patrick.net

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.

Patrick,

You have my condolences.

Patrick:

Deepest Condolences. Many of us have been through much the same thing, and while that shared experience may seem of little moment now, it may be some comfort to know that we came through, and so shall you, almost certainly stronger than before.

Patrick, Condolences to your family.

Direct Injection of money to consumers.
We are going to see more stimulus package to consumers. I would think they might extend Unemployment benefits.
SSN payments adjusted 5.8% upwords.

Watch out many ways consumers will get a bailout.

It would be nice to show those in Congress that this represented the worst of the ’smething for nothing’ mentaility.

I would love to see a candidate say: "Let's do away with the easy credit policies that enrich bankers and Wall Street types while continously pushing house prices to unaffordable levels. Our policies should make it easier for Americans to experience true homeownership with paid-off mortgages. Instead of spending one half of ones take-home pay on a 30 year monthly tribute, while hoping for an unrealistic rise in home proces to ease the burden, the home owner could be using that money to save for college or retirement. I propose we eliminate tax deductions on home equity extraction, require all home loans to be fixed rate, and prohibit the sale of of loan contracts." [audience goes wild with cheers]

After all, since people are such babes in the woods as to become "countrywide victims," we must take away thier ability to recklessly borrow. Let's use the same attitude as in applied to regulating "payday lenders."

its forced consumption. worse than communism.

Worst of both worlds. Evilness of communistic control plus the vileness of capitalism excesses.

Just thinking about the order of things
1. Credit Card defaults
2. Commercial RE
3. Car loan defaults
4. Business loss.

If the Dems want to build a country that works, it is not about extending credit. People must afford the products produced. So: make cheaper products (stop trying to sell 1 million units of $60k SUVs), find a way to raise real wages (hint, no CEO is worth 1,000x his emplyees), and stop trying to force credit extension to those unwilling to use it responsibly.

Duke,

I was just reading an article about AIG to stop lobbying. It was mentioned that the loan currently is 120B. I see you made some comments about Gov making a good deal of AIG. Does it still stand or is this a big hole?

no CEO is worth 1,000x his emplyees

How about we make companies pay Unemployment premiums to states based on some factor of CEO's pay.

If the Dems want to build a country that works, it is not about extending credit. People must afford the products produced. So: make cheaper products (stop trying to sell 1 million units of $60k SUVs), find a way to raise real wages (hint, no CEO is worth 1,000x his emplyees), and stop trying to force credit extension to those unwilling to use it responsibly.

Wrong track again. To build a country that works, stop intervening in the marketplace.

Let the system fail and a better one will emerge. I am a big fan of Andrew Mellon.

What's really pissing me off now is the game-changers. At this point, I think people would be happy if there was a known set rules. Once we have that, we can properly make personal finance decisions.

One really easy way to do that is to declare regulations and stick to them.

All of the bailouts and talk of stimulus just make people indecisive. People that should be foreclosing on their house might stay in it waiting for help. People waiting to invest in a certain company are waiting to see what new game-changers the government will come out with. People who can afford cars & houses are waiting because they have no idea what the government will do next.

All of their actions are resulting in massive uncertainty in every market. Everyone is standing still. Which, in capitalism, is a bad thing.

The ever-changing set of rules is a part of the game.

Peter - your purist view will not work. I would allow you the 'let the market work' approach, but it is not realistic. The governement will always distort the market at the request of the monied interest. Right now they write the rules and thus gain by the rules.
Of course you must now that a pure market does not work as it naturally gives rise to monopolies - and they raise prices and lower choices.

@SA

Well - with AIG I liked the approach. They crushed the stock, took oer the company and plan to break it up. The break-up value of AIG is still in excess of $120b so I would say, yes, still a good deal.

But the whole, bail out the systemic risk players is already so old to me. And AIG is about to come up against massive fraud cases. Their Lehman exposure is bad enough, but what really scares me is how much more they have out there. We now know they offered swaps for missing capital for major Eurpean banks. Who else? Unless the world choses to abrogate CDS this could get ugly. I mean really ugly.

We may have to let it fail yet - it which case it was a bad deal.

Credit is good because people can get leverage. Leverage is a double edged sword, but I digress. The proper use of credit can make you rich.

One really easy way to do that is to declare regulations and stick to them.

Another easy way to give priority to saving the funds that are already regulated; like mutual funds and pension funds.

Throw the hedgies to the wolves.

Duke, Andrew Mellon served several presidents as the Treasury Secretary. I am sure monied interest was just as powerful, if not more so, back then.

Of course you must now that a pure market does not work as it naturally gives rise to monopolies - and they raise prices and lower choices.

I say let monopolies stand until they get demolished by shocks (e.g. technological, geopolitical, etc). In the long run, no monopolies can sustain in a relatively regulation-free environment.

Quite often, monopolies are simply a product of over-regulation.

this is what happens when policy is completely driven by bribes, er I mean Lobbying.

Lobbying exists (mostly) because of regulation. The least-regulated industries have the fewest lobbiests, mostly to make sure they continue to be unregulated.

Here's the real track: Big Business is far more risk-averse than small business. Big Business loves to impose rules/monopolies that cut out small business. Big Business can afford to deal with regulations. Therefore they are not against regulation, or not as much as they would otherwise be. (And if you want proof, simply note who writes the regulations: in the vast majority of cases it is [drum roll] Big Business! Look at the first real regulation of business in the US: the Wilson Administration. The Railroads wrote the Railroad Rules, the Steel Mangnates wrote the Steel Rules, The Banks wrote the Banking Rules. Who the hell do you think the FED IS? The SEC? You think Congressthings know enough about Bessemer processes and Steel Union Contracts and short selling and Arch-Bar Trucks to write those regs?)

In this regulatory-rich environment, you either have lobbyists to protect you from the other guys, or you are the other guys trying to cram more regs down the competition's throat. Who benefits? Congressthings, whose campaign coffers fill up from all sides, and so they have position for life. It is true fascism, as the powers that be, political and business, work for each others' longevity, and startups get stomped.

Here are some regulations: Do not commit Fraud or we hang you. Keep the common air and water reasonably clean or we hang you. Do not cheat you suppliers or your customers, or we hang you. Public companies make their books (Standard Accounting Practice) public and transparent, or we hang you. No one in an industry (or sitting on the boards therof) can regulate that industry.

Do we really need any others?

Oh, and make the tax law work best for a 10- or 20-year horizon, rather than a quarterly one, meaning no capital gains on long-term investments.

But when the Federal Government is engaged in fraud (like off-the-books IOUs to Social Security and Medicare) how can you expect the rest of the country to do otherwise?

lobbiests = lobbyists
Mangnate = Magnate

I'm sure there are more. ;-)