Tuesday, September 18, 2007

50/50/50

That third 50? The dollar v Euro rate soon. Welcome back stagflation. It took years of missteps to bring you back but now you can settle in for a long stay. Good news? Well I'll had to look around to find something good out of this but China is screwed even worse.

53 comments:

Northern Renter said...

Let me be the first to say that there are silver linings to every cloud. Much of our scientific equipment/supplies has to be ordered from the States and imported into Canada. The difference between our 65 cent dollar of 3 years ago and the near parity today makes my life a bit easier.

NR

Sweet Cashback said...

This warms my heart to know that folks in this country will be able to dig themselves deeper but cheaper into their debt holes......seems like history will not teach anybody a lesson.

Oh and MURST btw. even though I kinda feel down right now. I was still hoping for some reason out there.

Peripheral Visionary said...

In response to FCB from the previous post, I held no position going into this other than my gold; I had the feeling things were going to get crazy™.

In retrospect, we should have seen it coming. As someone said on Calculated Risk, actions speak louder than words, and this Fed talked a whole lot about inflation but did nothing about it. But the markets drop a few percent from their all time high and they rush out the fire brigade to save Wall Street from itself. It's perfectly obvious whose side the Fed is on; future moves by the Fed won't require much guesswork.

But as we've discussed here previously, the Fed is now in trouble. The rate cut was the one big bullet they had left in the gun, and now they've gone and shot off the last of their ammunition, and this with markets down only 5% from their highs. If the markets fail to reclaim their highs and start to drop again, it will become obvious that the rate cut did not save the economy from itself, and the Fed will have little control over further developments. They acted too early, and just like the Bank of Japan in the early 90's, they will soon be left to sit and watch as the situation develops beyond their control.

Funny Circus Bears said...

They'll cut again.

H Simpson said...

Sage advice to Ben B. from the movie Animal House for when Wall Street tries to tar and feather him in 6 months:

Flounder (err Ben), you can't spend your whole life worrying about your mistakes!
You fucked up - you trusted us!
Hey, make the best of it! Maybe we can help.

serinitis said...

I am not saying that Jimmy Carter was a good president, but his problems with the economy was because of Johnson and then Nixon printing money for the war on poverty and the war in Vietnam. Jimmy was not enough of a crook to continue massive overspending as a way to pass the buck to the next president.

Hillary may be enough of a politician to spend her way out of overspending. And woe to her successor.

Obama will probably be like Jimmy. Not enough of a crook to make the problems worse, but not going to make the hard decision to put the country through a sever enough recession to clean up the problem.

The Republicans will deny there is an overspending problem and blame inflation on gay terrorists.

Peripheral Visionary said...

Oh, of course they'll cut again. But the market psychology was that once the Fed cut, the markets would stabilize, lenders would start lending again, the housing market would stabilize, and everything would go back to "normal".

That, obviously, is not going to happen. The markets might go up, but the lending won't be at the same level, as the fear of risk has not just gone away overnight, and of course there will be no saving the housing market. So if the bad news from the financial sector keeps coming, there will be no more dreams of a white knight Fed riding in to save the day--they'll realize that one rate cut hasn't saved the situation, and that a lot of rate rate cuts aren't likely to do that much better.

The key is that the *promise* of a rate cut is more powerful than the cut itself. A future rate cut can do anything, can fix any problem! It was that optimism that has been holding the markets together. But when it becomes clear that a real-life rate cut can only do so much, the markets' optimism could very quickly fade. If a Fed rate cut doesn't save the markets, what will?

Funny Circus Bears said...

Eh, **Shrugs**

I never fight the tape.

Akubi said...

@Serinitis: The Republicans will deny there is an overspending problem and blame inflation on gay terrorists.

ROFL. I'd say that's a rather accurate assessment.

Rob Dawg said...

Have you guys priced fishnet stockings lately?

The Republicans are out Democrating the Democrats. Which kind of Democrat are you voting for this election? The socialist tax and spend or the liberal spend and debt?

Lost Cause said...

Carter deregulated energy, airlines etc, and downsized and reorganized the big government. He also appointed Paul Volker, who was the man who tamed inflation and reformed the economy.

In other words, he did everthing that the Reagan republicans take credit for. The conservatives are very good at one thing: taking the credit for the work of others. They are not very good at original thinking, innovation or risk taking. Hence, conservatives.

Peripheral Visionary said...

I don't fight the tape, but I don't ride it either. I will admit that I'm tired of a market that doesn't reward investment, but that doesn't mean I'm climbing aboard the speculative bandwagon.

