The giant leg downs in foreign currencies, ex-Japan, are indicative of western money running for cover. Without a doubt, the next giant shoe will emerge in the emerging markets, ironically. Whether it comes in the form of national default, or widespread runs on foreign banks, one thing is abundantly clear: western investors have zero tolerance for risk.
One of the side caveats to the forex fuckery is the amount of exposure multi-national corporations have in Aussie, Euro, South American and Pac rim hedges. I guaranfuckingtee you, very soon, we will hear of all sorts of “forex related losses,” with hedges gone wrong, amidst calamitous drops in some high yield currencies.
In short, the dollar and yen have been the notable beneficiaries. It should not be a surprise to find out, sometime soon, Japanese banks have raped themselves, yet again, by lending money to Eastern European morons. And, let’s not forget, Japanese banks fund just about everything in Asia.
So, to sum things up:
European banks and corporations will soon reveal massive levels of rapery, via South American parties gone sour . American banks do not have the exposure to Latin America, like the Euro trash. However, our corporations are sure to have chockful of forex hedges gone wrong, as we like to sell our shit abroad in size. Chinese banks are toasty. And, Korean banks are the laughing stock of the Universe.
It’s just one more chapter to the greatest financial fuck up in the history of modern finance.
UPDATE: [youtube:http://www.youtube.com/watch?v=3-_-IKcoULE 450 300]
Wood’s favorite guy.
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Tell me first. Email me.
Everyone is going to be forced to “add a zero” to the end of every currency.
Flymeister,
You’ve come to the king of Forex.
The forex fuckup is the strength of the yen. Yes?
Check with me first when your running with an FX post.
Yen strength scares away US asset buyers. Yes?
Fly
Not developing…. get on with it. Tell us what you think as it’s late here in oz and I wanna watch 60 minutes… our version. move it along.
Okay
Here’s what I think.
The BOJ has to intervene immediately as it will be curtains all round. The problem with Yen appreciation against the rest of the world is that it causes massive wealth destruction back home. This feeds on itself and causes Asian capital to stay. Asian capital staying at home the wheels of the capital markets come off because it would mean current account deficit countries will have self finance and that would be cardiac arrest for the exporters. So it’s imperative that Japan begins to intervene or it’s really bad shit all round.
IS this what you were thinking, Fly?
Furthermore any whiff of Jap intervention and you have to quickly buy back you shorts as, depending on the level of intervention, the stock market could turn around quickly.
I think we will see intervention as early as tomorrow morning asian time.
Was listening to a bloomberg i/v of Marc Faber this am … he says the USA will be bankrupt in a couple years. His largest position is physical gold, followed by t-bills, cash, 8-9% equities.
If he thinks it will be bankrupt then why is he holding t-bills?
Fly
Stop this. You’re keeping us waiting. Now blurt it out and tell us what you’re thinking.
Everyone calm down, there’s nothing to see here…just some more rotting financial corpses on the side of the road.
BEHOLD – The world is ending. Time to get drunk and spend the rest of my money on $5000 hookers. When the end comes, I’ll be in bed with 3 or 4 of them.
Forget the ibc PPT. I’d pay a monthly fee for a comment blacklist feature.
Well if the rest of world’s currencies collapse, be glad all your money is in the tallest midget in the land – the U.S. dollar. The only other major currency that is holding up vs. the dollar is the Yen.
Here is some fun reading.
“The short squeeze forces me to buy back everything at prices that would make a Japanese investor blink. How did I feel? Imagine how it would feel to be Michael Jordan in mid-air, three feet above the rim with no one around you, when the ref blows the whistle. Dunking is now illegal, he says. The league fines you for trying to dunk; the media lambastes you for trying to dunk. Barney Frank subpoenas the dunkers. ”
“If you haven’t figured it out by now, America has hired the wrong Paulson. There are two of them, Hank and John. Hank turned Goldman Sachs from an investment bank into a busload of tourists going to a casino, with borrowed money. ”
LMAO
MR. EB
You don’t want the yen to appreciate the way it is because it means Asia may not recycle their surplus. If they don’t recycle we’re dead.
What crisis?…We continue to see brisk business.
“Currency crisis is gathering storm”
Yves Smith ([email protected])Oct 26, 2008 04:03:00 GMT
Ed Harrison sent us a link to his latest post, and it’s a doozy.
Most of us in the US who are financially-minded have been sufficiently caught up with the three ring circus of market turmoil, seemingly-a-new-trick-every-day Fed and Treasury interventions, and continuing financial firm implosions that we haven’t looked up much to see what is happening in the wider world. Yes, the Baltic Dry Index is tanking, a bunch of Eurobanks nearly failed, but hey, that was two weeks ago, old news, Iceland collapsed, Argentina is on the ropes again (but that seems to happen every five years), South Korea is wobbly, and plunging commodity prices are giving exporting countries big shocks. But in the generally-provincial US, that amounts to background noise.
Your humble blogger has taken note of further worrisome developments, such as the dramatic fall in the Australian and New Zealand dollars (7% on Friday, ouch, on top of steep falls before that), the pound and the euro without being sure what to make of that. It appears to go beyond flight to quality; some of its is high demand for dollars to unwind dollar-related trades, and the Friday action in particular, with big moves in the dollar and an even bigger rise in the yen, versus huge bid-asked spreads in some other currencies, seemed to be a flight to liquidity. And then we have other countries looking shaky: the Baltics, Russia, a lot of Eastern Europe. and Latin America.
Harrison has focused on this constellation, and what he sees is not pretty:
In the last few weeks, the currency market is where the action has been….all of this is a prelude to some sort of currency crisis….
But, it is in commodity and emerging market currencies where the trouble is brewing. First, we saw a nightmarish plunge of the Australian and Kiwi Dollar as commodities plummeted. This all out assault on commodity and emerging market currencies then widened to include the Icelandic Krona, the South African Rand, the Polish Zloty, the South Korean Won, the Hungarian Forint, and the Mexican Peso amongst others.
This speaks to hot money fleeing emerging markets wholesale…. today, I caught two interesting perspectives on this debacle that made me blanch. One was the cover story in the Economist.
A few months ago, many emerging economies hoped they could take mass casual leave from the credit crisis…
This detachment has proved illusory…. The IMF, which has shed staff this year because of the lack of custom, is now working overtime (see article). The governments of South Korea and Russia have shored up their banking systems. Their foreign-exchange reserves, $240 billion and $542 billion respectively, no longer look excessive. Even China’s economy is slowing more sharply than expected, growing by 9% in the year to the third quarter, its slowest rate in five years.
The emerging markets, which as the table shows enter the crisis from very different positions, are vulnerable to the financial crisis in at least three ways. Their exports of goods and services will suffer as the world economy slows. Their net imports of capital will also falter, forcing countries that live beyond their means to cut spending. And even some countries that live roughly within their means have gross liabilities to the rest of the world that are difficult to roll over. In this third group, the banks are short of dollars even if the country as a whole is not.
