core; The East and Central South will revert to its antebellum pseudo aristocracy for a while before reluctantly but inevitably joining the northeast as something of an agricultural and light industrial colony.

The corporations and the 1%ers will disappear. Local production will return, because it must AND because it can. Population will decrease but not significantly; the yawning gap between rich and poor will also decrease, more significantly.

Maybe.




Tansy Gold

[Demeter]

35. Going All Apocalyptic On Us, Tansy?

I can't argue any point--it is the most likely scenario, assuming Canada doesn't invade.

[Tansy_Gold]

40. Canada won't invade. They aren't that stupid ;-)

They don't have the military or the population to sustain an occupation.

Other than that, I'm not being apocalyptic at all. So far, all the prior empires have failed, and the core nation maintains its identity and culture but at a lesser magnitude. Egypt, Greece, Rome, England, Spain, even France and Germany. The U.S. doesn't have the national identity to hold such a huge agglomeration of mini-nations/states together the way those smaller entities did; it'll break off eventually into regional coalitions that will form federations or confederations or what have you. When? :shrug: I dunno. Depends on what happens with the economy.

China isn't going to invade, or at least I don't think they will. ditto for India. ditto for Russia. No one else has anything even approaching the capacity to do so, and no one else would want to. Besides, I do think in that event that the rest of the world would be up in arms (:hi:) to repel an invader. The current beef is all with booooosh, not with the American people.

The resurrection of the American economy following the Great Depression was indeed helped along by federal stimulus followed by wartime production followed by peacetime marketing of manufactures. It wasn't financed by foreign debt, which any such similar resurrection would have to be. The only viable solution is to tax the rich. Redistribute the wealth and do it in such a way that the nation becomes self-sustaining again, rather than relying on slave labor in other countries. When you detach the economy from the political structure, you're inviting collapse. I just don't think you can have one without the other. Either reintegrate them, or they will dis-integrate.

But what do I know?


Tansy Gold

[Demeter]

42. Pity. I think Canada Could Do a Lot for the US Under Occupation

It might be the only way we'd get Universal Health coverage, for one thing.

[Demeter]

43. deleted dupe post

[DemReadingDU]

58. A Russian Professor's Prediction of How the U.S. will be Split

12/28/08
For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument -- that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. -- very seriously.

Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry's academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.

But it's his bleak forecast for the U.S. that is music to the ears of the Kremlin, which in recent years has blamed Washington for everything from instability in the Middle East to the global financial crisis. Mr. Panarin's views also fit neatly with the Kremlin's narrative that Russia is returning to its rightful place on the world stage after the weakness of the 1990s, when many feared that the country would go economically and politically bankrupt and break into separate territories.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.





more...
http://online.wsj.com/article/SB123051100709638419.html

[Tansy_Gold]

59. I hadn't seen the map, but the geographic regions only make sense.

I don't think, however, that the international "alliances" he sees will come to pass. Alabama is not going to become "part" of Mexico, Illinois is not going to become part of Canada, and Tennessee is not going to become part of Europe. If anything, the regions will be autonomous regions, quasi-nation-states, but the individual states will retain some identity.

Short of nuking us and turning the whole continent into a radioactive wasteland, I don't think any nation, not even China, could afford to invade and occupy the U.S. We do still have our guns.


TG

[Joe Chi Minh]

34. Something I can't for the life of me understand. I was under the impression

that anyone remotely connected with the finance industry held that the higher the return on an investment, the greater the risk; that it was one of the most basic axioms. A poster to a Guardian forum said that he went into a branch of the Northern Rock intending to open a savings account with them, but when he saw how high the interest was that they were offering, he walked straight out again, for that very reason. Another man is said to have heard no less than eight alarm bells ringing before he got to page two of the Madoff's prospectus.

Yet, people extremely high in the business world, including that unfortunate Frenchman who slit his wrists, seem not to have heard any alarm bells ringing. How can that happen? Even given our natural human propensity for folly.

[Demeter]

15. LEGITIMACY DWINDLES by James Howard Kunstler

http://www.dailyreckoning.com/Issues/2008/DR122308.html#essay

The Daily Reckoning PRESENTS: What seems to spook Americans about the financial crisis is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. James Howard Kunstler explores...

(POSSIBILITY? I'D SAY IT'S A DAMN CERTAINTY, IF THE GUY IN CHARGE IS A GOPPER. I'M RESERVING MY OPINION ON THE DEMOCRATS OTHER THAN PELOSI UNTIL FURTHER DEVELOPMENTS....DEMETER)

Zounds! Public sentiment toward the accelerating economic fiasco has shifted, seemingly overnight, from a mood of nauseated amazement to one of panicked grievance as the United States moves closer to an apparent comprehensive collapse – and so ill-timed, wouldn’t you know it, to coincide with the annual rigors of Santa Claus. The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It’s like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve. And out in the heartland, of course, there is the spectacle of Illinois governor Rod Blagojevich trying to desperately dodge a racketeering rap behind an implausible hairdo.

What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we’ll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out.

This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal – trillions! – that the death of our currency seems assured. And in defiance of congress’s express intentions, none of the TARP “money” has been applied to its targeted purpose of buying up “toxic” (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.

George W, Bush’s personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy – when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering (“...we pretend to work and they pretend to pay us....”).

The years since Jimmy Carter have produced an astoundingly flaccid public, sunk in various addictions and distractions, but this is about to change. The darkling mood of political protest and violent activism that saturated my own young adult years is scudding up again on the horizon. Mr. Obama’s pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government. If he doesn’t commence some aggressive investigations and prosecutions – beginning with Henry Paulson for insider trading when he was in charge of Goldman Sachs and shorting his own company’s mortgage-backed securities – then the whole Obama enterprise could fall under suspicion of illegitimacy. The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can’t be allowed to hide under a TARP.

Unfortunately, the legal system, and probably the legislative system, will be so buried in procedural bullshit from the unwind of countless enterprises and institutions, and the sorting out of the remnants, that it remains to be seen whether this generation of people-in-charge can even embark on a fresh start of anything connected to real everyday life in America. All this is starting to alarm the tattered residue of the middle classes, and from here it’s a very short path to them being really pissed off.

When legitimacy erodes, anything goes. Nothing is respected including rules and personalities. The center doesn’t hold and the new vacuum there is a tumultuous place. The same crisis of authority and legitimacy is spreading from nation to nation now. Soon, China will contend with a discontented army of the unemployed. Greece has been in an uproar for two weeks. Belgium’s government just collapsed. Trade barriers are going up. Exports are falling away. The world’s energy markets are not immune to these disorders. I would expect problems with the currently seamless supply lines that bring America two-thirds of the oil we use. Even a mild disruption of oil supplies could attach an anvil to the ankle of an economy already falling off a cliff.

Right now, the overwhelming sentiment is to get this country back to where we were, say, ten years ago, when everything was humming nicely: Clinton nostalgia. We’re definitely not gong back there, though. It’s an idle wish. And any set of policies designed to lead in that direction will prove very disappointing. Our destination is a land of much smaller-scaled local economies. We could retain our federal ties if the federal government can scale back appropriately from the bloated, feckless enterprise it has become. Otherwise, it might only get in the way and make matters worse, and the public in one region or another of North America might reach a decision that they are better off without it. That would be what’s called a revolution.