I am, in the words of a much-loathed TV show host, "out!", and won't be coming back in anytime soon. Just waiting for entry points on overseas markets to set up so that I can move my money out of gold and into stocks that actually provide a real return. I think the U.S.A. will come right in the end--but I could say that of some of the people that I know, but between now and then they won't be getting any of my money.

As far as Presidential candidates, I'm going to do my best to figure out which way Congress will go, then vote for the candidate from the opposite party. In the last hundred years, the only time there's been any fiscal restraint has been when control of government was split.

Son of Brock Landers said...

i'm calling everbank to transfer mo' money. damn you Ben, i had hoped for a hold. Don't you know Ben that queers grow beards when they lose their hair up top?

wagga said...

@PV
As far as Presidential candidates, I'm going to do my best to figure out which way Congress will go, then vote for the candidate from the opposite party. In the last hundred years, the only time there's been any fiscal restraint has been when control of government was split.

Are you related to Mark Twain?

No one's life, liberty, or property is safe while the legislature is in session.

Is Mark Twain this blogs Patron Saint?

BJ said...

@Lost Cause
The conservatives are very good at one thing: taking the credit for the work of others.

And likewise the Democrats. I would have to say that Politicians in general, are good at taking credit for things they are not responsible for, so long as it is good.

Also remember that Greenspan refused to take credit for some of the good things that happened during his tenure.. and he is a conservative (but not a politician).

They are not very good at original thinking, innovation or risk taking. Hence, conservatives.
Hum.. interesting. Lincoln was a Republican.. In actuality, risk taking should be taken by individuals, not the 'state' at risk to its constituents. No one wants to be subject to a risky state experiment gone bad.

The real problem is that both parties have forgotten the people and that the US gov is supposed to be of and for the people.

@PV
In the last hundred years, the only time there's been any fiscal restraint has been when control of government was split.

Very true.. and it applies to more than fiscal restraint. It also applies to incursions to the public's civil rights.

Well, in all, I would have to say that we found out that the tail wags the dog in terms of Bernanke..

So with treasury yields also dropping, how is Bernanke going to finance deficit spending?

wagga said...

@ Akubi

Any gay terrorists in fishnet stockings on ZB yet?

Funny Circus Bears said...

PV, International is the place to be, but picking indie stocks is HARD, so I leave it to the pro’s and own MF’s and ETF’s. Here’s just a couple of what I own:

PRLAX YTD=23.53% 3yr=57.75% 5yr=44.83%

MPYMX YTD=11.04% 3yr=42.84 5yr=n/a

TREMX YTD=6.35% 3yr=42.35% 5yr=40.62%

BJ said...
This comment has been removed by the author.
BJ said...

A link to play around with. Note that an 'uphill' graph is not necessarily a good thing. That means it is taking increasing dollars to buy the foreign currency.. or that the dollar is getting weaker against the foreign currency.

Funny Circus Bears said...

I also have small 5% or less positions in China:

PGJ YTD=22.60% 1yr=62.62%

And Brazil:

EWZ YTD=31.10% 1yr=60.26% 3yr=64.23%


Good luck!

TK said...

Anybody catch Cramer blowing his load over Bernanke this afternoon? He's his best buddy now. They "get it". Wall St. asked and the fed said "ye shall receive". How long until all the good feeling wear off and reality catches up? Cut was to "Forestall a recession". More realistically it was to "temporarily stall" a recession

wagga said...

@bj
In actuality, risk taking should be taken by individuals, not the 'state' at risk to its constituents. No one wants to be subject to a risky state experiment gone bad.

The State has the power to prevent building and re-building cities below sea level and building and re-building housing on barrier islands. When the inevitable happens, the State bails out the individuals. And subsidizes insurance.

Nobody knows whether or not a full-scale solar chimney (with or without algae & koi (a kind of fish)) will work. A test article could be built for about 1 milliKatrinaBucks*, or 20 microIraqiBucks**.

*Katrina will run about 200 billion
**Iraq about a trillion

Akubi said...

@Wagga,
The gay terrorists in fishnet ZillowBook update will have to wait until I get home from the looser W-2. Hopefully that will be sooner rather than later.

The_Scum said...

First I'd like to say 'Fuck me running Bernanke! Stop destroying my dollars!"

Second, thank God I covered my shorts in DSL and LEN friday morning or I'd have shit my other shorts...the ones I'm wearing.

Now the obvious question...when do I re-enter the dark side and short again? I still want to short CFC...and Hov took a major bounce up no doubt on the successful weekend sales (ha ha ahah ahah) and the rate cuts. At some point they too will be ripe. But when and at what level?

That's the magic question. I'm out of town this week on business with limited net access during market hours so I'm going to pass on being a bull at least until next week.