Yves here. The whole article is very much worth reading. Back to Harrison:
But, the analysis penned by Ambrose Evans-Pritchard is what really caught my eye. He makes the case for us to worry about a full-scale currency crisis worse than the 1931 currency crisis of the Great Depression. The link: Bank credit. You can think of Sweden in the Baltics, Austria in Central Europe, Spain in Latin America — and you begin to picture the interconnectedness that will imperil Europe’s banking system much more than either Japan’s or America’s:
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump…
Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.
They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.
Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.
Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.
The region has borrowed $1.6 trillion in dollars, euros, and Swiss francs. A few dare-devil homeowners in Hungary and Latvia took out mortgages in Japanese yen. They have just suffered a 40pc rise in their debt since July. Nobody warned them what happens when the Japanese carry trade goes into brutal reverse, as it does when the cycle turns.
When the markets open on Monday, I expect the crisis in Emerging markets to take top priority. Iceland was the first victim of this crisis. The dreadful events there should be a warning to policy makers to address this now or else we could see some awful writedowns at European institutions in the very near future — not to mention the potential economic destruction this turmoil could cause.
Yves again. Now the meltdown may resume Monday, but another scenario may play out. Recall 40 nations (EU and Asian) met in Beijing over the weekend, endorsing Nicolas Sarkozy’s call for a revamping of international banking regulations and more coordinated, tougher supervision. None of this directly addresses the looming currency crisis, but the markets sold off badly Friday, and if there is any stabilization or reversion on Monday, the backing away from the abyss plus the hope that the next phase of meetings, scheduled for November 15 in Washington DC, might ameliorate the situation, may put the currency crisis in abeyance for a couple of weeks.
And Brad Setser suggests another possible way out of this mess:
And while we are on the topic of “stabilizing speculation,” China could also shift some of its portfolios from dollars to euros and pounds and Brazilian real and Australian dollars and Russian rubles. This is the time to diversify – not when the dollar is under pressure! Dollar strength amid US weakness strikes me as a growing problem.
*Rescue is the wrong word. Countries typically invests abroad to achieve their own policy goals — whether financial returns or strengthening their own ambitions to be a global financial center — not to “rescue” another country’s banks and help another country stabilize its markets. True rescues – investments with a high probability of a loss done to assure domestic financial stability – are generally done the government of the country that regulates the troubled financial institution. No country wants to “rescue” another countries’ banking system if that means losing money.
**The argument that China needs liquidity and only Treasuries are liquid doesn’t really work – China’s Treasury holdings are already so large that they are effectively illiquid, especially in the current market environment.
In this fraught environment, for China visibly (and the key is visibly) to start buying other currencies would have a disproportionate effect on psychology (and be rewarding to China, since it would profit from the rally it helped engineer). That might stem the panicked capital flight, and while it is probably insufficient to restore real stability, it could keep a necessary (and painful) revauluation/readjustment process from morphing into a rout.
classroom time:
http://www.pbs.org/newshour/video/module.html?mod=0&pkg=21102008&seg=5
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard.
What the fuck is that all about.
I don’t care about anything other than a strong U.S. dollar. USA! USA! The worst case scenario for me is if the U.S. dollar becomes worthless, as all my assets are in the U.S.
That being said, smart guys like Buffett and Julian Robertson think, in the short-term we might have deflation due to severe recession, but in the long-term they expect massive inflation, hence the curve steepener trade.
That would suck.
MR.EB you sound worried. Methinks you are going to lose a mega-fuckton of money tomorrow old chap.
MrEB
Stop being stupid and think a little harder you numbnuts.
The US dollar could be strong relative to other currencies and still become worthless with the rest. Now think why that could be so. That’s a little thinking exercise for you.
I am not worried about my equity holdings in the short-term. Mark my words, the U.S. stock market will be markedly higher by the end of October. Yes, by THIS FRIDAY.
The action on Thursday and Friday were good signs. There were actually buyers at these levels and no panic/puke selling during market hours.
After a period of deflation (1-2 years), I AM worried about massive inflation in a few years, which would make our U.S. dollar become like toilet tissue.
In other news, Obama is stopping by my city in Colorado today – Fort Collins. I live in Money magazine’s 2007 #1 Best place to live in America, so undoubtedly he’s stopping in to check out post-presidency real estate possibilities, however he’s also giving a speech at the CSU oval:
http://farm2.static.flickr.com/1082/1008576899_eb15618707_b.jpg
If all currencies become worthless, what happens? We go to trade/barter system?
That would suck because I don’t have any real-world skills other than money-making abilities in the stock market, which if you guys say currency becomes worthless, is meaningless. Unless I convert all my gains into hard assets…, but what hard assets? Gold, diamonds? That will be worthless when we have anarchy and have a gun staring at your head.
Funny thing, it is rumored the reason Julian Robertson owns tons of land in New Zealand is to go hide there during world anarchy depression.
The Obama Brand spent more ad dollars in 2008 than the Geico Gecko and as much as McDonald’s. “Lovin’ it”
Mr. Ed
Tomorrow is vitally important to the fortunes of the US stock market. If the Yen begins to strengthen again and the morons do nothing about… if they don’t lower rates this week too… it’s trouble (and I have been mildly positive by the way) .
The trouble is that the Japs are truly fucking useless in times of crisis.
Now I know my Japan pretty well as I was very focused on that heap of shit during the 90’s.
I saw one our clients at an I-bank I worked go from being a billionaire (5 times over) to a millionaire in 72 hours as a result of this guy’s huge dollar yen position as he was betting the yen would go to 250 because of the crisis there.
———–
It took those morons 7 years to establish a Tarp system… that’s how fucking slow they are.
If they don’t intervene or do something tomorrow hopefully with China then its quite possibly over.
I think they will because the US treasury may have had a word in the stupid fucking ear this this weekend and read those idiots the riot act.
Good stuff J
I wish you would do a primer on this all works. Should be a wild night.
^^ “How”^^
Nothing bad will happen as long as Hank Paulson is running the country.
World, I meant world. Nothing bad will happen as long as Hank Paulson is running the world.
Middle East banks in trouble today
Futures limit down again. Just take the fucking thing to zero already. Lets all just start over again.
I will go very long at DOW -0-
Blowhard:
The lawyers would sue you to oblivion because you’d be holding the bag. Go long at DOW -14,000.
Mr. EB “The worst case scenario for me is if the U.S. dollar becomes worthless, as all my assets are in the U.S.”
So you end up living off of pine straw and kudzu juice…yep that would be worst case.
Financial crisis ain’t over
Till the Euro is imploded
Japan Memories —
It’s a gas to hang out in Roppongi Bars being an American. 🙂
natsukashi, na Donny?
Futures limit down? What are you smoking, give me some of that…
i bet that George Soros fuck face has something to do with this
charlie – my undergrad was at CSU in Ft. Collins. Grew up round there. Love me some Yum Yum on Elizabeth and The Pickle Barrel on Laurel. small world, eh?