Regards,

James Howard Kunstler
for The Daily Reckoning

Editor’s Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine . In 1975, he dropped out to write books on a full-time basis.

His latest nonfiction book, The Long Emergency describes the changes that American society faces in the 21st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and, amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in smaller places and eat locally grown food.


I'M WITH KUNSTLER--WE CAN DO A LOT BETTER THAN CLINTON, IN FACT, WE HAVE TO.

[Demeter]

16. Americans Turn to 'Plan B'

http://www.dailyreckoning.com/Issues/2008/DR122208.html

Just this morning, we turned to Elizabeth: "We're going to have to shift to Plan B next year."

"Plan B?"

"Yes…we've got to cut back on our expenses. Plan A is where we go along as we have been. Plan B is where you have to get rid of some of your horses. And then, there's Plan C…."

"Plan C?"

"Yes, in Plan C we eat the horses."

..........


When the boom began, people were slow to get in the spirit of it. They remembered the '70s and fretted. As the Dow rose from 800 to 1,800 they thought they saw a crash around every corner. Then, in October of '87, the Dow hit 2,700 and crashed - down 507 points in a single day. Investors thought the bull market was over. Instead, it continued.

By December, 1996, the Dow had reached 6,437. Alan Greenspan, as witless at the beginning of his career as at the end of it, pronounced this the result of "irrational exuberance."

But the boom continued. And gradually, people came to accept that stocks would always go up "in the long run," and that houses always went up all the time. Oh yes, and jobs were always available…and so was credit. At the beginning of the boom, people saved about 10% of their incomes. But as their faith in the boom grew their savings diminished. There was no longer any need to save money for a rainy day - because it never rained.

And if they did need money, they could always draw on someone else's savings! Stocking money began to seem as old-fashioned as canning tomatoes. Why bother? You can get all the fresh tomatoes you want at the supermarket. And, until recently, you could get all the cash you needed from credit cards and home equity lines.

The saving rate fell to zero.

Then, of course, it started to rain. And now, the lack of savings is becoming a serious crisis at the household level. Gone are the smiley faces at the home-equity loan departments. Nor are there more credit cards arriving in the mail.

A little insight from Durham University in Britain: You might have thought that in the Bubble Epoch people used their credit for extraordinary expenses…such as adding on to their houses or taking a once-in-a-lifetime vacation. If that were the case, they could now merely forego the unusual expense. Their lives may not be so much fun…but at least they would be solvent. Not so. It turns out that borrowers got used to living on home equity withdrawals. They counted on the money to fill in the gaps in their household budgets.

James Saft: "It seems that even during boom times in Britain people were not borrowing against their houses simply to buy BMWs or to pay for vacations, but often to keep their households running during tough times."

In short, they used borrowing in place of savings - for when they got sick, lost their jobs, or had some other crisis.

Now, cometh another crisis - the worldwide financial crisis - and they have to move to Plan B. But how? They have no savings. They can no longer borrow. What do they do if they lose their jobs?

"You can always get a job flipping burgers," was the poor cousin of "stocks always go up over the long run." Both these fantasies depended on a boom. The boom gone…so are the jobs… Soon, they will have a crazed look in their eyes…and a carving knife in their hands. Look out, Flicka! Look out, Mr. Ed!

*** The more the average householder is pinched, the more he resents Wall Street. The press no longer reports the latest news on executive compensation with admiration…now it is outrage that readers want to feel. A group of 600 executives in the financial industry - the same executives who are now getting bailed out with taxpayers' money - pocketed $1.6 billion last year. The banks did the same thing as ordinary households. Rather than save money, they spent it. The typical household bought a big-screen TV. The banks paid off their top employees, giving the average banker a compensation of $2.6 million.

"The bankers get bailed out; we get sold out," said one unemployed autoworker.

*** We have only seen the beginning of this crisis. So far, consumers have put off buying things they could easily delay - such as new cars and new houses. Next year, without jobs, they will cut back further. Consumer prices will fall - simply because consumers will buy less of them.

Then, the call will go out to stop bailing out Wall Street and begin bailing out the consumer. Some form of direct giveaway to households is almost inevitable. Perhaps more "rebate" checks will be sent out. How much? Hard to say…but this is what gives us confidence in the feds. If they really, really want to cause consumer prices to rise - they can always bring over Gideon Gono as a consultant…and add zeros.

[Demeter]

17. The Mogambo Guru Checks In (at Insane Asylum!)

http://www.dailyreckoning.com/Issues/2008/DR122208.html#essay

Bloomberg.com reported that Treasury Assistant Secretary Karthik Ramanathan, “the department’s chief debt manager,” said that the United States faces “as much as $2 trillion in borrowing needs this year,” and warns us that they “may introduce new financing methods to sell a record amount of government debt”, requiring them to use “novel approaches to debt management.” Yikes!

I remember when I tried this “novel approach to debt management” scam one time early in my career when my natural incompetence and general lack of interest in a career started to manifest themselves, which predictably ended badly, although it looked so good on paper.

My “novel approach to debt management” was to loan the employee pension fund to me as my “seed money” for a big run at the Vegas casinos using some stupid new gambling “system” I developed back when I believed in the bell curve over the long-term, and which has, thanks to the phenomenon of catastrophic Black Swan events, now been shown to be a Big, Big Mistake (BBM), as if my subsequent experience in Vegas was not enough proof! Hahaha!

But apparently nobody wants to hear about how I lost so much of the employee’s money, or how a “novel approach to debt management” did not work out, or how I was personally embarrassed to have lost all their money while risking none of my own.

But perhaps people will be interested to know that the federal government is going to make sure that we are all losers, as inflation in consumer prices destroys us, which I cleverly deduce when Bloomberg said, “Ramanathan cited private analysts’ estimates of borrowing needs that may reach $1.5 trillion to $2 trillion in the financial year that ends in September 2009.”

What? A $2 trillion federal budget deficit? In a $13 trillion national economy? Gaaahhhh! When the trade deficit is running at almost $900 billion a year? Double gaaahhhhh!

If you disregard my loud, terrified screaming as just a pathetic “cry for help”, you will realize that my underlying message is sound, and that it’s too, too weird, it’s too, too unprecedented, it’s too, too everything-bad-from-an-economic-perspective, and it is so all-around terrifying that even holding gold in one hand, and laying down some suppressive fire with a 0.45 caliber semiautomatic in the other to send a little “message” to the neighbors, provides but little solace.

A hell of a lot of noise, yes, but little solace! Hahaha! On the other hand, without the safety of gold, absolutely none of the latter!

Until next time,

The Mogambo Guru

[Demeter]

18. Daily Reckoning Predicts....

http://www.dailyreckoning.com/Issues/2008/DR121908.html

And here, a Dear Reader, puts the question to us:

“I've read Empire of Debt and considered the current recession long and hard, and it seems to me the question of the century is: will money destruction caused by stock market declines, housing market declines etc., and the concomitant deleveraging, result in classic deflation like the 1930s? Or will Quantitative easing and our reliance on the kindness of foreigners to buy (and hold) our treasury bonds result in a dollar crisis and subsequent inflation? It seems to me that as a debtor nation we are at great risk for a dollar crisis as former buyers of our bond auctions turn inwards, but this morning's largest CPI decline on record has me questioning that. Do you still favor hard assets and avoiding the dollar?”