Curious said...

@ PV from the previous thread.

Thanks for the reading list and recommendations. I do read CR but haven't attempted Tanta's UberNerd explanation yet. It's bookmarked and ready to start.

I appreciate the pointers.

-C

Lou Minatti said...

Carter deregulated energy, airlines etc, and downsized and reorganized the big government.
????
He created two bloated departments that have produced nada: The Department of Energy and the Department of Education. Over the past 30 years we've spent trillions on these two departments alone, and what do we have to show for it? I'm not saying Republicans have been any better, but don't pretend that Jimmeh was a government-shrinker.

Lou Minatti said...

TK, I remember Cramer blowing a load over the emergency rate cut in early 01. He was urging viewers to BUY BUY BUY.

This will be a repeat.

Lou Minatti said...

That's why I'm easy.

BJ said...

@Wagga
The State has the power to prevent building and re-building cities below sea level and building and re-building housing on barrier islands. When the inevitable happens, the State bails out the individuals. And subsidizes insurance.

And the real answer, instead of controlling people... is to stop bailing out insurance companies! Where did all of the premiums that these residents paid, end up going? People who had saved up the money instead of over-insuring then having to sue their insurance company, have already rebuilt. Insurance, what a racket. Now we are looking at mandatory health insurance? Insurance does not drive down costs. It just amortizes risk and hides true cost!

It is possible to live in these areas if you are willing to pay for the engineering. Engineering was ignored in favor of special interest/etc programs. Take a look at their budget and what they really spent it on in New Orleans. The mind-think was 'mañana, mañana'(tomorrow, tomorrow) when having to deal with the known needed engineering. Holland seems to be able to do it quite well.

Nobody knows whether or not a full-scale solar chimney will work.
Actually they do. They know it will work, but the energy production will not offset the cost. While a solar chimney may not be effective for energy production, for 'passive' ventilation, heating and cooling.. that is a different story. It would mean changing how we build 'disposable' houses.

As for the Katrina expenditures.. Louisiana government is known to be corrupt. All that money is going to be wasted and nothing real will come of it. Louisiana was offered portable medical facilities by FEMA. The Gov of Louisiana wanted to control the facilities.. but they were owned by FEMA. The facilities ended up going to Mississippi (who was also badly hit by the same storm) because of the stupid politics. I also have pictures of New Orleans firemen ripping off a AC supply store while a business was burning in the background (it burned to the ground).

Irag; I don't know how much that will cost. I do know that some of it is being offset by Iragi oil. How much, I don't know.

Pleather Murse said...

Boo-yeah. (Pressing button) "They know NOTHING!" Lightning round coming up.

Lou Minatti said...

BJ, believe it or not Mississipians make fun of Louisiana, and with good reason. If it wasn't for the oil, Louisiana would be the poorest state in the nation. As it is, they are the most corrupt.

Louisiana is really two states. The redneck racist northern half. Shreveport is the capital. Then there's the southern PWT/Cajun/black half in the south. It's a gumbo of government corruption and it always has been. They wasted billions on nonsense when they could have been fixing the levees themselves.

wagga said...

@bj
Actually they do. They know it will work, but the energy production will not offset the cost.

Add in algae oil production, warm-water live fish, condensed fresh water. References on request.

We've had a number of 100 degree plus days. Although the house is not designed for it, I've kept AC use down to an hour a day by opening windows at night & using indoor/outdoor thermometers for temp. management. Not because I'm a saint - just can't afford to waste energy.

Iraq: For the trillion dollars spent (including interest into the far future), we (the taxpayers) could have purchased between 250 to 300 nuclear power plants. Not a perfect solution, but the additional plants would have brought us up to 60-70% of all electricity from nuclear.

Pleather Murse said...

@LM
Louisiana is really two states. The redneck racist northern half. Shreveport is the capital. Then there's the southern PWT/Cajun/black half in the south. It's a gumbo of government corruption and it always has been.

But at least they're not "racist" like the northern half. :rolleyes:

Akubi said...

The most heroic act of my day was washing the shit off my Pomeranians asses when I got home from work. They felt much better afterwards, danced about and so did I - once I survived the Lysol fumes.

sid_finster said...

@Akubi: your dawgs shit themselves?

Lou Minatti said...

But at least they're not "racist" like the northern half. :rolleyes:

They are racist with a Cajun accent.

Peripheral Visionary said...

Setting aside the "who's more racist" debate, Morgan Stanley's earnings came in both below expectations and down from last year's. That's in addition to Lehman Bros.' profits being down from last year, despite being reported as being favorable--meaning, of course, that they beat the intentionally low-ball estimates.