HONG KONG (Reuters) – Aluminum Corp of China Ltd (HKSE:2600.HK – News; Shanghai:601600.SS – News), the world’s No.3 alumina producer, said on Sunday its third quarter net profit dived 92 percent, dented by high production costs and sliding aluminum prices amid weakening demand in a slowing world economy.
cant make that up in volume, can you?
Paul Krugman today
The mother of all currency crises
I invented currency crises. No, really — not the thing itself, of course, but I did publish the first paper in the modern academic literature on the subject, back in 1979. And as I like to say, business has been good ever since.
But I never anticipated anything like what’s happening now.
I’ve been reading reports from Stephen Jen, a former student of mine who’s now the chief currency strategist at Morgan Stanley. He points out that since the fall of Lehman, we’ve been seeing clear signs of currency crises throughout the world of emerging markets, including Eastern Europe. This time, it’s not an Asian crisis or a Latin American crisis, it’s a global crisis. He adds,
So far,the US financial sector has been the epicentre of the global crisis. I fear that a hard landing in EM assets and economies will become the second epicentre in the coming months, with very damaging feedback effects on the developed world.
Right now I feel like the guy who was told, “Cheer up — things could be worse!” So he cheered up, and sure enough, things got worse.
Welcome to the bullshit pleather economy. And get used to it, because it’s not going away anytime soon.
http://www.nytimes.com/2008/10/26/fashion/26words.html?ref=business
TARP = A cover or cover up.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3260052/Europe-on-the-brink-of-currency-crisis-meltdown.html
Things are looking up this week in Mr. EB-land. My Dallas Cowboys actually won a game! I feel an awesome week up ahead with this early positive note.
Stratfor: The World According to Riyadh
The Organization of Petroleum Exporting Countries (OPEC) will be meeting in Vienna on Friday, a month ahead of schedule. The issue on the table is whether or not to cut OPEC production in light of declining global demand for crude as countries the world over are coming down with the financial flu.
OPEC members like Venezuela, Iran, Libya and Algeria — all of which are pulling their hair out watching oil prices slide down to around $70 a barrel — have been issuing statement after statement over the past week, calling on their fellow OPEC members to cut production so that they can maintain the flow of petrodollars coming into their government coffers. Going by their statements, it seemed as if it was inevitable that OPEC would make a decision to cut production and buoy the price of crude.
But earlier in the week, Stratfor cautioned that an OPEC production cut is anything but inevitable — especially with the Saudis in play.
As the world’s largest oil producer and exporter and the cartel’s undisputed heavyweight champion, Saudi Arabia is the ultimate decider when it comes to the issue of increasing or decreasing OPEC production. Since the Saudis have the most oil, they are the only ones who can take enough crude off the market to make a meaningful difference in price.
Upon arriving in Vienna, Saudi Oil Minister Ali al-Naimi was asked whether his country supports the idea of cutting output when the cartel meets Friday. His answer: “Who said anything about a cut? Prices will be determined by the market.”
We have a feeling a number of leaders in oil-producing countries across the globe nearly went into cardiac arrest upon hearing those words.
Anything can still happen at this OPEC meeting, but Saudi Arabia is very clearly indicating that is in no big rush to prop up the price of oil. On the one hand, you might consider Riyadh crazy not to want to keep the petrodollars flowing at a healthy pace when global demand is sliding. But Saudi Arabia isn’t worried about the cash right now (the Saudis already have a nice cushion of at least US$1 trillion in petrodollars to fall back on.) Riyadh’s plans for OPEC run on a much deeper geopolitical calculus.
The 1973 oil embargo was the first time Saudi Arabia learned what it meant to use oil as a tool of foreign policy. The Venezuelans ultimately knocked the legs out from under the embargo when Caracas decided to fill the gap by increasing its own oil exports. But nonetheless, the Saudis developed a taste for using oil as a weapon. In the 1980s, the Saudis, in private collaboration with the Americans, shifted gears and increased oil production to flood the markets. The Saudi move was one of the variables that helped bring about the collapse of the Soviet Union, allowing the Saudi Arabia to drive a major competitor out of the energy market for a good ten years and dismantle what was at the time the greatest foreign policy threat to the West in one fell swoop.
Since then, the Saudis have used their oil wealth primarily as a means of policy to keep U.S. interests in line with those of Saudi Arabia, particularly when it has come to issues of maintaining Sunni power in Iraq and keeping their Persian rivals in Tehran in check. Now, the Saudis are presented with a situation in which the world’s three major economic centers — the United States, Europe and Asia — are approaching recessions nearly simultaneously. The inevitable global economic slowdown spells bad news for the more-vulnerable oil-producing countries such as Venezuela and Iran, whose regime security is almost wholly dependent on oil prices not taking a deep plunge.
From Saudi Arabia’s point of view, it wouldn’t be such a bad idea to hold out a bit longer and allow the price of crude to drop a few more dollars to drive some select competitors out of the market. For instance, by turning the screws on Venezuela, Saudi Arabia could get payback for 1973 and knock down a major irritant in the U.S. backyard.
The Russians also have reason to be worried. The Saudis do not like the idea of a resurgent Russia, especially when it comes to meddling in the Middle East. With the Russians already suffering from major liquidity problems, draining their oil revenue would help deflate their ambitions even more.
The Iranians, who have most vociferously called for a production cut, are on the top of Saudi Arabia’s geopolitical target list. The Saudis want to prevent the Iranians and their Shiite allies from radically upsetting the regional balance of power that has historically been in favor of the Sunnis. With Iran already under deep economic distress, the Saudis would be more than inclined to knock Iran down a few more pegs.
There are, of course, other side effects to bringing down the price of oil, particularly for countries less hostile to U.S. interests — such as Mexico, Canada and Brazil, which are going to take a hit from a decline in energy revenues. Of most concern for the United States is Mexico, which might require substantial bailouts to prevent the chaos from spilling over onto the U.S. side of the border as the country is already struggling with a fight against powerful drug cartels and a tight fiscal crisis. On the other hand, Saudi Arabia’s major energy clients — including the United States — would greatly appreciate a break in oil prices to help reduce production costs at home and ease the pains of the coming recession.
In any case, it would be foolish to think that the cost-benefit analysis running through Riyadh’s head right now is simply based on short-term income numbers. Major geopolitical opportunities are dancing before the Saudis’ eyes. We’ll see in Vienna just how hard and how seriously the Saudis intend to play
Could anyone point to any links or reading about the “great big forex fuck up” that The Fly is talking about??
Thanks!
Mr EB, buy tons of canned tuna, 20 acres of Iowa farm land, and a raft of vegetable seeds.
And 2000 lbs of flour in triple plastic bags.
And get your chicken coops built in Iowa.
Adolf Hitler just got a margin call.
http://www.clusterstock.com/2008/10/hitler-gets-a-margin-call
Just got a hold of the game plan for this week:
http://www.youtube.com/watch?v=oE5JjQuabB8
A little irony for the historically minded: The epicenter of the currency earthquake shattering the euro is again banks in Austria, just as it was in the Great Depression.
