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Thoughts on the crisis and the bailout - Page 2

post #31 of 56
In the meantime:

Retail spending was flat in August, which almost guarantees 0% GDP growth in the third quarter and the NBER will probably decide that we've been in a recession for all of 2008;

The ISM (Institute for Supply Management manufacturing index) fell to 43.5% from 49.9% in August - above 50 indicates growth, below 50% indicates contraction - and was the sharpest one month drop in the index since 1984;

Factory orders fell 4% in August, and orders for durable goods fell 4.8% in August. Excluding the 9.1% drop in transportation orders, factory order fell 3.3%, the biggest drop since September 2001;

The US lost another 159,000 jobs in September (worst since March 2003) - total loss of jobs this year, 760,000. Unemployment remained at 6.1%, but 9.5 million americans are looking for work. Average workweek fell to a record-low 33.6 hours, and the number of people working part-time jobs because no full-time jobs are available rose by 337,000 to 6.1 million - that figure is up by 1.6 million in the past year. Some may be cheered by the fact that average wages are up 3.4% - but prices have gone up nearly 6%;

Home prices fell at a faster pace in July (again, ahead of the crisis), sending values down a record 16.3% in the past year. Prices in all 20 metropolitan areas tracked by the index were down from a year ago. All in, prices are down 19.5% from the peak in July 2006;

Auto markets (US only) went into freefall in September:

Ford -34%
Honda -24%
Toyota -32.3%
GM -15.6%
Lexus -37.7%
Chrysler -33%
Volvo -51.8%
Porshe - 45%
Nissan - 37%
BMW - 25.8%
Mercedes Benz - 16.4%
Volkswagon -9.4%
Hyundai -25%
Kia - 27.8%

Sales of autos in the past decade has ranged between 14 million and 17 million vehicles. September reflects an annualized rate of 13 million annualized sales. That's slightly over 1 million a month: the last time fewer than 1 million new vehicles sold in a month was February 1993.

Oh there's also this great news:

Gov. Shwarzenegger asks Treasury for $7B loan CNNMoney.com

Quote:
California may need a $7 billion emergency loan from the Federal government for day-to-day operations and to pay teachers' salaries, nursing homes, law enforcement, and every other State-funded service this month....
http://biz.yahoo.com/cnnm/081003/100...ia_crisis.html

I am not happy about the bail out plan, but the credit markets aren't just bad - they're dead. Companies and STATES have not been able to issue commercial paper, which is how many make payroll. Last week, $6 billion of municipal securities auctions were cancelled. Let's pray the passage of the bail-out bill helps restart at least some of the credit markets.

Sidebar: Many have been freaking about the crazy volatility of the stock markets. The DJIA began as an index in 1896. According to Mark Hulbert, Reality Check, six-day periods in which the total of daily swings (in % ) was greater that this past week is 123 such days over the past 112 years - though there hasn't been much of this in the last decade.

Laurie
post #32 of 56
Thread Starter 
Well, apparently the markets don't like the plan. Down today despite a strong start. It's been just brutal. I'm back to where I was in Nov. 2006. This is not a repeat of 1987. 1987 was fast and sharp and six months later we were back to where we started. This has been going on for some time and every time you think it's about as bad as it gets, it gets worse. There's no more blood in the streets, it's all run into the gutters. Seven of 13 positions are below their stops (though only two of them are negative) My money-management went out the window. I hate selling; it's a lot of work to find a good stock. To have to replace seven....... Now they're at a point where I might as well just forget the stops and hold. There's an awful lot of money that's gone to cash. That's got to get reinvested some time. They're losing money sitting in T-Bills.

..... ramblings .....

Volatility: the mathematics behind market volatility measurements causes the volatility calculation to come out higher on the downside than on the upside for an equal point move. Therefore, high volatility as an indicator is biased toward the downside.

..... oh, where is Louis Rukeyser when we need him? ..... come back, Lou, from wherever you went. Your market needs you.
post #33 of 56
Well, we're fundamental analysts, not technicians, though we understand the importance of charting in today's world. Obviously it's a times like this when we're darn glad we focus on fundamentals.