The answer is yes. Deleveraging will (and is) giving us a bout of ’30s-style deflation. But, yes, the feds are coming to the rescue – like an exterminating angel. Bernanke has said as much himself recently. They’re going to print money. And Alan Greenspan spelled out what printing money would mean, speaking to Congress back on February 15, 2005:

“We can guarantee cash benefits as far out, and at whatever size you like, but we cannot guarantee their purchasing power.”

We don’t know what their purchasing power will be. Gideon Gono was so successful in avoiding deflation, he got consumer prices rising at 230 million percent per year. We doubt Ben Bernanke will be able to keep up with him.

Still, what seems OBVIOUS to us is that after a period of ‘30s-style deflation, the feds will get the hang of inflation...the dollar will fall...and gold will rise.

What makes us nervous is that it seems too obvious. What must happen does happen. The bubble in finance had to burst. It did. Prices have to come down...and they are coming down. Now, the feds have to inflate. And everyone knows it...everyone sees it coming.

Everyone is now saying: stick with Treasuries during this down leg...switch to gold, TIPS, stocks, or other asset classes when inflation turns up.

This trade is too crowded for us...too obvious... What could go wrong?

We can think of two possibilities:

1) It could take too long. Every major downturn produces at least one major rally on the way down. If the rally lasts long enough, investors could forget what’s behind it. They could begin to think that the rally is a new bull market...that inflation really is under control...and that have no need to protect against it. They may feel that the rally is their only hope of getting their money back...and they may be loathe to give up on it. Then, when inflation finally does hit, they will be unprepared for it.

2) It could happen fast. If China, for example, were to panic out of the dollar...the greenback could collapse. Treasury bond yields could double...and triple...almost overnight. Gold could pass the $2,000 mark in a few trading sessions. This could all happen like a blitzkrieg, paralyzing investors who wait for a correction before they take action. .

Best bet: Stick with the formula – sell dollar-based assets on rallies...buy gold on dips . Don’t wait for a clear signal that inflation is increasing. And don’t be misled by a sustained countertrend – if we ever get one.

[Demeter]

19. THE BRIGHT SIDE OF CATASTROPHE by Bill Bonner

http://www.dailyreckoning.com/Issues/2008/DR121908.html

The Daily Reckoning PRESENTS: Bernie Madoff is a giant in his field. He out-ponzied Charles Ponzi. He out-princed Chuck Prince. He could have taught the Egyptians how to build pyramids. In the history of high-stakes grifting, he outdid them all. A Robin Hood with Alzheimer’s; he stole from the rich. If he’d only remembered to give to the poor he’d be a hero! Read on...



Who can honestly say he isn’t enjoying this financial crisis? It has unhorsed cavalier fund managers ...it has turned the masters of the universe into servile waiters...it has made Nobel Prize winners look like morons. The rich...the proud... the pompous...the vain...the incompetent...Wall Street – surely there is a God...an ‘invisible hand’...giving them all a whack on the head!

And there are the regulators too! Under their very noses the biggest scams in history went unnoticed. America’s SEC alone – to say nothing of the countless other cops on the financial beat – had 3,371 employees playing the piano in 2006. If you can believe it, not a single one of them noticed what was going on in the back room. Even after rummaging through Bernard Madoff’s back office twice in the last three years, they still didn’t know. They must have been like pets watching an orgy...with no idea what to make of it, but wagging their tails and vaguely wanting to get in on the action.

Between Tuesday and Wednesday of last week, Madoff’s managed accounts were thrown into a “spiral of horror” said one fund manager. Tipped off by his own sons, the feds went to Madoff’s apartment. They gracefully asked if there was perhaps a misunderstanding. No, replied Madoff, “there was no innocent explanation.” And so, they put the cuffs on him and acted as though they had Lucifer himself in custody.

Bernie Madoff is a giant in his field. He out-Ponzied Charles Ponzi. He out-Princed Chuck Prince. He could have taught the Egyptians how to build pyramids. In the history of high-stakes grifting, he out did them all. A Robin Hood with Alzheimer’s; he stole from the rich. If he’d only remembered to give to the poor he’d be a hero!

Madoff’s charm was that he out-foxed the foxes and out-scammed the scammers. How hard was it to give away new houses to people who didn’t have any money...or get people who didn’t speak English to sign toxic mortgage documents? Child’s play, really. And the executives with their millions in bonuses... and humbuggers like Richard Fuld – their marks were mostly ordinary stock market investors; low hanging fruit compared to the coconuts Madoff plucked. Rather than go after the widows and orphans, he swindled the smartest money in the world...money managed by family offices...the old Jewish money from New York and south Florida...London’s Man Group...Switzerland’s Union Bancaire Privee. He even flim-flammed the hedge funds – including Fairfield Greenwich for $7.5 billion. And Tremont, a fund of hedge funds, put in more than $3 billion. How cool is that?

And he was remarkably democratic about it; he took money from his own tribe, his own clan, and his own golf club buddies. Billions of it. Even more impressive, he did it not with hyperbole, but with relative modesty. He produced only about 10% per year – which didn’t seem like much during the Bubble Epoque.

How could he guarantee steady 10% per year returns from stocks? Like so many of the conceits and delusions of La Bubble Epoque, it was absurd on its face. How come the SEC, with its legions of accountants, didn’t notice that the numbers were fraudulent? And how could the entire financial industry – with its Nobel winners and it business school graduates – not have noticed what was even obvious to us feral economists here at The Daily Reckoning ? For years, we warned that the whole thing was a scam, a fraud and a delusion. And The Daily Reckoning is free!

And now, historians look back and wonder: how could people have been so stupid? The answer is simple: in a bubble, it pays to be stupid. You buy something at a lamebrained price...and it goes up. Not only did stupidity pay, it paid well. Running a bank paid better than robbing one. Hedge fund managers got paid more than contract killers or stick-up men.

“When the tide goes out, you see who’s been swimming naked,” says Warren Buffett. We haven’t seen the tide so low in many years; the view is nauseating...hideous...but never before have we seen so many skinny dippers nor had such a laugh. More than $15 trillion has been lost...so much that it threatens to turn the lights out on the entire world economy. The investment banking industry has disappeared. Regular banks have been nationalized. The auto industry is broke. Investors stagger. And mobs break shop windows protest.

Historians will try to make sense of it. But all historians lie. Not intentionally. It’s a professional requirement. They look back and think they see a plot. From then on, every circumstance is bent, greased and wedged into the story line. The basic facts are the same any way you look at it; the dramatis personae don’t change. But the historian can make readers laugh or cry. He can turn it into morality play or an amoral farce. He can focus on the struggle of the masses or the failures of leaders, the triumph of a caste...the defeat of a class...or the perfidy of an entire profession. Already, they’re telling their tale: the system failed...now, we need to fix it. We need more regulation; another Nobel Prize winner, Joseph Stiglitz, says so in the current issue of Newsweek Magazine .