From Ambrose Evans-Pritchard in today’s Telegraph UK, who, as usual has his facts right but can be a little extreme in interpreting them, and has never been a fan of the Eurozone:
“The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.
Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.
They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.
Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.
Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket…”
Apologies to pablodpt; I didn’t notice that this was included in your on-target citation from NC.
thanks, pablodpt, bailout lover, and anonymous, for the info.
There are many many great forex fuck ups either happening or that have already happened. You know that whole “de-levering” thing? Remember every institution, SWF, and hedge fund perennial favorite Ye Old Carry Trade? Yeah, those are all dead.
Egregious loses will be announced far and wide.
This has some very nasty consequences for the Fed’s balance sheet, because of the huge currency swaps it has extended at exchange rates which are rapidly diverging from market rates.
It is bleeding from major arteries.
Combine this with the massive Wall Street paper it is now holding instead of Treasuries, and we’re approaching the point where the Fed is a total write-off, where it makes more sense to scrap it and start over from nothing.
Buy a house, get a luxury car for free:
http://timesofindia.indiatimes.com/Buy_a_house_get_a_luxury_car_for_free/articleshow/3643727.cms
What the fuck happens if GDP is positive?
Anyone watching this shit on 60 Minutes?
The big banks and brokerages meddling in CDO’,
high leverage, hedge fund shorting, and swaps
are what should be scrapped! Let’em all go BUST!
And take their $60 trillion of debt WHICH THEY OWE TO EACH OTHER WITH THEM!
Pickens if finished.
GDP positive? Gov’t concocted numbers = 1 day rally, shorting opportunity. Lather, rinse, repeat.
GDP is a government manipulated number anyway. Check this out:
“Much of the data used in GDP is collected by sending out surveys to different companies. They will send out surveys to a select bunch of retailers and manufacturers to ask for details of their output or sales on a monthly basis. Then comes the estimate of the whole. The governments can obviously use this to their advantage by selecting the companies that they know are steady companies and not choose the smaller companies who are more likely to be erratic. Therefore most smaller companies will never get asked to perform a survey for the government as this may upset the figures.”
Japan
US strikes targets in Syria.
DSB craps pants. Hopes he has enough food stuffs and chickens.
USA is going to have the eye of the tiger this week. Oh look futures are up. I have a special spidey sense that things are going to be rocking and rolling this week. I may add to my massive long exposure tomorrow.
Stock up, DSB, stock up.
Mr. ED
how much of a run up are you thinking?
FLy
the story that has been doing the rounds prior to the focus on currencies was that Jap banks had good balance sheets comparatively speaking. You now saying this isn’t true? Honest question here. No trap.
Me thinks the Japanese Central Bank will start dropping rates in the very near future, and that’s when the YEN joins the fuck parade.
Fly’s favorite blog & blogger, Slope of Hope by Tim Knight, is a raging BULLtard ……
http://slopeofhope.com/2008/10/26/the_allneedles_haystack.htm
Korea cuts .75
J:
The equity prices of Japanese banks say otherwise, no?
They may be better off then some, but losses are still abundant.Japanese banks are pulling in their horns. Hence, the Yen is soaring.
I think the market can easily have a 27-30% run from here based on historical vicious bear market rallies.
If you read the hedge fund letters posted on Dealbreaker, all these guys have collapsed their net exposure down to 0% after having net long exposure of 50-90% earlier before the crisis. Long-only funds have been puking for weeks and building their cash position. You have trillions of dollars in cash, treasuries, and money markets on the sidelines.
It’s like dry wood in a California wildfire season. Once the market gets going (spark on the dry wood), all these funds will have NO CHOICE but to chase and buy stocks like mad, so they don’t fall behind their benchmarks and their monthly performance reports. You may think it is silly, but that is simply how the world works.
I will probably ride the first 1/3 of the move (10% of the 30% move potential), cut my long exposure back then, to reduce risk. I like asymmetric risk rewards. Going long last Wednesday was a good setup with massive panic, everyone 3rd tier net blogger shorting the market, and the good historical setup (as I mentioned before comparing to the crash of 1929 – crash, rally, rollover to this -16% from the initial move up, then 27-30% rally potential, etc.). After a big move, I’ll cut back and re-assess.
I will admit Thursday (I was down 3-4% intraday before finishing positive) and Friday (I was down 8% near the open, but ended the day near flat) were PAINFUL intra-day, but my massively long-biased portfolio held up positive at the end of it all. Which to me is a GREAT positive sign.
Fly,
Any ways to play what you’re saying in the market? eev?
True, Fly.
Suddenly the US looks like a sea of calm compared to the shit that the Euros have got themselves into. Spanish banks have a $320 billion exposure to Latin america… I read in a link above.
Anyone see the ratios some of these countries have to the emerging world? I never would have believed it. Meanwhile the Eurotrash central bank is sitting its hands and not lowering the overnight rate. that’s what you end up with having a frog running the show.
Douchebags.
Italian bonds are now trading at just under german govies with the red light being 1.00 basis points.
I had a dream about the stock market today during a long nap. Goes a little something like this…
____________
I arrived at work to find that all of my computer monitors were missing. I was frustrated because I could not trade.
I decided to watch the action on CNBC. I tuned in and found the usual cast of characters were offering commentary on the early action. The coverage was unlike anything I had seen before on CNBC.
Today, something had changed. No charts. No quotes.
Today, the stock market was a live roller coaster!
The CNBC talking heads were marveling at this live roller coaster. There were many riders aboard it, clutching buy and sell orders. All of the riders were scared to death.
The coaster climbed a huge hill before starting a series of plunges and curves. The ride was wild and unpredictable, and left its passengers screaming in fright.
The commentators noted that although this ride was rough, and that the roller coaster was old and wooden-framed, it was, ultimately, safe and proven. Riders might be scared, but they were going to make it out alive…eventually.
Art Cashin burst onto the screen to announce “This is the classic bottom and capitulation I’ve been waiting for. We are aggressive buyers of equities here. Now is the time. Go! Go! Go!”
I became afraid just watching the action of the roller coaster. It was truly frightening as it reached the bottom and appeared to be making a sharp upward climb out of a deep V-shaped section of track.
Everyone was cheering and amazed at the climb. “Look at that recovery! Classic bottom! Amazing!”
Just then, something went wrong. The roller coaster started to tremble and morph. It was surreal…
…how could it be?
The roller coaster was coming alive, growing scales, a ferocious mouth with sharp teeth… it looked like an deep sea eel. A massive, hungry eel…a living beast with a will of its own.
The eel paid no mind to the rules of the track. It turned back on itself an devoured everyone that dared ride its back. Not a single life was spared.
CNBC suddenly went off the air…
I woke up.
Can I just say something about the capitulation?
It would be best if people stopped talking about this shit as no one knows what capitulation looks like until it’s happened. Bottoms can be violent or boring.