For what it's worth, Gary said at the beginning of the year that he thought there was a 3,000 point risk to the DJIA. Most of our recs this year have been shorts. His latest comments to the desk were that he could see DJIA 9,000. If it doesn't happen this year, he believes it will next year - and that if we break 9,000 (for more than a couple of days), he thinks the next target is 7300.

I think I wrote this before, but for individual investors, we never recommend trying to time the market. Because of the inherent risk, equity investments should be made with time horizons of 5 - 10 - 20 - 30 years. If the economy goes where we think it does, even if we don't break 9,000, it could take years to get back to "even" at this point. When the market peaked in January of 2000, the weak economy/recession and then events of 9/11/01 led to a market that took until September of 2006 to return to the same levels.

We think the economy is much worse now that it was then.

Laurie
post #34 of 56
Well, here it is. It's a pdf file, and it's big, over 450 pages. It has some interesting moments. Tax exemptions on wooden archery arrows used by children, Puerto Rican Rum, some wool producers, some movie producers;

and I'm only on page 268.

http://www.taxpayer.net/user_uploads...10-01-2008.pdf
post #35 of 56
Something that I have been thinking about a bit today. The economy is kind of like a living entity. It's go through periods of deckine and growth. Could the collapse of some of these lending institutions be the economy's way of trying to rid itself of the dead weight that has been holding it back?
post #36 of 56
Thread Starter 
I think a lot of economists would agree with you, Bryan. Unfortunately, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke don't. But why they should be right, I don't know. I'll side with you. The only problem I see is that we're setting up for an even bigger dead weight with these mega-monster bank buyouts.

The Federal Reserve doesn't seem to ever get a handle on the boom-bust cycle, do they? When they've dealt with one boom-bust cycle, another pops up somewhere else and they always seem to be late to recognize it. Now, if someone would kindly tell me where the next boom will be, maybe I can get in early and make some money before it goes bust.
post #37 of 56
I agree. I think Paulson and Bernanke are incompetent clowns, I have zero confidence in those two.
post #38 of 56
Thread Starter 
I know the new President will appoint a new Secretary of the Treasury, but I'm wondering, can he also fire Bernanke and appoint a new Fed Chair? Or is that a tenured position like judges?
post #39 of 56
Quote:
Originally Posted by coaster View Post
I know the new President will appoint a new Secretary of the Treasury, but I'm wondering, can he also fire Bernanke and appoint a new Fed Chair? Or is that a tenured position like judges?
The Chairman of the Fed is nominated by the President and he/she has to be approved by the Senate. The chairman serves a four term.

Bernanke has been in there since early 2006.
post #40 of 56
Thread Starter 
OK, so in 2010 the next President can appoint a new Fed Chair? We'll be swimming in something by then.
post #41 of 56
I am completly against the bailout....I think it's going to prove to be a massive mistake.
post #42 of 56
Quote:
Originally Posted by StarryEyedTiGeR View Post
I am completly against the bailout....I think it's going to prove to be a massive mistake.
I agree with you.
post #43 of 56
Quote:
Originally Posted by Essayons89 View Post
I agree with you.
Thanks Bryan!
post #44 of 56
Quote:
Originally Posted by Essayons89 View Post
Something that I have been thinking about a bit today. The economy is kind of like a living entity. It's go through periods of deckine and growth. Could the collapse of some of these lending institutions be the economy's way of trying to rid itself of the dead weight that has been holding it back?
BNP Paribas agrees with you. BNP Paribas acquired the Belgium and Luxembourg operations of Fortis (because the Netherlands nationalized the Dutch portion of its operations), its 10.4 billion euro portfolio, and insurance operation, and some branches in Poland and France. But BNP Paribas COULD have afforded to by Wachovia for just $2 billion more than they're paying for the Fortis ops, if it wanted to jump into the fray. But they would rather buy 1,458 branches (and the other extras) for 0.7x book value as opposed to Wachovia's 4,820 branches and $107 billion in assets. Which means that BNP would rather buy 1 branch in Europe to 4 branches in the U.S. And the market agrees - it's been up since the announcement (and was up today!)

Quote:
Originally Posted by coaster View Post
I think a lot of economists would agree with you, Bryan. Unfortunately, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke don't. But why they should be right, I don't know. I'll side with you. The only problem I see is that we're setting up for an even bigger dead weight with these mega-monster bank buyouts.