Too bad they can relax and enjoy the elegant mischief of capitalism. In the space of 6 months, it has scratched 10,000 Porsches...destroyed more monuments than Cromwell...and squeezed the rich harder than Mitterand. It would have taken an army of dreary Bolsheviks decades to redistribute so much wealth; and it wouldn’t be half as much fun.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning . He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis .

[Demeter]

20. AN ERA OF DELEVERAGING by Byron W. King

http://www.dailyreckoning.com/Issues/2008/DR121808.html#essay

The Daily Reckoning PRESENTS: As you may have seen, the Federal Reserve cut its discount rate in the hope of increasing economic activity. And OPEC is cutting oil output in the hope of raising oil prices. Who do you think is going to win that tug of war? Our intrepid correspondent, Byron King, explores...


Clearly the Fed wants to spread more cheap liquidity around the world. But is the world’s problem really not enough cheap dollars? It seems to me that we got here – deep in this current recession – with too many dollars floating around. Too many people borrowed too much cheap money. Now the big blowback of history is that we’ve entered into an era of deleveraging. So the biggest concern for most of the world’s governments, businesses and households is overall solvency. Can people pay down their bills as they come due? For far too many people, the answer is “No.”

My inner-Austrian economist tells me that what the world needs is more savings and more capital formation. The world needs more basic productivity. Instead, we are getting more bailouts and government programs that will benefit people and firms of dubious productivity. That’s not capital creation. That’s capital destruction.

And pity poor OPEC. Saudi Arabia needs oil prices at $60 per barrel or so just to cover its national budget. At $45 per barrel, they are losing money. Russia needs to see oil at $75 to keep its accounts in balance, and that’s before they lay the keels for the new fleet of aircraft carriers they are discussing. And those poor souls in Iran? Mr. I’m-a-Dinner-Jacket needs $100 oil to meet payroll. While Generalissimo Chavez of Venezuela needs $125 oil to cover the national outlays. So OPEC wants to cut output and try to drive the oil price back up.

Will it work? Don’t bet against OPEC on this one. They want to cut output by over 4 million barrels per day. That’s a lot of crude. So expect to see oil prices heading back up in 2009. We won’t see $147 again any time real soon. But expect higher oil prices as 2009 unfolds, and expect to see higher prices for everything else within the energy chain.

OPEC’ predicament just goes to show. The key OPEC players sure got used to high oil prices in a hurry. They believed their own press releases. They thought that oil was high and going higher, as if there was never an oil bust before.

So you can have a lot of money, but not know anything about how money works. Then again, we in the U.S. shouldn’t gloat at OPEC, let alone laugh. Not as long as we keep electing the same members to Congress, year after year.

Speaking of that, did you see Rep. Barney Frank (D-MA) on CBS’s Sunday evening show 60 Minutes the other day? That noted public intellectual Leslie Stahl interviewed him. Along the way Ms. Stahl called Mr. Frank “the smartest man in Congress.” Wow. If that’s true then we’re in trouble. OK, Rep. Frank is smart. He sure is not dumb. He came across as bright and quick-witted. Ms. Stahl made sure to tell us that Rep. Frank “went to Harvard.” (Big deal. So did I.)

But Rep. Frank came across as an angry and bitter man. From what I saw on 60 Minutes , the meaning of money does not register with Rep. Frank. He just wants to spend dollars on things that make him feel good. And if you disagree, he has a prompt explanation for why you must be a bad person. He will give you a non sequitur of a comparison for why his subjective feelings are better than yours. And if you persist he has a personal put-down. He’ll call you an “idiot” or something worse.

Well, Rep. Frank is what I think we’re going to look back on, one of these days, as a “financial sociopath.” He comes across as just in favor of spending the national wealth with no regard for the long-term consequences, as if the $10 trillion national debt is not already crippling the nation. As Ronald Reagan once asked, “Where does this country find such men?”

It just goes to show about 60 Minutes . They can misquote you. Or worse, they can quote you correctly.

Until next we meet,

Byron W. King
for The Daily Reckoning

P.S. I’ll keep you updated on these issues, and on other news about the OI portfolio, in future articles. In the meantime, check out my latest report...

Editor’s Note: Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments , and editor of Energy & Scarcity Investor .

THE CURRENT BUSHCO FINANCIAL POLICY IS PROOF POSITIVE THAT NONE OF THESE IDIOTS HAS A CLUE, AND THEY SHOULD NEVER BE TRUSTED WITH A DIME OF THEIR OWN, LET ALONE ANYBODY ELSE'S MONEY. AND I'D SOONER TRUST BARNEY FRANK'S ECONOMIC INSTINCTS THAN EBENEZEER SCROOGE'S....DEMETER

[Pale Blue Dot]

33. I'd trust Frank over Scrooge, too, but just barely.

I think Frank's been one of the bad guys in this whole mess.

[Demeter]

36. I Think He Was a Slacker, But He's Willing to Work, If Anyone Will Cooperate

Trying to get anybody to agree to act in Congress has been rather futile for activist Democrats lately.

[Pale Blue Dot]

39. For me, it's not that. I think he's working toward the wrong goals.

He pushed the financial bailout, for one, and now he's pushing to release the 2nd half of it before Obama takes office.

I think the fact that he's normally a friend and that he has a good head on his shoulders makes him especially dangerous with economic matters.

[Demeter]

41. Every Politician Has Been Working Towards the Wrong Goals, IMO

They sit around thinking they should stick to the "possible" when they are just sticking to the corporate goals. The possibilities are much broader than that, and so are the needs.

[Demeter]

21. On the Daily Reckoning's Domestic Front Lines...

http://www.dailyreckoning.com/Issues/2008/DR121708.html


“Don’t you know there’s a worldwide financial meltdown?” we asked Elizabeth last night. “This is no time to be buying new furniture.”

“Well, I needed a new desk. But I’m not buying anything else.”

“Aren’t you picking up a new horse trailer tomorrow?”

“Yes, but I ordered that before the crisis hit. When I thought you had some money...before you started worrying about going broke.”

The phone rang.

“Who was that?” we asked a few minutes later.

“That was the curtain man. I need to get new drapes for the living room.”

“What’s wrong with the old drapes?”

“They’re just not right.”

“They’ve been okay for the last 13 years...what’s suddenly not right about them?”

“They’ve never been right...and I’ve finally realized what it is...so I’m going to change them.”

“Don’t you realize that there’s a global financial crisis? This is no time to be spending money.”

“Yes, but the crisis is likely to go on for 10 years...and I don’t want to live with drapes that aren’t right for a whole decade...and then buy them after we’re too old to enjoy them.”

“You’re not one of those ‘toxic wives,’ are you? You know, those women who leave their husbands after they lose their money.”

“Don’t be silly. You didn’t have any money when I married you. And I’ll stick with you even if you go broke. We may not have any money. But at least we’ll have nice curtains to look at. That’s why I’m getting them now...while you’ve still got some money left.”