Capitulation is look back exercise.
Survivalist
I need to put together a still – any advice?
There is not a single person who knows exactly WTF is going on in the world economy. There probably is no one person who knows WTF is going on in the US economy. A respected economist says there is no liquidity problem – says it is a toxic debt problem. The 30 year government bond is nearly breaking below 4% – it is at a level not seen since the 30s and stock market volatility is beginning to remind of the 30s. The stupid bankers need to get the Libor rate down – they are cutting their own throats by being reluctant to take action.
I know what the hell is going on. The economy SUCKS right now. Volvo said their truck sales were down 99% now. Read that… 99% freaking %. Car sales are down 30%+. The bulk dry shipping index is plummeting, which means companies have simply stopped shipping stuff. 1/2 the maine lobster demand is gone because Canadiens used freaking Icelandic banks.
But that doesn’t mean the market goes straight down. Bear markets have patterns and repeat themselves. From 1929, 1973-74, 1987, 2000-2002. I believe we’re at the stage of the 30% bear market rally from historical corollaries.
Human behavior doesn’t change. You have the crash because people freak out, the super oversold condition as every weak hand pukes and the newbie shorts pile on… which leads to the vicious bear market rally, and then the roll over if the economy continues to deteriorate even further.
What a dream you have dreampt [sic], Boomer!
Now come up with a playable investment thesis of that, please.
Cash!
Here’s to hoping Mr EB is right on the money.
Correctly in my view people are arguing that CB’s are and will monetize a great deal of this problem and we will begin to see much high inflation rates in a few years time.
How does that play out with the stock market though?
Crash.
Stratfor Analysis on Japan:
Global markets engaged in panic trading Oct. 24 with nearly all exchanges registering heavy losses. Obviously, there is a great deal of fear and uncertainty in the markets. This is what recessions look like: all but the most stable of investments experience volatility as inefficiencies are brutally crushed. But the day’s market crash appears to have two particularly contributing causes.
First of these is investment unwindings related to the Japanese carry trade. Interest rates in Japan have been within reach of — and often at — zero percent for most of the past decade. Since economic opportunities in Japan are thin, many investors in Japan and elsewhere take out low-interest yen-denominated loans in Japan, but then move the money abroad and invest in more profitable ventures. They then not only can use de facto subsidized capital to fund their investment, but they often make even more money as the yen depreciates and the currency in their target country appreciates. They are particularly enamored of small countries, where it does not take much incoming capital to drive the target currency up.
All goes well until something goes wrong with their investment — for example, getting broadsided by a global financial crisis. This forces them to liquidate their holdings and scramble to buy enough yen to be able to pay off their loan back in Japan. Should they fail to do so, not only will they face a loss on their original investment, but as their target currency drops they will lose even more. The entire trade will turn against them. One of the things that has been happening for the past several weeks is that this “carry trade” has been unwinding, and for every investor who has to seek yen to unwind his position, the yen goes up a little more.
The yen is rising particularly violently against currencies which the carry traders targeted — the New Zealand dollar, the Icelandic krona and even the Hungarian forint. It is also experiencing sharp gains against the euro, much more so than against the U.S. dollar. This is for two reasons. First, the European Central Bank is treaty-bound to consider only inflation concerns when making policy: the result is perennially higher interest rates, which make Europe more attractive to carry traders — it is similar logic that pushes carry traders to consider places like relatively high-interest-rate New Zealand. Second, the U.S. dollar is a natural safe-haven in times of economic distress while the euro is not.
The other major driver behind the selloff in the markets is that the gains in the yen are now strong enough that another class of investors seem to be unwinding their positions: average Japanese citizens. Japanese investors have very few options for their nest-eggs due to Japan’s perennial economic funk. The economy essentially has been addicted to government spending for 17 years — all of which has been funded by deficits. The money to finance the deficits has to come from somewhere; the Japanese government, therefore, does what it can to prevent the average citizen from investing money anywhere but in Japanese government bonds, which traditionally earn less than 1 percent. Thus, many average Japanese citizens evade government restrictions and squirrel away what they can in overseas bonds, even if that means investing into things no more exotic than U.S. Treasury bills.
This is all well and good until there is a global crunch and the yen starts to rise very quickly; then these overseas holdings start to lose value. The Japanese citizen then gets understandably frightened and starts to pull the money back home. The net effect magnifies the currency distortions of the unwinding carry trade and the yen rises still more.
The specific value of these unwinding investments is open to debate, with most estimates putting the carry trade in the $2 trillion to $3 trillion range. The value of private individuals’ overseas holdings is even less well known, but it is probably larger than the total value of the traditional carry trade.
And all of it seems to be unwinding with a vengeance. Within the past three months the yen has risen 30 percent against the euro and more than 10 percent against the dollar. On Oct. 24, as of this writing, the dollar has fallen 4.6 percent and the euro 6.1 percent against the yen. That single day’s change alone is enough to have wiped out two years of interest earnings on most euro-based accounts.
The immediate impact is a massive downward pressure on all assets everywhere. Japanese citizens and yen carry traders alike are ditching their assets, dumping shares on stock exchanges and removing capital from markets — all of which complicate the ongoing global liquidity crisis and stock market crashes.
In the longer term, most of the pain will be felt in Japan. Westerners will be less likely to purchase Japanese exports not simply because they are spooked, but because the rising yen is making those exports much less attractive. Japan faces the probability of a protracted and deep recession from which it cannot recover until Western demand for Japanese goods revives. Remember, the Japanese government is already chronically in debt to the tune of roughly 175 percent of Japan’s gross domestic product, and already is engaged in deep deficit spending. There is thus no more room for the government to create a domestic stimulus, even before one considers that the average Japanese citizen is deeply shell-shocked.
Tim says there will be no crash. For it is written…..
http://slopeofhope.com/2008/10/26/the_allneedles_haystack.htm
* Those waiting for the fabled “capitulation volume” are wasting their time; it’s not going to come until deep into 2009.
* The symmetric triangle, which I haven’t shut up about for a long time, is going to be a fizzle. I don’t think we’re going to see a 2,000 point plunge; or a 1,000 point plunge; or really any kind of a plunge in the near future.
* On the contrary, I think we’re going to start an explosive rally, and it’s going to start this week. It might even start as soon as tomorrow (that is, Monday).
Tim is a liar.
I just wanted to put that out there, with the other things I call him.
Dope-a-slope is a wee bit early on his bullishness. Gonna take a bite out of his bear gains the next couple days while he, and other converted bears jump the gun on the “explosive” rally that’s just not coming.
I wish I speak as clearly as the fuckface in the video, but because I’m so gawd damned impulsive and impatient … the best and only I can explain it, we’re fucked.
However, the good news is this. There’s gonna be a fucking depression … just not in America.
Who’s Tim. He’s mentioned on every thread.
Tim is a fictional character.
Tim & The Fly have a beautiful unrequited love affair still ongoing.
that volvo info is false — calculated risk issued a correction.
