patrick.net

Patrick,

Actually, I am not in favor of kicking out the AYEs. Many of them are solid and well-meaning representatives, and there should be no judgment on whether they were wrong or not until we see how this all plays out. This decision is not practically irreversible, unlike the similar and very ill-fated decision to go to war in Iraq.

We shall see how well we do without the bill.

It is quite possible, as Headset says, that the dip in the market will not last very long. Personally I think today looked promising in terms of market reaction. I think someone said that the market first did not like that the bill was going to pass, and then it didn't like that it did not,. All in all it was a 7% day. It could have been much worse.

And EBGuy just wrote about a new 300B addition to the Fed Term Auction facility. This might be enough to tide the worst over and let a more free market do its job.

“…gave proof through the night that our flag was still there…”

...where the flag pole was anybody's guess, but Paulson was sure walking funny.

I'm sorry, anyone who voted to spend $700 billion of taxpayer money to buy distressed mortgage-backed bonds at OVER market value, rewarding the exact behavior that got us into this, is definitely guilty of betraying the people.

Especially since the vast majority of people recognized this for the scam it is and were against it. Our representatives should represent us. They did, but just barely.

The ones who did not represent us should not be forgiven. They failed.

I agree with Patrick! If they voted yes for the bailout, throw them out of office! Run their asses out of Washinton on a rail!

Oh ho.
This is but the first dip. We are seeing 401ks flight to security. Even more importantly tomorrow is "Redemention day" at the hedgies. The massive sell-off will pop them and drive the markets to heck. Also, after the hedgies pop, they will simply say 'bankrupt' and all that borrowed moeny they used will go bad. And wow, at up to 50:1 that is a ton of debt going bad.
Bond market will go bad. I am curious to see Mr. Gross' much hyped Plan B.
People's flight to cash will onlybe changed by inflation scare, and I simply cannot believe the Fed would do that on purpose.
Also, we FINALLY saw Europe get it. They are worse than us. I predict Germany will be the first bank that drops the EU central bank. More will follow. Italy and Spain will be hardest hit at first.
Like the US, the British Pound is backed by the taxing authority of Mother England. But as a country whose wealth and workforce are in the financial sector, they will be disproporitannly hit. Pound sterling may hit dollar parity by years end.

In the end, calling the bluff of the Financial gang was the right thing t do. So many resrouces are so misallocated now. I want to see all those quant mathmatecian PhDs working on real problems, like: 50% solar cell effeciency, algea biofuels, fusion, cheap de-salinization, etc

Pound sterling may hit dollar parity by years end.

If you prediction comes true. I will consider you an Oracle (as in Delphi, not database). Is anyone else predicting that?

Dollar-Quid parity would make it cheap for me to take my family to see all our bloke relatives.

Oh yeah genius! Free market, democracy - more like idiocracy! People have no idea!! When they all lose their jobs they'll look back on this say that that was the day we could have done something and we failed ourselves.

US stock markets lost $1.1 trillion today. Most of that came out of people's retirement accounts.

So people voted to lose money - far more money in the future than this plan would have cost. Brilliant!!

If you prediction comes true. I will consider you an Oracle (as in Delphi, not database). Is anyone else predicting that?

I am not so brave... but dollar-euro parity may be a reality.

Not investment advice

When they all lose their jobs they’ll look back on this say that that was the day we could have done something and we failed ourselves.

Coulda, woulda, shoulda. Meaningless.

Exactly! Today was it. It's done. Depression here we come!

The previous industrial might of the US was daunting. We could make machinary that was less expensive and with higher quality than the rest of the world. And we did very well as an export nation.
Now we have a massive trade imbalance and simply paying the interest on our debt is causing huge piles of cash to build up in foregn ledgers.
While we, likely, will not be an export nation for a while as all other economie are adversely affected, we do at least have a very well developed domestic market.
We are simply better positioned to weather this crises.

As for the pound. Timing is so hardto call. I thought we would be at DOW 10,500 months ago. So, 3 months to sterling parity? maybe not. I just do not see the way clear for England to dig out from their problems with their 1 trick economy.

I have lots of money in Key Bank. I also know they have massive amounts of land in a RE trust where I live. I wonder what the chances are of them selling some of it to me to raise capital?