Until tomorrow,

Bill Bonner
The Daily Reckoning

[Demeter]

22. AT WAR WITH THE OBVIOUS by Chris Mayer

http://www.dailyreckoning.com/Issues/2008/DR121708.html

The Daily Reckoning PRESENTS: Everyone has their opinion on what the U.S. economy is going to do…but as we like to point out in these pages, what the majority believes is very rarely correct. Chris Mayer explores…

AT WAR WITH THE OBVIOUS by Chris Mayer

"The world is full of obvious things which nobody by any chance ever observes."
- Sherlock Holmes, The Hound of the Baskervilles

After World War II, economists had an airtight case for another Great Depression. The argument went something like this…

The U.S. never really recovered from the Great Depression, they said. It was war-related hype that pulled the economy out of its doldrums. What would happen when all those orders for war materials dried up? Utter collapse.

The unemployment rate was 14.6% in 1940. During the war, it dropped to practically nothing. But when the war ended, what then? Well, you throw 12 million military personnel back into the work force and it would be a disaster.

Seymour Harris, a prominent economist of the day, called for unemployment rates of 20% in the U.S.! That was not at all an uncommon point of view. Paul Samuelson, a future Nobel Prize winner, said that "There would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced." Pretty much anybody of any standing thought the U.S. economy was ready to go into the tank after the war.

As it turns out, that was exactly wrong! The economy took off. In fact, the Truman years were great years economically. During his eight years, the economy grew 60%. Corporate profits nearly doubled. Unemployment by 1952 was practically nonexistent, at 3%. The Dow rose more than 80%, albeit from a very low base.

Just goes to show you that the consensus isn't worth a pile of pigeon droppings. Great investors have always understood this. Bernard Baruch, the great wheeler-dealer of long ago, is an interesting case study in bucking a strong consensus.

Baruch made his first killing in 1897 going long American Sugar Refining Co. when everybody else thought it was a stupid thing to do. In fact, The Wall Street Journal reported on July 3 of that year:

"Washington correspondents of various newspapers are taking extremely bearish views and nearly all Washington houses are short the stock… The Street impression certainly is that the Sugar Co. has been defeated."

So there you go. Nearly unanimous opinion among the experts. But Baruch went long anyway. He turned $300 into $60,000 in the process - within in a year - and was on his way. (He bought the stock on margin. That is to say, he borrowed heavily. And he kept buying as the stock rose higher.)

The Journal, after a sharp rise in sugar, reported on July 24 - a mere 21 days after its first dispatch:

"Never in the history of Sugar manipulation have so few people been right on the stock."

I start with this anecdote to impress upon you that when the great mass of brains we call experts coalesce around an idea, that idea is far from being right. In fact, it doesn't often pay to bet with the consensus, for the same reason it doesn't pay to bet favorites in a horse race. The price you get won't compensate you enough for taking the risk. You won't make money over the long term.

Today, it seems analysts are competing with each other to see who can come up with the lowest prediction for the price of oil. Everybody is piling on. The Wall Street Journal reports: "Many oil industry insiders and traders now say prices could slump much lower, into the $30s, before supply cuts push prices back up, perhaps much later into next year." Merrill Lynch, as if to top that, now says that oil could get as low as $25 per barrel.

The commodity bull market is over, the consensus opines. You were an idiot not to see the bubble. You are an idiot today for continuing to invest in the names. That is what the mainstream consensus seems to be saying these days.

I don't buy it.

Granted, I was wrong in thinking commodity prices would hold firm in 2008. I thought that the favorable supply and demand dynamics of these markets would prevail over a potential economic slowdown. And for a while, it looked like that's what would happen. After all, let's not forget that most of the destruction in commodity markets happened since July. Oil was $147 per barrel on July 11. Today, it's $43. I certainly didn't see that. In fairness, I don't think anyone saw that steep of a drop. Other commodity prices fell in a similarly steep pattern.

And so we see our commodity names pummeled as well. But I'm hanging on because the market has gone too far in punishing these names. It will correct itself faster than I think most people expect. I still see good hard-to-replicate assets and smart management teams and cheap stocks, so I've stuck with them. If I thought otherwise, I would've blown out half the portfolio and started over. But I don't think that's the right course. I think we need to be patient. (I always remember the wise words of old Phil Carret, a great investor who at the age of 99 found himself on the Louis Rukeyser show. Asked what was the most important thing he learned about investing over the past three-quarters of a century, Carret gave a one-word reply: "Patience.")

Let's also not forget that 2008 was as bad a year for stocks as nearly anyone living has ever seen. The broad S&P 500 index will likely finish the year down more than 40%. There weren't any places to hide, unless you were going to sit it out in cash.

As bad as it seems now, it won't last forever. In 1932, in the absolute pit of the Great Depression, Bernard Baruch wrote a short foreword to Charles Mackay's classic work Extraordinary Popular Delusions and the Madness of Crowds. This was a book Baruch said saved him millions. And it is a good history book that stands up even today. Anyway, Baruch wrote:

"I have always thought that if, in the lamentable era of the "New Economics," culminating in 1929, even in the very presence of dizzily spiraling prices, we had all continuously repeated, 'Two plus two still make four,' much of the evil might have been averted. Similarly, even in the general moment of gloom in which this foreword is written, when many begin to wonder if declines will never halt, the appropriate abracadabra may be: 'They always did.'"

He was right. In fact, in 1932, when he wrote this, the worst was over.

I don't know if the worst is over today. I wish I could say it was. But markets don't work that way. No one knows where the bottom is. It is unknowable. I can only tell you that what my Mayer's Special Situations readers own is cheap at these prices. And that I think all of what I'm recommending to them will be much more valuable in the years ahead.

Regards,

Chris Mayer
for The Daily Reckoning

P.S. There are bound to be several 10-baggers lurking on our back page and out in the marketplace today. If we give up now, we may never have a chance to own these stocks at these prices ever again. Inevitably, some won't make it - and we'll trim them as we go - but the ones that do will more than make up for them.

Editor's Note: The above was taken for Chris' latest issue of Mayer's Special Situations.


LET'S NOT FORGET THAT THIS EISENHOWER FAIRY TALE OCCURRED BECAUSE THE LITTLE WOMAN WENT HOME AND BIRTHED AN AVERAGE OF 4.2 CHILDREN AND THE WOMAN'S MOVEMENT AFTER THAT. IF WOMEN WERE COUNTED, THE UNEMPLOYMENT RATE WAS PROBABLY MUCH HIGHER THAN THE 20% THEY FEARED.

IN FACT, THIS IS ONE OF THE WORST CASES OF SPECIAL PLEADING AND SELECTIVE FACT PICKING I'VE EVER SEEN, BUT THIS IS WHAT IS OUT THERE, AS WE WELL KNOW .....DEMETER

[Tansy_Gold]

26. Thank you for your comment at the end, Demeter.....

....because as I was reading this piece I kept thinking he was really not getting the post-war picture at all. There was all that industrial capacity just waiting to be used, all those "consumers" waiting to consume. And what began as a "boom" never abated until it had reached bubble status. The corporations looked for more profits, more markets, then looked for cheaper labor. It's all a logical sequence, unless, of course, you leave out certain bits and pieces.

When do we start looking at solutions?




Great reading on a cold but so far reasonably clear morning (though with some clouds on the horizon).