Nikkei hits 26-year low
Straits Times, Singapore – 2 hours ago
But then it makes sense. Japan is growthless.
FLY – With Forex though, its a zero sum game. A loss on one side is matched with an equal gain to another party. Hence, some people will go broke, some will get very rich.
Cap
Stop thinking too hard as you’ll end up with a brain explosion.
FX isn’t a zero sum game. There are final transactions that take place. Not all, but there are enough.
tim is the fly’s father…
Honestly cap.
I can understand why Fly sometimes lets off steam by suggesting he’s surrounded by idiots. In fact he exhibits the patience of Job with some of the morons that show up here. It’s heart rendering having to see what fly has to endure in terms of rank stupidity and overall idiocy. I genuinely fell sorry for him.
Well, here comes the FX Fuckery.
““We reaffirm our shared interest in a strong and stable international financial system,” the G-7 said in a statement read by [ Japanese Finance Minister ] Nakagawa. “We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability.”
“We continue to monitor markets closely, and cooperate as appropriate,” the G-7 said. ”
http://bloomberg.com/apps/news?pid=20601087&sid=an0s9tXTrWFY&refer=home
If it were a US official, I’d translate that as “We ain’t doin’ shit” (Greenspan – “we ain’t doin’ shit!”, Bernanke/Paulson – “we ain’t doin’ shit yet, but our friends can now start lining up at the trough!”), but I only speak Western Bureaucratese, not Japanese Bureaucratese, and I’m sure something gets lost in the translation from Japanese to English.
Can anyone translate from Japanesefedspeak to IBC? (The words are so ambiguous that they could legitimately be interpreted as anything from “we ain’t doin’ shit” to “if you’re reading this and still long the Yen, you’re already dead”. They obviously have meaning, but only to someone who’s regularly followed the Japanese central bank, which ain’t me.)
J – Explain how FX isn’t a zero sum game ? My long position is offset by some other party’s short position. Viz.
what about imports and exports. Dividend payments. All those sorts of transactions, you doofus.
“what about imports and exports. Dividend payments. All those sorts of transactions, you doofus.”
What about them ? Its all zero sum if you break it down.
How is paying for Merc zero sum, doofus? the owner of the car is not about to reverse his position in the implied FX transaction if the currency takes a big turn. It’s a final transaction.
And yes the merc owner pays in dollars and doesn’t have an fx transaction but the importer in a sense did the transaction for him.
Can I just say something about the capitulation?
It would be best if people stopped talking about this shit as no one knows what capitulation looks like until it’s happened. Bottoms can be violent or boring.
Capitulation is look back exercise.
Yes, but I can tell you what capitulation looks like. Capitulation was October 10th when we got all those end-of-the-world prices. You know what the low was on Chesapeake on Friday? $17.47. You know what the low was on October 10? $11.99. Are you going to see $11.99 again? Uh, no. Stop looking for capitulation folks, you missed it already.
Please get Tim’s head out of here – it’s crowded!
“j Says:
How is paying for Merc zero sum, doofus? the owner of the car is not about to reverse his position in the implied FX transaction if the currency takes a big turn. It’s a final transaction.
And yes the merc owner pays in dollars and doesn’t have an fx transaction but the importer in a sense did the transaction for him.”
J- In this example, as a buyer, I am exchanging dollars for a Merc. This is not FX trading. Its simply buying an imported product. The FX part of this transaction involves the importer and MB of Germany. The importer sells Dollars to buy DMs ( in order to pay MB ). Whoever he sells his dollars to in order to buy DMs is effectively going long USD against the DM ( Or short DM against the USD).
Cap
The sale of the car is the final transaction for both those two. So it’s not zero sum. I’m not in the mood to teach you simple logic.
Please pull Steph’s head out of here too!!
“We continue to monitor markets closely, and cooperate as appropriate,” the G-7 said. ”
Ignore it. They always say his shit. Japs always make useless comments like that. It worrying they haven’t intervened.
It’s going to be explosive, but I wouldn’t call it a rally – clutch your snout!
G7 comment…yen action bad for market. Wow. Thanks for the insight. Japan immediately falls 7%. That seems fucking stupid.
This reminds me of the Long-Term capital period (although obviously it’s much, much worse now). Everyday, someone would announce some shit and the market would drop a few percent. It just seemed so ridiculous that every piece of bad news would knock the market down. It didn’t matter if there were 7 good things, all that mattered was the one bad thing. I kept hoping that we’d designate a single bad news day, so everyone could announce their bullshit at the same time and we just go down 5% that one time instead of every day.
There were a few goofy days last week like that. One day, several companies reported decent numbers but then, omigod, shitty numbers from Texas Instruments. Sell! Sell!
Uh, yeah, since when does anyone give a shit about Texas Instruments?
Well
Let’s watch tonight as the Japs have basically called it curtains. It looks like its basically over now bar the shouting.
they’re fucked. they can’t recap as they are running the government debt to GDP of 175% so the only thing left for them to do was to monetize through unsterilized invention. they’ve basically fucked it up.
Another day at the office for the Nikkei… Starts off flat, and now it dives.
To nobailouts.
I hate bailouts, I’m a freemarket capitalists, but I can see you are misinformed. How can you just “let people go bust with their debt. If they all sell everything, we’re talking about supermarkets around the world not being able to have the credit to make payroll, and if they go under, we’re talking about famine, and people unable to access food…
Perhaps it may mean great wealth in the US and nations with lots of farmers that can produce food, and the return of potash, but farmers are also leveraged out their ass, and if hedge funds all go boom, and all the capital goes out, banks are insolvent, and farm machinery can’t be produced, and the deleveraging hurts everyone until we all starve.
It is TOO late. Ron Paul is right on a lot of things, but it is TOO late to maintain capitalism, to elliminate all debt, to wipe everything clean… Not unless you want absolutely extremism in the form of major global ammegedon like population reduction, so we can all reset an live leverage free.
This shit is bad.
this is my kind of party.
i wish i’d found a cave to hide in, though.
bailouts are a neccesary evil to postpone the inevitable armegeddon that we have created for ourselves. Money makes the world go round, and if the velocity of money freezes, or if it merely doesn’t move fast enough to keep up with the added credit, domino effect occurs, and we eventually all become in trouble, simply because those providing everything that society needs, runs out of incentive to provide. Banks can’t provide when they know they can’t be paid back, steal makers can’t produce steal when they know they can’t ship it. Shippers can’t ship it when they know there’s no demand, demanders can’t demand it when there’s no credit. Farm machine makers can’t make farm machine without steal. Famers can’t farm enough to provide for everyone without machines.
Global contraction in many ways.
j: thanks for the reassurance… I think.
If it translates to “we’re not intervening because we’re too stupid to realize that we’re missing our last chance to intervene”, we’re all fucked.