When they all lose their jobs they’ll look back on this say that that was the day we could have done something and we failed ourselves.

Look, we can prop up this sytem until it looks like a Dr. Seuss tree house, but that is still not going to prevent it from falling, as far as I can see. Yeah, people are going to get hurt, me included. But keeping it up in the air just so it doesn't fall down tomorrow is not the best use of yet another $700B of borrowed money. And when it hits the ground the next day, we could then say, "Why didn't somebody stop that crazy bailout bill!?!"

The system's broken (and broke). Time to take our medicine and fix the damned thing.

No - today was the day we say to Greenspan, "That was not economic growth basedon productivity gains, those were fake gains based on shadow banking and leverage"

And that $1.1 that disappeared today, that money that was NEVER real.

Paper gains. Paper losses. C'est la'vie.

But I do feel bad for retirees. No idea what we can do for them other than give em a desk and say, "Working in your 70s in high tech is easier than hefting bricks" I really don't mean to sound callous, but the short term recovery to Dow 14,000 isn't in the cards and if reitrees were havy into the market - yeowch.

Shit I feel just terrible for all those people who lost money in their 401k's. But what truly puzzles me is how this could happen? I thought everyone in the bay area was rich beyond compare and everyone that lives there were not only baller programmers but financial geniuses? What gives? You Bay Area residents shouldn't worry, you can always use your house equity. Plus the vigorous manufacturing section will weather all storms.

Shit that is just never going to get old.

How does it feel mother fuckers?

When Bear Stearns went under, the Fed put up $30 billion in taxpayer dollars in order to....prevent Lehman/Merrill and the entire financial system from collapsing.

Well, what happened? Six months later, Lehman & Merrill collapsed along with the entire financial system. So the taxpayer lost $30 billion to delay a collapse for six months.

Maybe $700 billion could buy us a year or two...but the financial collapse is coming. Let's just rip the band-aid off and get it over with...

NO BAILOUT!

But I do feel bad for retirees.

Sorry, I do not feel bad for them. They should have seen this coming.

So if you take a giant shit log (BA?) and slice it into very thin slices apparently it does not really smell that bad, but when you go to make a shit sandwich, man it reeks. I guess if you end up with too many shit sandwiches you can always petition the government to buy your shit sandwich stand.

Love the boomer fuck Paulson. He just reeks "trust me".

Suck it long, suck it hard. Get back to work code monkeys.

I'm just worried that this will happen: the Dems will put back in the concessions to the GOP they pulled (e.g. $$$ for ACORN) and pass it on a strictly partisan fashion tomorrow.

Dennis, the bill *will* be passed sooner or later, in one form or another. There is only *one* Ron Paul. :(

Sorry, I do not feel bad for them. They should have seen this coming.

I don't. Even if they could predict the housing market, they might not have been savvy enough to do something with their money to "protect" it.

I’m just worried that this will happen: the Dems will put back in the concessions to the GOP they pulled (e.g. $$$ for ACORN) and pass it on a strictly partisan fashion tomorrow.

Well, not tomorrow, 'cause they're taking Rosh Hashana off. No. Really. Their self-described *Henry Paulson-end-of-the-world-financial-armageddon-48-hour-doomsday-clock* is ticking well into T+12 days, ohmygodweregonnadie!!!!!

...but they'll be back Thursday.

But yeah, they may very well then pass the ACORN version on a party-line vote. BUT then it has to get past the Senate, (which could miss cloture) which almost certainly means a more moderate bill, then back to conference, and another opportunity for those fine upstanding reps of ours to show some backbone. Or at least their talent for self-preservation.

And when it goes to the Senate, there are a couple of Senators (M and O) who then get to show their worth. :)

Let's see...the Senate has 49 Dems, 49 GOPs, Lieberman and one other I. Tie goes to Dick Cheney.

Why is options liquidity so shitty nowadays? The bid-ask spreads are horrible even for large-cap stocks options.

Peter P :

When volatility is so high, the market makers often increase the spread. I haven't noticed any major drop in open interest.

I was watching Nightly Business Report on PBS just now, and they were trotting out one `talking head after the other that said congress better had pass the bill or else. No surprise there,

The only voice of reason was John Bogle of Vanguard fame. He basically stated that we need a support deal, but that it should be based on equity purchases and not bad asset purchases. Now there is a guy that I can support. He has always been in favor of the shareholder (that's you, surfer-x :-)) rather than the management.