TG

[Demeter]

29. Michigan, on the Other Hand, Is Having a Heat Wave

It's already above freezing, and 60F is predicted. The threatened rain is holding off, for the moment, giving us a chance to melt and drain off some of the ice and snow. The fog is dense. I could barely see 10 feet ahead this morning on my route, and I had to follow the middle line to stay on the road. Used up my cache of pistachio shells getting out of an ice trap, too.

It looks like half of our white Christmas has already disappeared. That's okay with me. Winter started too damn early this year, and we had no spring to speak of last year.

[Demeter]

30. As for Solutions, I Look to FDR and Barack Obama

with some serious prosecutions thrown in for preventative medicine.

[Demeter]

24. Daily Reckoning Economic Theory....

http://www.dailyreckoning.com/Issues/2008/DR121608.html

Here at The Daily Reckoning we have a different theory entirely. It’s not our invention...but we like to take credit for it anyway. We saw the crisis coming not because we have better eyes, but because we are able to stand on the shoulders of giants: Adam Smith, Adam Ferguson, Jacques Rueff, Friedrich Hayek, Murray Rothbard, Josef Schumpeter and Kurt Richebächer. Not that we’ve done a thorough study of the field. It’s just that there is something so transparently superficial about the Keynesians and the Friedmanites...not to mention the Gonoists.

At the bottom of it, we don’t think the economy works like a machine. You can’t tinker with it to make it run better, in other words. You can’t turn a screw to eliminate mistakes. And you can’t trick consumers into thinking they have more money – at least, not without adverse and unexpected consequences.

No, in our mind, an economy is a living thing...organic...natural...subject to moral laws rather than mechanical rules. In our theory, people don’t get what they want or what they expect...they get what they’ve got coming. Sooner or later.

Of course, that’s why economists, government planners, and world improvers don’t much care for our pensee. The clumsy mechanics have their own jackass theories; they stick with them no matter how many times they prove not to work.

*** A remarkable issue of Newsweek offers advice to the President-Elect:

“How to Fix the World” promises the cover.

What makes the magazine remarkable is that it has managed to put between its covers more claptrap ideas and silly ‘blah, blah’ humbug than we ever seen assembled in one place.

Of course, you know what’s coming when you read the headline. If you’re going to “fix” the world, you must believe that there is something wrong with it...and that if the Obama Administration would listen to the editors of Newsweek , it would be improved. We know you can fix a fight...or fix an election...or even fix a flat tire. But whenever people want to fix the whole world, they are looking for trouble. What they really mean is “change” the world – bend it into a new shape, more to their own liking...but hideous to everyone else.

“The world needs smart management,” say the editors. No kidding. That’s shows the height of bar Newsweek editors set for themselves. But what is “smart management?” And why should tomorrow’s managers be smarter than today’s?

And how is it possible to manage the world anyway? If the editors would only reflect for a minute they would realize that so far the “management” of the global economy has been disastrous. The last thing the world needs is more of it.

“Foreign policy requires adult supervision...” is another of the newspaper’s empty bon mots. Who do they have writing this stuff, we wondered? Tom Friedman maybe.

Then, in a piece entitled “How to save democracy” the authors suggest “technical assistance” and “training programs” setting “clear conditions” before the United States gives away any more money. They think that if foreign governments promise to work on “women’s rights” and “transparency,” the world will be a better place.

Tom Friedman must have had a hand in this, we conclude. It is all so childishly simpleminded. ‘Democracy is a good thing,’ the editors must have said to themselves, ‘What can we do to get more of it?’

You see, dear reader, it’s the same kind of drivel that you find in economics. ‘Credit is a good thing; how can we get more?’ Or, ‘consumer spending makes the economy grow; how can we get consumers to spend more?’

The Newsweek team even offers to “fix Islam.” Again, we didn’t know there was anything wrong with it. But here is where we begin to get in the spirit of this whole world-fixing scheme. It’s a shame they don’t turn their attention to Christianity. How could that be fixed, we wonder? For example, maybe the 10 Commandments could be lightened up, so as not to exclude so many people. How about just 8 Commandments...or 5...so they are easier to remember? Or, how about “Thou shalt not commit adultery very often?” Or, “thou shalt honor thy father and mother except when they are annoying?” See how easy it is to improve someone else’s religion? Maybe they could go right to the heart of the Christian dogma and improve “Love Thy Neighbor” to “Like thy Neighbor.” That would make the whole thing a lot easier to live with, don’t you think?

Now that we’re in the mood to fix the planet, we will take up Newsweek ’s next challenge with greater grace. Yes, dear reader, the magazine wants to fix relationships between men and women. They don’t seem to like it when women wear those black outfits that cover them from head to toe, for example.

Now here is where we can make common cause. We don’t like those black outfits either...except on women who look dreadful. But we don’t know which women look dreadful and which don’t, so we will make a suggestion; let’s fix this black bag thing with the following edict: women’s clothing should be inversely proportional to their age and beauty. The more young and attractive they are, the less they should wear. There...that should help!

And while we’re at it, we humbly and respectfully propose a simple code of ‘rights’ for women: women should be able to do anything men can do...only better. Except chew gum in public...we draw the line there. We hate to see a woman chewing gum...or swearing. Women should never swear; it makes them sound like low-bred washerwomen. Also, since we’re taking the initiative here, women should wear dresses. We know this will seem a bit retrograde, but sometimes you have to go back before you can go forward. We like to see women in dresses, and we are sure it will be a better world if women wore dresses...except, that is, for the women who wear black bags.

But we’re probably going a bit far afield from the world improvements the Newsweek team had in mind.

Let’s return to their agenda.

“Markets can’t rule themselves” says Joseph Stiglitz. We need “better regulation,” he says. Now there’s a novel idea. The SEC was set up by the Roosevelt administration 70 years ago. They were actually watching over Bernie Madoff’s company...and actually did a review of it in 2005 and 2007. Somehow, these ace regulators didn’t notice the biggest Ponzi scheme in world history...a scheme approximately 5,000 times bigger than the scheme of the eponymous Ponzi himself.

Better regulation? We know how to get more regulation. But what we don’t know is how to get better regulation. We don’t even know what it means. There were thousands of regulators on the job in New York City. Not one of them seems to have caught on to any of the great scams that were going on. Even when they were so obvious even we poor scribblers here at The Daily Reckoning warned about them for years. We said sub-prime would be a disaster. We told the world that hedge funds were a rip-off. We whined about high executive salaries and bonuses. We explained how the profits going to the financial industry were an aberration. We laughed at the pretentious nonsense of the investment engineers, the pious complicity of the rating agencies, and the reckless greed of the mortgage lenders. Housing...finance...private equity...hedge funds...the dollar – what did we miss? And a subscription to The Daily Reckoning is free!

Newsweek presses onward in its delusions:

“More government is the solution” says Brazil’s President Lula da Silva. The solution to what? We would like to know what problem – that was not caused by government itself – has ever been solved by government. We can’t think of any. But so the magazine lurches on...from one bit of claptap to another...from mass delusion to popular fantasy...from farce to dada.

*** Poor George Bush. At a press conference in Iraq, a journalist called him a dog, in Arabic, and then threw his sized-10 shoe at the president. Dubyah ducked.

What’s wrong with America’s journalists, we wonder. Have they no shoes?