Ain’t real thrilled with the Nikkei’s overnight implosion and (as much as I hate to watch the SPX futures) the S&P off -10 (was +5ish). Down 1-2% is the new green. Down 5% is the new flat. Down 10% is the new red. Down 20% is the new crash?
Fuggit. Off to bed. Got a hunch it’s gonna be another long day tomorrow.
Never thought until today that Japan is fucked.
I knew Europe was fucked.
Emerging markets are fucked.
USA wins again (on a relative basis).
Wow. That’s quite a party they’re having in Japan. Nikkei at 26 year lows. Can’t wait for the Dow to be at 26 yr lows – 1000. Will happen over the next 5 yrs or so.
Limit down open in the US markets tomorrow I hope.
The US is now the bright spot. That’s how sick this thing has become.
Funny thing is Cap, the US really does look like the bright spot now. I wouldn’t be selling down the US at the present time as the US banks look almost rock solid compared to the Eurotrash etc. The US has very little exposure to the emerging markets and they’re actually well capitalized… yes well capitalized compared to the Euros. This shit is really fucking sick now.
I’m not sure who will implode first, Europe or Japan
Perhaps this can be the wakeup call to the human psyche, that can be passed on to everyone that we are all a part of each other, and society cannot function without people having the incentive to do things for each other, just for the sake of providing, and knowing it will come back to you. Otherwize greed will be the death of us all.
Communism is possibly more dangerous than the FIAT financial system. But perhaps communism is the neccesary evil for all of us. People must be forced to provide the steel, and the minerals, and the growth, and the farming, and the food, and the building of houses, and everything, and those that are rich will have to use their resources for building and providing. Population must be controlled by limiting sex, sterilizing, and using effecient protection.
Unfortunately successful communism requires outstanding leadership, and a clear vision that we all can agree with and enjoy working towards, something that is hard to find. And somehow a balance of powers by us all to prevent corruption and greed.
Ironically the weakness of a system that can save us from greed and corruption, is the one that is most vulnerable to the greed and corruption that caused this mess.
Manipulation in itself is not inherently bad, but it is the intent behind it, and the human nature of greed that creates the intention behind opec to illiminate competition by first driving prices sky high, and then into the ground, so that they may profit while creating new competition, and then driving that competition into the ground, and then buying the energy companies at pennies on the dollar. Or the federal reserve and government creating this abundance of credit, then shutting off credit, and buying up banks.
Thomas Jefferson indicated, that a central bank is more dangerous than standing armies. I say the danger of ANY greedy manipulation that has a “butterfly effect” on society is dangerous, and therefore I say it is GREED ITSELF, and anything suseptible to greed is more dangerous than nuclear bombs.
But greed has already begun it’s ripple effects, and the consequences are so huge that I fear we must do something extreme and very very scary.
The introduction of a world government and world banking will seem like a good idea to a lot of people, but it may not work, and we may all be slaves, and we may not be treated fairly. And what happens to the physically unable to provide to society? Must they be sacrificed? Would it be better to orderly have mandated assisted suicides starting with volenteers, and then to the least able to produce, and then to the oldest, and then to the youngest? Would this be better htan
How could things come to this? Is this a side effect of greed? Was this all the plan of a group of very smart men, planning for world domination? Or was this all just a cycle and pattern of life of major abundance, followed by major contraction and consolidation?
I don’t know, but we need some way to give everyone incentive to do something positive for society, and at the same time have protection from greed and corruption to ensure our survival.
damn it, I used to be so optomistic about everything… could someone please give me some sort of good news in the long run?
Blackswan
STFU with the commie shit ok. The commies did have outstanding leaders and they ended up killing 200 million people last century. So go ahead propose the biggest killing machine the world has ever known.
Kdenninger has a face that needs to be PUNCHED!
J, you may be right. But greed is the killing machine. Old Communism is merely the vehicle where greed can be unchecked and is unrestricted. How are people like Hitler, Stalin, etc great leaders with a vision everyone (meaning the whole world) shares? Are you kidding?
I’m refering to a communist system economicaly, where everyone works for the sake of providing, but one where a monetery system does not exist. It is a resource based system. A blend where there are the neccesary checks and balances, of a democracy, as well but without a monetary system, and one where citizens all have guns to defend themselves, and all citizens are soldiers.
The system is on the verge of collapse anyways, what do you propose we do?
The visions of our forefathers were great, but it was still a system where money ruled the world, and material desires create greed and corruption. It took a hell of a lot longer, until we finally became corrupt in 1913, and it took a lot longer to grow until it caused the problems, but until we can find a society absent from one that allows greed, we will be in trouble globally. We cannot continue to borrow with exponential ramifications shown in Danny’s video.
Communism is not bad nor good, it is the greed and corruption that is bad, and it is the limits that are bad, and it is the lack of desire and morale that is bad.
How many people have died in wars over oil, land, religion brought on by greed?
And killing over religion is certainly a greed. It is the “my invisible friend is real, and yours isn’t, and therefore you must not be allowed to see things differently than I, because that’s what I personally want and I don’t care about you” attitude.
Greed is the killer, and it has infiltrated capitalism and modern banking so extreme, that it is growing beyond what even the old communism would be.
And I would rather millions die from a bullet then have an entire societies around the world starve to death, simply because businesses aren’t going to be able to receive the worthless paper required to keep their business alive, because some people can’t lend worthelss paper, because other people haven’t paid back the worthless paper, because someone is hoarding it all.
The fact is, there’s enough resources in the world for everyone to live like millionaries… but we do not because of greed. Whether it’s people being too greedy to actually do the work required, or it’s people too greedy to focus on providing for society, it’s ultimately greed that kills us.
Socialists that expect checks for doing nothing are even more greedy, than rich capitalists who simply want money for the sake of getting more dollars than someone else, or for governments seeking more power.
ok fuckers, now we’re REALLY talking about counterparty risk and captial preservation.
which are the safe banks and brokerage houses to stuff our cash. your earnings on your shorts don’t mean shit if you can’t cash out next year.
Welp Asia is getting taken hard up the rear today. Best of luck to anyone long…
Also, that’s fucking awesome Boomer. 50,000 people were at the Oval for Obama’s speech at Colorado State University today. I couldn’t believe my eyes.
Here is a clip from the speech – at 2:40 you get a view of the whole crowd. More on this later…
Be sure to watch it in HQ
http://www.youtube.com/watch?v=Q6mTs3AsuGU
That’s bullshit, Swan.
It’s pretty deplorable that people seem to describe bankers as greedy while everyone else isn’t.
Let me ask you: If Exxon saw demand for oil lift and didn’t do a thing to meet that demand you would immediately cry out that the CEO is an idiot and should be fired, right?
Same with the banks.
There were a few things that happened that brought us to this mess, but the worst was the central banks monetary policy.
1. The SEC opens the spigot allowing I-banks to expand their balance sheet because they thought securization, cross margaining and collateralization meant that I-banks were able to meet nay headwind that came their way as they could sell securities quickly to meet demand. I-banks also fell for this hubris.