The Federal Reserve doesn't seem to ever get a handle on the boom-bust cycle, do they? When they've dealt with one boom-bust cycle, another pops up somewhere else and they always seem to be late to recognize it. Now, if someone would kindly tell me where the next boom will be, maybe I can get in early and make some money before it goes bust.
Check this out: The Downturn has Just Begun: A market stabilization will be short lived A discussion of the investment rate - a demographic analysis of investment demand on a consumer level.

Laurie
post #45 of 56
lol aww yes, it now comes down to its a racist thing.

http://www.breitbart.com/article.php...show_article=1
post #46 of 56
Quote:
Originally Posted by theimp98 View Post
lol aww yes, it now comes down to its a racist thing.

http://www.breitbart.com/article.php...show_article=1
For all we know, it may be.
post #47 of 56
Barney Frank, like Pelosi, needs to be gagged and not allowed to speak anymore. Replacing sound financial lending practices for the sake of political correctness is part of why we are on this mess today.

There's more than enough blame to go around. A few past administrations, Reps and Dems in Congress, Wall Street greed and people getting themselves in debt over their heads because they truly weren't qualified in the first place. Owning a house isn't a right, it's a privilege. One that I know I can't afford.
post #48 of 56
Thought this was a very interesting summation of the credit crisis/bailout: Ignoring Reality Has a Price

Quote:
The Treasury’s $700 billion bailout fund, meanwhile, is based on the premise that investors are collectively undervaluing assets and that the government can pay above current market prices without losing much money. “One has to be at least a bit skeptical,” the economist Greg Mankiw says, “about the idea that government policy makers gambling with other people’s money are better at judging the value of complex financial instruments than are private investors gambling with their own.”
Laurie
post #49 of 56
I really liked how Christopher Whalen (Institutional Risk Analytics) put the problem (as posted in Tech Ticker at Finance.Yahoo):

Quote:
Originally Posted by Christopher Whalen, Institutional Risk Analytics
Rather than resolving the crisis, the government's plan to inject capital into big banks is "merely the appetizer and soup course" in what will ultimate be a multi-course meal, says Christopher Whalen, managing director at Institutional Risk Analytics.
Here's the summary article and the video interview: http://finance.yahoo.com/tech-ticker...LF,WFC,AIG,FNM

Laurie
post #50 of 56
Well, here's something that should make it easier for the new leaders to pass all those fabulous programs.

http://online.wsj.com/article/SB122628143512612399.html

The cessation of paygo.

I think I read that national debt counter is busted already, it probably wouldn't have lasted long after paygo drops to the wayside.
post #51 of 56
Don't ya just love it Neet? Hang on to your money, it is going to be a looonnnnggggg four years.
post #52 of 56
Quote:
Originally Posted by ckblv View Post
Don't ya just love it Neet? Hang on to your money, it is going to be a looonnnnggggg four years.
What money???
post #53 of 56
Thread Starter 
Ya, but why? It's the preceding eight years that lead up to the next four years.

And now the Dems have jumped on the neo-con bandwagon to Nationalize and Socialize the U.S.A. as Nancy Pelosi says bailing out the automakers, and bailing them out NOW, is priority #1. Seems to me, it sounds an awful lot like what was said about Fanny and Freddie.....then about AIG........ And are we any worse off now than if we'd just let them go bust?

It's the old "downhill slope" nobody believes in, but is very much alive and well, thank you.
post #54 of 56
Just some relevent current headlines:

Cost of the Bailout $3.5T so far but "real" cost could be much higher

US Deficit could hit $1 Trillion emphasis added

Uncle Sam's Credit Line Running Out?

BTW, the $3.5 trillion bailout cost estimate does NOT include anything for the autos.

Laurie
post #55 of 56
It's no longer even being used as passed, so pfff on the whole freaking thing.
post #56 of 56
Thread Starter 
Paulson doesn't exactly inspired confidence, does he? Though from what little I know of his latest change in direction, I think it was an improvement. He left out so many details, though. I'm sure the gov't can still screw it up badly without too much effort.
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