Until tomorrow,

Bill Bonner
The Daily Reckoning


HE'S GOT THE RIGHT FACTS, BUT THE WRONG INSTINCTS! dEMETER

[Demeter]

31. LA BUBBLE EPOQUE by Bill Bonner

http://www.dailyreckoning.com/Issues/2008/DR121208.html

The Daily Reckoning PRESENTS: All over the world, prices are falling. Inflation is no longer a sure thing. For the first time since the 1930s America, and many other nations, run the risk that inflation rates will turn negative. Bill Bonner explores...



“It was horrible! Horrible! Like lightning had struck. No one was prepared.

“You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery store were empty. There was nothing you could buy with your paper money.”

In 1993, Friedrich Kessler, law professor at Harvard, described an event from his past – Weimar Republic’s hyperinflation. He might have been describing the future too.

All over the world, the inflation pumps are running hot. In Australia, the government recently announced a stimulus program. Checks of $1,000 per child will be sent to deserving parents. Senior citizens will get $1,400.

The Japanese have a 5 trillion yen program, while Europeans are in for $1.8 trillion. But it in the United States the pumps are practically burning up. The Americans have put up $8.5 trillion, including $120 billion to bail out a group of foreign countries, as well as the homeland. A trillion here...a trillion there...pretty soon you’re broke. But who’s worrying?

“I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States,” Ben Bernanke assured Congress, adding that “a determined government can always generate higher spending and hence positive inflation.”

So determined was the U.S. Fed since 1970 that the dollar lost more than 3/4s of its purchasing power. But now, all over the world, prices are falling. Inflation is no longer a sure thing. For the first time since the 1930s America, and many other nations, run the risk that inflation rates will turn negative.

Ben Bernanke has been wrong about many things; but as to the Fed’s ability and determination to destroy the dollar, he is almost certainly right. The burden of today’s column is that we share his confidence. Having inflated so many bubbles – including the monster in private debt that has just blown up – the Fed chief should have little trouble inflating another one in public debt.

History will record that the Bubble Epoque began soon after the Plaza Accords in 1985. The immediate problem confronting the finance ministers and central bankers at the Plaza Hotel in New York was what to do about the dollar. After having gone down in the late ‘70s, it went up so much in the early ‘80s that there seemed no stopping it. The strong dollar had its advantages of course. American tourists visiting London in the early ‘80s could leave their calculators at home. A dollar was a pound. A pound was a dollar. But the strong dollar was a threat to America’s commercial interests. Japanese imports, in particular, were undermining America’s competitive position.

So the assembled economists came up with a solution. It was decided that the yen should be revalued, upwards, so as to tilt the playing field a little more in the Yankees’ advantage. With a higher yen and a lower dollar, products from Japan would have to roll uphill if they were to reach U.S. markets.

Since Richard Nixon had closed the gold window at the U.S. Treasury, in 1971 dollar, not gold, was the bedrock of the new financial system. But the dollar was hardly granite. It was more like gas. Foreign nations bought dollars from their local merchants and exporters, and paid for them with their own currencies. The more greenbacks America emitted, the more money of all shades and colors expanded all over the planet. If central banks failed to keep up with rising supplies of dollars, their local currencies would rise against the greenback, hurting sales to everyone’s favorite customer, the USA. The banks also used dollars as reserves; as their capital increased, so did their lending.

The system was absurd; but it wasn’t unpopular. The more Americans spent, the more money foreigners had available to lend them

Readers should be grateful; if this column were not so short we would give you more of the details. But there is no need. The facts are not in dispute. The Plaza Accords was followed by the first major bubble of the bubble era – in Japan. The Nikkei Dow, rose from 12,000 in 1985 to over 39,000 in 1990. Property prices in Tokyo soared.

The Japanese bubble found its pin in January of 1990. It brought about a bust that has lasted longer than marriages and refrigerators. The Bubble Epoque was only beginning. A few years later came bubbles in Asia, Russia, and an oft-rehearsed one in LongTerm Capital Management. LTCM was the blow-up not heard around the world. Investors should have listened more carefully. The fund had two Nobel prize winners on its payroll. Their theories of risk management and mark-to-model pricing were clearly wrong. Pity no one noticed.

Instead, the authorities learned exactly the wrong lessons. When one bubble blew up...the feds pumped in more hot air – inflating a new bubble somewhere else. When the dot.com bubble exploded, they pumped overtime. Pretty soon, they had inflated huge bubbles – in emerging markets, housing, consumer credit, the financial industry, commodities, food, and even art. Private debt – used to fund the asset bubbles – was the biggest bubble of all. And now, with all those bubbles flattening, along comes another one. A bubble in public debt.

It’s inflation they want. And inflation they shall have. Of course, Mr. Bernanke is as keen to avoid the “hyper” modifier. “Just a little bit” would be plenty, he says to himself. He aims for 2%...maybe 5%. And if inflation rises to 10%...20%...or more...he won’t be the first central banker to miss the mark.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

[Demeter]

37. History of the Credit Card, Citibank, Usury and South Dakota

http://www.economicpopulist.org/?q=content/friday-movie-night-secret-history-credit-card

Hour long video report...scary!

[Demeter]

38. Chutzpah Unlimited

http://skepticaltexascpa.blogspot.com/2008/12/chuzpah-unlimited.html

"Intense lobbying by banks and bankruptcy experts softened a key provision in the auto-bailout bill that would require government loans be repaid ahead of banks and other lenders. But the current language leaves unclear just who would collect first in the event of a bankruptcy filing--taxpayers or existing creditors. ... The banks prime concern centered around a plan to make the U.S. government's $14 billion in rescue loans senior to other loans. They argued that this clause violated the Fifth Amendment of the U.S. Constitution, which prohibits the taking of private property without 'just compensation'. ... Historically, the only way a secured lender can be forced to take a backseat to another lender is in bankruptcy court, where a judge hears from the secured lenders and determines if those creditors are protected with additional collateral or other measures. ... 'It really sounds like a clear violation of the taking clause in the Constitutuion, to put the government ahead of all the other lenders. To go this route is a treacherous path riddled with all sorts of constitutional issues,' said Don Workman, head of the restructuring practice at the law firm of Baker Hostetler . ... It is still unclear what the practical effects of this language may be. Potentially, that could place the government behind the banks but ahead of the bondholders in repayment, say turnaround experts. Lenders said if left unresolved, the language could make banks and others even less willing to lend to troubled companies, for fear that the government could intervene in more situations. But the change may also anger policy makers, who have demanded the government and taxpayers be paid back first", my emphasis, Jeffrey McCracken & Elizabeth Williamson at the WSJ, 11 December 2008.

"GMAC LLC is racing to raise $1.25 billion in fresh capital necessary for the to begin backstopping the company's finances. ... As a federally chartered bank, GMAC can have its debt temporarily guaranteed by the . GMAC could also access the Fed's discount window for inexpensive, short-term emergency loans at a time when its borrowing costs have soared due to battered credit ratings. ... GMAC's shift to a bank holding company would greatly benefit GM", Aparajita Saha-Bubna at the WSJ, 15 December 2008.