If we must have a bailout, ANYTHING is better the the cuurent POS.

Why all the posturing? Why didn't Congress serously consider something else. What is Paulson not telling us?

"englishman26 Says:
US stock markets lost $1.1 trillion today. Most of that came out of people’s retirement accounts."

Then it's their own darn fault for not actually saving, and buying into the idea that investing=saving. Investing has risk, and if you lose, you have only yourself to blame for gambling.

Pay attention to your money. Nobody else is going to look out for your best interests; that's your job.

Tesh,

The problem is that if you "save", then somebody else will borrow the money and "invest" it for you. That's why watertight regulation is key.

When volatility is so high, the market makers often increase the spread.

I see...

It is also interesting to see how the short-sale ban is affecting the put-call parity.

The problem is that if you “save”, then somebody else will borrow the money and “invest” it for you. That’s why watertight regulation is key.

No, even with watertight regulation, air escapes. But airtight regulation suffocates everyone. That is not the answer either.

The solution is to *allow* credit deflation. It is a normal and necessary part of the credit cycle.

Kinda' reminds me of Barings - only really, really big.

P.S. John Bogle warned us about the 401k stuff in "The Battle for the Soul of Capitalism"

European central banks cut sales of gold

By Javier Blas in Kyoto , Financial Times, 28 Sep 2008

European central banks have cut their sales of gold to the lowest level in almost a decade, reversing the practice of recent years when hefty sales helped depress prices.

Institutions bound by the Central Bank Gold Agreement – the banks of the eurozone plus Sweden and Switzerland – sold about 343 tonnes of gold in the year that expired on Friday, the lowest amount since the first CBGA was signed in 1999.

This compares with 475.8 tonnes in the year to the end of September 2007. Under the agreement, the banks are allowed to sell up to 500 tonnes of gold each year.

The European trend is part of a global movement of reduced central bank selling and increased investor buying that is helping to underpin high prices at a time of turmoil in financial markets.

GFMS, the precious metals consultancy, estimates global central banks will sell 269 tonnes of bullion in 2008, the lowest since 1995.

Much of the selling by European banks took place between October and December last year.

As central banks sell less, investors are rushing into bullion-backed exchange traded funds to such an extent that some analysts refer to the ETFs as the "people's central bank" because they are now bigger than most countries' official reserves.

Bullion ETF holdings reached a record 1,056.7 tonnes – or more than $30bn – on Friday, up 33 per cent in the past 12 months and double the 2006 level.

The developments provide a bullish backdrop to the annual meeting of the London Bullion Market Association, which begins Monday in Kyoto.

"Less central bank selling sends a strong bullish signal to the market," said Philip Klapwijk, GFMS chairman.

"The investors' bullion-buying will be sustained for the time being if people continue to be concerned about financial system stability."

Gold prices surged last week to $911 a troy ounce, up more than 20 per cent from the level before the collapse of Lehman Brothers but below the high set last March at $1,030.80. Bullion closed at $885 an ounce on Friday.

Kamal Naqvi, head of commodity hedge fund sales at Credit Suisse, said: "We are witnessing strong buying of bullion as financial risks have increased."

Along with investors, some central banks that have sold gold are reviewing their position.

No bailout without equity

is the modern day equivalent of

No taxation without representation.

EBGuy,

are you suggesting that Fed has already started printing since it has less than $300B on its balance sheet? How fast can it print?

I think there will be a deal in the end, when the Wall Street losses begin to be reflected on Main Street in terms of massive layoffs, Americans will do exactly the opposite by faxing and calling their Reps and Senators for a deal. The huge drop in stock market is just a part of the negotiation process.

I am still suspicious that they are just doing a kibuke dance and will pass this anyway.

They must think it doesn't have enough baiout for the foreclosure house debtors----

Also--Buffet is for it because he invested 5B on the promise it would pass.
I'd be for it too---if I had 5B on the line.

Oh yea, they will come up with something. Hopefully it will it will have something in it for the taxpayer other than rhetoric. People want something for their money.

Does anyone think that today's market crash is at least half engineered?