patrick.net

How 'bout some Wall St CEOs running in ciricles, literally. That would reduce the amount of mischief.

Cars, Season Tickets, $50K kitchens, Stocks… just about anything with “disposable income” written on it to be (read “borrowed money”) have jumped through the roof in the last 20 years.

Uncanny. That sounds like the script for one of those "priceless" Mastercard commercials.

Best proof that the bailout was for Wall Street execs:

No "Sidewalk Soufflés" in front of the skyscrapers. Serious economic downturn usually produces a morbid rain of the newly unrich. Unless, of course, thier fortunes were saved somehow.

Headset:

My personal indicator of the true sanity turn-around? When Starbucks files Chapter 11. ($8 for a cuppa? Dese peeple r knuts!)

But I ain't holding my breath.

Starbucks is closing a lot of stores, and now we are hearing the "cool people" talk about the superior taste of the the much less expensive McDonalds and WaWa coffees.

Hope!

I'm a Folgers kinda guy, but glad to hear about Starby's. Next thing you know the yuppies will move back to drinking Boone's Farm and Gallo. I feel like that 70's show is coming back around, starring Barry O as James Earl Carter. Stagflation and 20% CDs here we come!

I'm also out of Moderation, which is always a good thing. I am immoderate, after all.

RE: cockfighting

That would be illegal though.

The ugly details of Paulson's contracts are starting to trickle out. NOW is the time to fix this, all who were against the bailout should not wash their hands of this You should demand that Paulson does it right.

http://www.marketwatch.com/news/story/corporate-governance-takes-back-seat/story.aspx?guid={8750f6ed-3f7f-4e80-b39a-c8d03e13234a}

As if demand things make them happen...

Do not confuse what ought to be and what is.

It is what it is. And it does not depend upon what the definition of the word 'is' is.

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package

http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking

I am looking to buy a townhouse in Cupertino. This is what a realtor advised .... :

price-wise as we see the properties dropping more in price. You may notice for the first time in as long as I can remember, this real estate turmoil is also affecting homes in the Cupertino area. None of the houses currently on the market are moving which may very well nudge the prices down more. You can bet I'm watching them all very carefully and will keep in touch if a "good deal" drops in. I would say for the patient buyers Nov/December could be very good months to buy as there will be those that will want to sell by year end for the tax breaks and may become very negotiable....

Fears of Lehman's CDS derivatives haunt markets

It is a full week after bankers gathered in New York to start sorting out the derivatives mess left by the bankruptcy of Lehman Brothers. We still do not know who is on the hook for some $360bn of default insurance, or how much they will have to pay.
...
Those on the wrong side of these Lehman debt contracts - known as credit default swaps (CDS) - must come up with the money by Tuesday, the next D-Day in the ever-fraught calendar of the credit markets. There has been a deafening silence so far.

There is no easy way of finding out who they are, so every bank and insurer is suspect. The $55,000bn CDS market is "completely lacking in transparency and completely unregulated" in the words of Chris Cox, the chairman of the US Securities and Exchange Commission.
...
Chris Whalen, head of Institutional Risk Analytics, says this creates a huge moral dilemna. Why should taxpayers now responsible for AIG foot the bill for huge windfall transfers to hedge funds?

"We need to shut this whole thing down. The people who don't own the underlying collateral and were just betting should be flushed away. It would be grotesque if the US authorities were now to subsidize speculators. The US political class is waking up to this," he said.

PermaRenter Says:
I am looking to buy a townhouse in Cupertino. This is what a realtor advised …. :

"price-wise as we see the properties dropping more in price. You may notice for the first time in as long as I can remember, this real estate turmoil is also affecting homes in the Cupertino area. None of the houses currently on the market are moving which may very well nudge the prices down more. You can bet I’m watching them all very carefully and will keep in touch if a “good deal” drops in. I would say for the patient buyers Nov/December could be very good months to buy as there will be those that will want to sell by year end for the tax breaks and may become very negotiable…"

Be careful. I was sent an unsolicited message that is almost the same (some stuff like Nov/Dec is an exact copy) - but about another area nearby. It looks like the realtwhore cartel has got some talking-points that they are inserting into their "advice".

This guy also used the same phrase "nudge the prices down some more". The gist is still - "it is a pretty good time to buy, and I am only here to help you". Same wine, slightly more subtle bottle.

Never forget that you are dealing with a salesperson who ultimately gets paid only if he/she convinces you to buy.

http://www.star-telegram.com/metro_news/story/982369.html

If this is not an abuse of the law I don't know what is. TXDOT rejected Chesapeake's request for a pipeline because they don't allow gas lines on their easements. Somehow a homeowner who actually owns the land is a legit target of a lawsuit.

So, does anyone have any idea when the Credit Card CDS are going to be the next big news item?

1 Subprime is old news.

2 Alt A is the rage now

3 Credit Card (next)

4 FED follows Iceland's Lead (sometime in the future)

nut,

we still have prime ARM reset. Please don't jump the queue.

On topic, the forced capital infusion into the big-9 banks isn't, and probably won't help increase consumer credit lending. The big banks are using the money to recapitalize themselves. We were talking about this on my blog. Basically, they're taking the gov't 5% freebie money to pay off their 10%-12% outstanding notes.

Paulson was questioned about this on the day after they gifted away our money, and his response was something like "well, they better not just use the money to recap; they won't, they promised". Or something like that. Three days later and the CEOs of the big banks were giving interviews describing exactly how they were doing just that.