So someone help me out here--if the financials sector (30% or so of the market cap) are reporting earnings as being down, and if stock prices are based on earnings, why exactly is it that stocks are powering up to near record highs?

serinitis said...

The stock market is going to record highs because of Baby Boomers. The Baby Boom is in its peak earnings and savings years as it prepares for retirement. A large number of baby boomers have not saved enough to retire so they need high returns to have a chance at retirement. They also expect high returns because when they look at the past through rose colored glasses they see the money their friends made in the dot com boom, real estate, etc. These people are going to actively pursue the next boom. Since the stock market is doing well, they will put money into it till it busts. They will then jump to the next boom

Rob Dawg said...

It will be at least a generation before "Chocolate City" stops resonating in the minds of many.

Lost Cause said...

@serinitis

All the boomers want to invest. Therein lies the rub. When you get so many people handing over their money, you can effective pay them almost nothing for the favor. Don't expect to see any fortunes being made in the stock market. But you hit the nail on the head.

You must also realize an election year is coming up before making any hasty decisions.

Peripheral Visionary said...

I hear a lot about Boomers investing for retirement, but then I also hear a lot about how much debt Boomers are in. One possible explanation is that people are investing in the markets, but using credit to cover their living expenses. Of course they don't see themselves as using a 15% credit card rate or an 8% home equity rate to pay for a market investment, but that's effectively what they're doing when they make investments while taking on additional debt to fund their lifestyles.

But in any case, the Dow is now within 1% of the all-time high, and it's clear that it's going to make another run at it, and possibly set new records. Credit crisis, what credit crisis?

This isn't rearranging deck chairs on the Titanic--this is the Titanic's ticket office opening back up and selling new bookings, even as the crew are giving up on bailing water and are piling into the lifeboats.

aaron said...

I agree about the stock market bit. More money is flowing in and that is driving the market. Earnings are taking a back burner it seems. Although commodity based companies will continue to do well IMO. My dad recommended PCU and SID back in March. I bought some of both and sold after a 12% gain. I missed out on most of the gain but I guess that's how Mr. Buffett did it ;)

Now it's just a question of when the recession hits and having cash in hand to buy stocks after they plummet.

Funny Circus Bears said...

Anybody catching the toothless, grinning retard at the OJ press conference?

Classic.

Rob Dawg said...

Boomers are insane. They think a $600k house with $417k mortgage with 27 years to go and 2 years' salary in a 401k is retirement planning. Until "We can always sell the house" is replaced with "We can pay off the house anytime" they haven't covered so much as basic housing. The stock market seems these days like so much "Where else can we put it?" that it is scary.

I'm a useless dinosaur. All I can do is evaluate fundamentals and prospects and determine future value. Absolutely a sucidal strategy in this market.

Lost Cause said...

If we are heading toward a recession, which is Ben's bet, then oil consumption will drop. As will consumption of almost everything else.

I think Ben is right. There is going to be a recession. By January, things are going to be pretty slow. The economic cycle.

serinitis said...

Normally I would say fundamentals and future value would at least keep you safe, but right now they are going to drive you toward a cash position, and a cash position may very well get eaten up by inflation.

Sac RE Agent said...

I'm feeling better now that the state of Oregon's Chief Economist says that stalling real estate market will pick back up in Oregon due to Fed's cut.

Edgar said...

Mozilo wants to raise the limit on GSE purchases to $850k. I bet he does. That way CFC gets all the fees and the GSEs get to take all the losses. That would be a "win-win" for Orangezilo, that's for sure.

TK said...

FCB

Caught the toothless Retarded guy at the conference! "yes! High five!" And the I love celebrities hat.

Speaking of toothless, how many of our favorite shorts of late put up weak rallies only to head into the red? CFC looks like it'll be red by the close.

This rate cut may have even less legs than the 2001 cut.

Sweet Cashback said...

I have no words for this bullsh$t.

Make me feel sick to my stomach.....

serinitis said...

@Sweet Cashback

Absolutely Amazing. I don't really object to the $300,000,000. Congressmen can blow that much in their sleep. But the raising the upper limit and eliminating any downpayment requirement blows my mind. I was planning on voting straight anti-Republican in 2008, but the Democrats are working hard to change my mind.

Rob Dawg said...

Sweet Cashback,
New thread giving you the credit for the find.

The word for the day is "MORAL HAZARD."

Bill said...

Or devaluation.

Expect to see "U.S. dollar at par!" signs in Canada soon enough.

Which is why I've had a foreign account since before 9/11.

Those of you worried about the dollar should put your money where your mouth is and do the same.

>and a cash position may very well get eaten up by inflation.