"The key to any magic trick is to focus the audience's attention away from where the action is actually taking place. That is what Congress did in the failed auto bailout bill. Language in the proposed legislation seems to uphold the rights of existing car-company creditors while also protecting any taxpayer funds used to prop up Detroit. In reality, the bill raised a chilling prospect for debt investors: that in extreme situations the government could upend the traditional pecking order of the bankruptcy process. ... Creditors' rights became an issue in the proposed automobile bailout because the government planned to put its money first in line for repayment in the event of bankruptcy. That seems to be a no-brainer for taxpayers", my emphasis, David Reilly (DR) at the WSJ, 15 December 2008.

Is Uncle Sam considering an auto maker or another banker bailout? BH's Workman should be called to Congress and told on television tell your clients, "if you want federal money, subordinate. Alternatively, we will let the auto makers go bankrupt. Which would your clients prefer?". Congress should call Vikram Pandit (VP) and ask him, if he thinks Citigroup should treat any federal auto bailout money as if it's debtor in possession financing. Then call in Kenneth Lewis (KL) and ask him what is the B of A's position. What will VP and KL say on television in front of millions as thousands of UAW members and other peasants with pitchforks surround the Capitol? That any financial institution would raise this issue is amazing. Until Unc puts money in, he holds the cards. For that matter, any bank which received federal bailout money should be prohibited from lobbying. The bank doesn't like it, give the money back. I don't see banks arguing the Fed's existence violates US dollar holders rights and for the Supremes to reverse the 1930s' "gold clause" cases. "For fear the government could intervene"? This is the banks' Alice In Wonderland world. Michael Savage, radio talk show host, speculated that what's really driving the auto bailout bill is the Bush administration's desire to protect Cerberus Capital which has positions in Chrysler and GMAC and is well-connected politically. Maybe.
Temporarily?

I agree DR, this is a "no-brainer". Either this is an auto bailout bill, or another bank bailout bill.

[Demeter]

44. that's all, folks--until tomorrow!

It's amazing how much I missed. My brain is stuffed.

[Dr.Phool]

47. Glad, you're back up and running again.

:hi:

[Karenina]

50. So very happy to see you back, Demeter!

:hi::loveya::hi:

[Ghost Dog]

51. Thanks very much for this, Demeter. You provide an excellent Gestalt,

from mostly US-centric points of view, of what's going on and what will be going on that helps my unconsciousness mind get a grip, so that in my heart I know more about what to expect and therefore what (within limits) to do.

Please hang on to your sanity and try not to burn up or out.

[Dr.Phool]

45. Wow! I didn't realize it before, but Florida is being overrun with geniuse's.

The wife and I just got back from a trip a couple of counties north of here. It was a combination post-election, holiday party. If you believe all the wall to wall radio ads, we've got the smartest investors in the world, right here in the Tampa Bay area, and they're willing to share their expertise with you and even manage your money.

None of them have ever made a bad investment, routinely kicking out double digit returns. And they know how to make even more money in a down market, and financial crisis. The one guy even had an ad in broken English. I didn't recognize his accent, but I'd hazard a guess that it was Nigerian.

Who knows? We might have a few budding Madoff's in making. Or a least a Meyer Lansky!

First thing Monday, I taking everything out of the bank. It's at least $70. That's seventy singles, not k's. Everything but the Fudd's biscuit and Beggin Strip allotment. I'll be rich! Maybe I'll even let them hold the property tax and homeowner's insurance funds for a little while.

And if by some reason, my body is found floating in a 55 gallon drum in The Gulf of Mexico, my wife found out.

[Tansy_Gold]

48. Oh, bummer! And I spent my windfall on. . . . .

. . . . .shoes!

Otherwise I'd've given you every penny I had to spare, all $4K of 'em!

For the non-math majors, four thousand pennies is $40 :evilgrin: I had tucked it a book I was reading and then stopped reading the book for a while. When I picked it up again the other day I found the loot. This morning I bought two new pair of sandals.


Tansy Gold, who does the sandals thing pretty much year 'round unless she's rock hunting.

[Dr.Phool]

49. I could have sent you half of my wife's shoes.

That would only bring her down to Imelda Marcos' quantity.

[Ghost Dog]

52. I prefer to go barefoot myself,

here on the arid island, using a pair of slip-on 'Kung-Fus' at most.

When I have to wear shoes they kill my feet. But now I have a broken toe I've also invested in a pair of wrap-over sandals made of some weird petrochemical-based material.

I read, BTW, that the Berber fighters who conquered most of the Iberian peninsula in their day did so barefoot.

[Tansy_Gold]

53. Oooh, me too! me too! Me too!

I hate shoes. Not too fond of clothes either.

A few days ago when it was particularly cold and rainy, I wore sneakers to coffee. A friend noticed and remarked, "In three years I've known you, I have never seen you with real shoes on. I didn't think you owned any. You've huddled at the outdoor table wrapped in a jacket, but you always wore sandals."

I own no "real" shoes. One pair sneakers (about 8 years old, too). One pair hiking boots. Balance sandals. And those come off as soon as I'm in the door.

How did we get on this subject?




Tansy Gold

[Demeter]

55. I Must Have Been VisitedBy the Evil Fairy at Birth

Phone lines were out due to windstorm until now, and I must go off and do official board stuff...

We're having March on steroids today. 50mph winds, dropping like a stone from 60 to 20f, most of the snow gone, except for the ice piles in the parking lots. Most of the ice is gone, too, which would be great if it weren't going to reform tonight.

Stay warm and safe, and if I get home and can't sleep, I'll post more, but it's doubtful right now...

[Tansy_Gold]

56. Don't worry about us, Demeter. Keep yourself safe

I've already had one friend report a fall due to ice, so let's not have any more of that!


Tansy Gold, in Apache Junction where it got cold enough to zap my bougainvilleas overnight but not so cold I couldn't wear my new sandals to coffee this morning!

[UpInArms]

57. Say Goodbye and Good Riddance to 2008…

http://online.wsj.com/article/SB123041833857937379.html?mod=googlenews_wsj

It was a year when the most dire financial predictions finally came true.

After years when the housing bubble inflated, American credit-card debt soared and global stock markets set record highs, everything was brought back to earth in 2008.




The Dow Jones Industrial Average, off 36% year to date, is on pace for its worst return in 77 years. European stocks have done even worse, and once-high-flying emerging markets lost nearly half their value over one four-month period this year.

That left panicky investors with few secure options, other than retreating to the safety of U.S. government debt, where one-month notes sold in December yielded essentially nothing. Also this month, the National Bureau of Economic Research declared what many business executives and consumers already felt intuitively: The U.S. is mired in a recession, which the NBER says began in December 2007.
Over the Brink

Has there ever been a year when so many once blue-chip financial companies were pushed to the brink, and in some cases over it?

Shortly after Labor Day, the federal government seized mortgage giants Fannie Mae and Freddie Mac, sticking the American taxpayer with billions of dollars in losses from bad home loans.



The 158-year-old brokerage firm Lehman Brothers Holdings received no such help when it couldn't raise cash, and was forced to file for bankruptcy protection. Insurance giant American International Group narrowly avoided the same fate by agreeing to hand over control in exchange for an $85 billion loan from Washington.

...more...