The sad thing is that something like 80-85% of consumer credit lending in the country is not done through the top-9, it is done through the regional and local banks. And those guys are dying on the vine right now. They're the ones who really need the help. Some even deserve it. There are plenty of small, regional banks who didn't sit at the MBS sushi bar, who held their mortgages, and who are now getting squeezed out because of the giant sucking sound of all the money going upstream to the big banks.

I guess the good news is that this lunacy is preventing inflation. It's all deflationary. As in liquidity-trap, Japan-style deflationary. So if you consider that good news, I guess... Maybe our lost-decade will produce some good anime; people will have a lot of free time and pent up creative energy for the next many years. It's not like they'll be working.

PermaRenter,

Do you have a reference/link for the post about Tuesday LEH CDS market event?

I guess the good news is that this lunacy is preventing inflation. It’s all deflationary. As in liquidity-trap, Japan-style deflationary.

Or, we have have deflation and inflation in quick successions. It is just dangerous for banks to have more liquidity than responsibility.

Randy,

What I do not get is whether the 125B has actually been disbursed. Signing a 1-page "contract" last Sunday ought not be enough to do that.

What will it take to force Paulson to require "Buffett terms" for the equity purchase, and not 5% giveaways with no teeth at all (see earlier link)?

Are you blaming voters or democracy in general? Or both?

Both I guess; democracy doesn't work so well when the majority of ones citizens are nitwits.

My lease expires in december. They'd send me a lease renewal agreement in 2 weeks. I will try to negotiate my rent down and sign a 1 year lease. As it is I am seeing a lot of empty apartments (in Pleasanton) as the companies around here are laying off even the Indian Bodyshop Labor who were living 8 to an apartment, so I am hoping for a messed up vacancy rate at my complex to help me negotiate.

We're going to this show tonight!

http://www.schadenfreude.net/

Randy,

we won't have the lost decade the Japanese style, because the Japanese headed into their lost decade(s) with plenty of household savings, and a national savings rate of above 15%. We don't have that luxury.

I don't know how we drag on, but during GD 1.0 most American households had savings, and we were the manufacturing base on the world, and that could be why it dragged on so long to digest the overcapacity.

I have a feeling that either we don't drag on that long, or we drag on with far more pain than Japanese. I hope we just get it over with and move on, obviously the politicians think otherwise.

Patrick, sorry to hear about your loss. May God bless you and your family.

How could you be "saying for weeks" something which only occurred in the past couple of days? I didn't realize in my absence musings here had become overtly clairvoyant. If you're talking about deflation, we were referring back to threads from 2006 on that topic.

Patrick, I join others to express my condolences. God bless.

Hi Randy, how are you doing?

Back-testing always looks more clairvoyant than reality.

Patrick, my condolences as well.

Peter, I intend to call you soon. Sorry, I've been distracted finishing a big project and with the markets lately.

I just found this SeekingAlpha article interesting. Lots of folks here will appreciate it.

The markets are very interesting indeed.

May we living in interesting times.

One thing though... notational values are sometimes misleading because derivatives do tend to cancel each other quite a bit. So long as cascading cross-defaults can be avoided, that is.

Also, the good news is, in the end, only military power matters. And the US has plenty of that.

I just want Andrew Mellon back at the Treasury. :(

http://financialsense.com/fsu/editorials/schiff/2008/1017.html

Anyway, a Japan-style slow-motion crash is more tradable, right?

yes but soldiers need to be paid.

Conquer the land and paid you shall be.

Britain faces deflation for first time since 1960
For the first time since 1960, the cost of living will start to shrink next year, in a worrying parallel of the Japanese "disease" of the 1990s, according to new research.
...
The Monetary Policy Committee last week unexpectedly cut rates by a half percentage point to 4.5pc in the face of the financial crisis. However, there is also growing evidence that inflation, which has risen above 5pc in recent months, is set for a dramatic fall. The Retail Price Index – the most comprehensive measure of UK high street prices, will drop at an almost unprecedented rate to -2pc by the second half of next year, according to new research from Fathom Consulting.

It said the fall was largely due to the drop in mortgage costs and house prices, which together form a large part of the RPI. However, lower food and energy prices would also play an important role. Since modern comparable records began in 1956, the RPI has dropped into negative territory only once, in the late 1950s and early 1960s, but it only dropped as far as a rate of -0.5pc.

Andrew Brigden, economist at Fathom Consulting, said: "This does have worrying implications – particularly if it heralded a general period of deflation. The risk is we have a rerun of Japan because you simply can't [cut interest rates] to below zero."

>> Do you have a reference/link for the post about Tuesday LEH CDS market event?

Do google news search with LEH CDS .....

Patrick, I'm sorry this has been such a horrible year for you. Ginger and I would like to express our deepest condolences during this difficult period.

Patrick, my condolences to you and your family. Words are inadequate at times like this, but may the thoughts of those around you help you through this time.

Patrick, accept my family's condolences to you and your family over the sad demise of your mother. May her soul rest in peace. She'll be in our prayers.

My condolences Patrick.

As a housing blog, this site can be instrumental in revealing the market distortions of cram-downs and the massive moral hazard the government is now actively engaging in.
As a clearinghouse for informaton, this site can serve to shape future policy.
Also, many (like Lou Dobbs) take a distorted populist view that most home buyers were victims of people like countrywide. I think this site could go a long way to show that the massive majority were really spculators hoping to get rich. It would be nice to show those in Congress that this represented the worst of the 'smething for nothing' mentaility.