Glass half full, half empty economy

[moonman]

Jim Markman writing for msn money central summed it real well today:

"Optimists think the "real" global industrial economy is so robust, driven by insatiable Asian demand, that it cannot be driven off track by some dinky problem with subprime mortgages in California and Florida. They think every sell-off is a buying opportunity and that all ailments can be fixed by prudent, measured liquidity injections by an accommodating Fed. This point of view accounts for rallies like the one on Sept. 11.

Pessimists think that the financial "plumbing" that underlies the global economy has become hopelessly clogged and is much too complicated to fix merely by trying to flood it with more money. They believe that a dysfunctional financial system will lead inevitably to cracks in the optimists' idealized "real" economy, preventing businesses from being financed. They point to evidence the trillion-dollar market for a type of corporate short-term debt known as commercial paper has frozen, as investors who would normally buy it without question are afraid that it is fatally tainted with hidden pockets of broken mortgage loans. They further point out that the Fed cannot rescue the market, as the trouble with bad paper extends to Europe and Asia, where central banks are actually still raising rates."

Investors know bankers a.k.a. paper money boys go through life with one foot on the street and one foot in the slammer. Transparency in banking? The idea, the dream upon which Markman pins his hope fails even the laugh test.

IF the Fed comes to the rescue with another round of rate cuts and floods the system with cash the result will be 3rd World style hyper-inflation. Bernanke vowed to toss money into the streets from helicopters to keep the system afloat.

The best solution, the only solution is to let the market work. The sooner we take our medicine, the less expensive and shorter our impending finanical ills. You have but a couple weeks left to get out of cash and into things if I'm right. If I'm wrong you have a few more months.

Either way, I stand by my October '07 market meltdown prediction. It's now the bankers turn to issue earning reports. Financial markets represent 20% of the broader market. Real estate, home building ect represents 28% of our GDP or did up until 1st quarter of 2007.

this month we've witnessed banks in Germany & France close their doors becasue they failed to answer the question about subprime exposure. Sadly, there is no answer because the world's reserve currency has no measurable value.

[Bill]

It's interesting to note, that with all this "buying oppurtunity", the glass half full folks don't seem to be doing all that much buying.

[moonman]

It's interesting to note, that with all this "buying oppurtunity", the glass half full folks don't seem to be doing all that much buying.

:lmao2: :lmao2: :lmao2: When aren't they sayin' it's a great ime to by? R.E. will bottom sometime between 2008-11. If we're lucky it will bottom next year. I'm not that optimistic though.

There isn't any M&A activity because there isn't any credit. I haven't watched the volume numbers on Wall Street so won't comment. Enuf' to say that the market decline since hitting 14,000 means there are more sellers than buyers. In R.E. what was a 4 month inventory in 2005-06 has grown to a 9 month inventory of exisitng new homes ready for move in.

A great time to buy? Yes, things like gold and other precious metals. Infratructure investments in India and/or China are worth buying. I still like Maple Leaf gold coins. that's about it.

[mwillman]

The glass is full its just belongs to 3% of the people.

The rest of us just hope the powers that be decide that our crumb will be big enough to get us through another christmas.

[moonman]

Sadly mwillman, the banker's Enron accounting practices shouldn't pass the smell test with 3rd quarter earning reports. If they don't disclose the off book partnership losses they won't be believed.

When a bank as large as BOA announces a huge increase in fees primarily at the consumer level, an increase such that they are not competitive in the industry, it is because they aren't making money elsewhere.

The question is wether or not BOA is unique or the other major banks will follow the lead. Since there is no M&A activity and banks aren't lending to each other right now for fear of subprime and commercial paper exposure, banks are left to make money from fees and deposits.

It ain't pretty and I can't stress it enough. For the first time in our lives my bride and I are seriously considering buying some guns and getting trained in how to use a gun. What I am wrestling with is wether I can actually fire a weapon with intent to kill. I'm told by people who know that at the moment of truth, most people, non-military generally decent, law abiding citizens like me, have extreme difficulty pulling the trigger when faced with a potentially life or death situation.

I'm seeing a depression so severe that home invasions and car jackings sky rocket. I hope I am wrong. My heart wishes I am wrong but my brain see's it coming and it is imminent.

[mwillman]

I understand your worries moonman. My main hope is that we survive long enought to get politicians in office that want to start paying debts rather then just spending.

We still have the most powerfull economy in the world we just need to start using it wisely rather then letting politicians and corporations rob us blind.

[moonman]

mwillman, you're touching on our biggest problem. Our policy post WWll has been not to pay debt, with the exceptions of Eisenhower & Clinton Administrations, but to monetize the debt. The consequence of monetization has been to pay back our debt with ever lower valued USD's.

We are now in the very precarious position wherein IIRC 52 cents of every revenue dollar goes to debt service. We aren't paying down; rather we are making interest only payments.

Bush' final budget is expected to provide for over a trillion dollars in defense spending alone. Operation Iraqi Freedom, costing some 12 billion per month according to estimates is all borrwed money as it is an off budget expense. Most leadership candidates are talking about us staying there for a decade or more.

Bush is playing right into Osama's hands. bin Ladin declared that he will bankrupt us, as he did the Soviet Union. Iraq will bankrupt us and I fear we will witness, as the Soviets did, service people in uniform panhandling in our streets as we fail to meet our military payroll.

I wish I could say we can continue to rollover and monetize our debt. Those days are done. We have spent ourselves into bankruptcy. The wiggle room or slack in the rope has been all used up. There is no longer any faith in the full credit fo the USA.

We have accomplished this by following the example of England during the 1st Gilded Age. We have transitioned from an industrial based economy to a mercantilist/service economy. Just as the world lost faith and rejected the pound sterling as the reserve currency. The world is now rejecting the USD as the reserve currency.

Had Bush followed the fiscal integrity of the Clinton Administration we would have had a deeper recession but we would also have avoided the coming depression.