2. Basel accords gave commercial banks an opportunity to increase their balance sheet size compared to straight loans because securities get kinder treatment than straight lending.
3. Low interest rates created huge demand for housing
4. F&F get the opportunity to run leverage to 135:1
Banks saw their capacity increase while there was huge demand for loans.
Every single one of these problems can be sent back to the authorities and painted as government failure.
the greed schtik is stupid.
Communism is not going to happen. Scratch that off your list.
The world has endured events like this before. They pass. A new era will come out of this, and it probably won’t be much fun, but it won’t be the end of the world, either.
Capitalism is by no means over. You are witnessing capitalism in action — inefficiencies build up over a period of years and are destroyed in massive liquidation events. This is how it’s supposed to work.
Nikkei is now at 1982 levels.
Where was the Dow in 1982?
j wrote:
Every single one of these problems can be sent back to the authorities and painted as government failure.
It is just as wrong to portray the bankers, et al, as helpless pawns as it is to portray them as evil bags of greed.
It is accurate to say that the government allowed the bankers, et al, to participate in an orgy of idiocy, but it is not accurate to suggest that the government made anyone participate.
Take this relatively straightforward item you noted:
3. Low interest rates created huge demand for housing
Clearly, low interest rates allow people to pay more for homes. But that factor provided a lift to prices only in the very beginning of the housing bubble. The massive inflation phase, and the resulting damage when the bubble popped, was due to incredibly lax lending standards. All the nonsense like ultra-low teaser rates, no-doc loans, option ARMs, and so on were pushed by the mortgage industry when prices soared so high that relatively few buyers could afford standard 30-year fixed loans even at the low interest rates.
Why do you assume bankers know which way the economy is going, ottnott. Bankers are ciphers like every other business people. IF they have capacity to make a loan that falls under their parameters, they’ll make the fucking loan. calling them greedy for doing so is asinine.
the Fed has control of interest rates. They are to blame 90% for the fuckup that’s going on. It’s government failure of the worst order.
—————-
Anyways
The Japs have now lost control of the situation and the stupid fucking ECB fiddles while Rome burns. I think it’s over now.
You couldn’t have teaser loans unless interest rates were at 1%
j wrote:
You couldn’t have teaser loans unless interest rates were at 1%
Wrong. Very wrong. Option ARMs replaced teaser rates with teaser payments. Buyers didn’t have to pay any interest at all in the early years.
j wrote:
Why do you assume bankers know which way the economy is going, ottnott. Bankers are ciphers like every other business people. IF they have capacity to make a loan that falls under their parameters, they’ll make the fucking loan. calling them greedy for doing so is asinine.
You really have some blinders on, j.
First, even a brand spanking new banker can look at historical charts showing that prices were way above historical norms versus rents and wages. You’d think that would matter to them.
Experienced bankers would have been aware that loan standards previously in use had been tossed aside.
What do no-doc loans for all-comers have to do with economic forecasts, anyway. A bank making a no-doc loan is gambling – in this case, they were gambling that the buyers would make payments long enough that the loan didn’t get crammed back down their throats.
The bulk of loans weren’t liar loans. We should wish they were.
don’t want lax lending standards? don’t put the fucking cash rate at 1% and leave there for 18 months.
Wrong. Very wrong. Option ARMs replaced teaser rates with teaser payments. Buyers didn’t have to pay any interest at all in the early years.
No, I’m not fucking wrong. Teaser loans only came up because the fucking rate was 1% and people were demanding loans like crazy.
As I said the Fed is 90% to blame for this clusterfuck.
ANYONE SEEN THE DOG? DOG, WHERE ARE YOU?
this is the first day I have bought on volume.
purchased at hk 1497, 40% prf. buy in.
I’m an older guy who’s seen this shit before.
looking to buy at 10% decreases, we are not going to zero!
looking to scale in large from here
I luv the fear. expect baltic tensions, and opec to begin
to put a bottom under oil.
never felt better!
this is the first day I have bought on volume.
purchased at hk 1197, 40% prf. buy in.
I’m an older guy who’s seen this shit before.
looking to buy at 10% decreases, we are not going to zero!
looking to scale in large from here
I luv the fear. expect baltic tensions, and opec to begin
to put a bottom under oil.
never felt better!
don’t want lax lending standards? don’t put the fucking cash rate at 1% and leave there for 18 months.
j, that is idiocy.
Lending standards should reflect a risk vs. return assessment. When interest rates are extremely low, and home prices are extremely high, the obvious conclusion is that the risk of price declines is high. That doesn’t = a decision to ease up on standards.
No, I’m not fucking wrong. Teaser loans only came up because the fucking rate was 1% and people were demanding loans like crazy.
I’m stepping away from this discussion, j. First you present the bankers as pawns of the government, and now you have them as pawns of prospective borrowers. There’s a canyon between us I don’t want to try to bridge.
Look at a fucking demand supply curve ottnot.
Tell me what the fuck happens when you have demand and supply both increase in a falling price environment?
You’re asking bankers to defy the laws of supply and demand. Another example of a lefty type who understands nothing.
Don’t use the word greed when it has no fucking meaning in the context it is being used.
Homestate tells Palin to come home, and stay home.
http://www.adn.com/opinion/story/567867.html
If the fed causes the demand curve to shift to the right and the bankers have capacity to make a loan (if it falls within their lending parameters) they will make the loan.
According to you and all the other nutballs on the left -accusing people of being ” greedy’- bankers should be the only people to defy the laws of economics.
Some fast facts: in 1982, the DOW was at around 800.
And by the way, there’s a huge bear flag on the DOW right now. Financials like JPM started breaking below support on Friday. Bellweathers like NKE were breaking just below support as well. Even safatey stocks like K are breaking below support. In sum, there seems to be sectorial and index wide technicals that suppport another leg lower. Be carefull — this market looks like it wants to see 7000 this week.
Dunno phil
the US is starting to look like a sea of calm compared to Eurotrash and japan now. If the US hangs in over the next few days the crisis moves to Europe and Japan. US banks are actually starting to seem well capitalized compared to the crap in Europe.
Yea the banks to a hit in sympathy to the rest of the banking system in the world, but that doesn’t mean the market is going to fall over itself.
The jap market is down because those fucking idiots should have cut rates and didn’t. they should have intervened and didn’t.
Denninger needs to hire a hot chick to read his scripts… what’s Lindsay doing? She could really take market ticker to the next level…
I mean, if we’re going to hell in a handbasket, can’t we have fun along the way? Do we need to be so glum and mothballesqe?
-DT
I can’t believe that I’m going to say this, but I’m thinking about going bullish on some of the commodity plays. I agree with the FLY valuations are starting to get insane.
The 3:00 am futures manipulators may finally get their due.
Wow I wish I was as smart as you fuckers. I am a special Ed trader. I like to hide in the hedges and look up Mother Markets Skirt.
You are not alone re: being a special ed trader. Hedge funds have short yellow buses that transport their traders every AM to work from the group homes.