Scary Records
Today’s market left some ugly records. The Journal chronicles the moment on the trading floors this afternoon.
The late-day implosion probably sparked more than a few corner-office types storming onto the trading floor and shouting to nobody in particular, “What the hell just happened?” The collapse of major financial stocks — Citigroup finished down 23.4% — served as one catalyst, along with massive widening in credit-default-swap spreads, an indication that the credit markets have bugged out again.
The legendary investor Doug Kass says that the 30-year return for BBB-rated corporate bonds is now greater than the 30-year return for stocks. So it has not paid to take equity risk for 30 years! Doug also says the S&P has not been this far below its 200-day moving average since the Great Depression. As I have been warning, the overcapacity in the malls is going to shake out badly in the next 60 days.
The hardest-hit market on Wednesday was for debt tied to shopping malls and other commercial property. The value of bonds tied to such property hit new lows, pulling down shares of real-estate investment trusts, banks and insurance companies that own these securities. Bonds issued by Fannie Mae and Freddie Mac also weakened. Yields on their two-year notes, which move in the opposite direction of prices, rose to around 1.8 percentage point above yields on Treasury securities — a wider gap than before both companies were taken over by the government in September.
Can we make it to January 20th? The specter of deflation hangs over the whole economy. This country needs to get some serious fiscal stimulus going on the infrastructure front and put some people back to work. Barack should announce that he is giving the Rebuild America Portfolio to Joe Biden to run. Biden knows how to talk to both the county commissioner of roads and the union boss. Biden can also take the project selection out of the hands of the lobbyists and their earmarker comrades in Congress. David Leonhardt points out the current system of deciding where infrastructure money gets spent is broken.
It’s hard to exaggerate how scattershot the current system is. Government agencies usually don’t even have to do a rigorous analysis of a project or how it would affect traffic and the environment, relative to its cost and to the alternatives — before deciding whether to proceed. In one recent survey of local officials, almost 80 percent said they had based their decisions largely on politics, while fewer than 20 percent cited a project’s potential benefits.
There are monuments to the resulting waste all over the country: the little-traveled Bud Shuster Highway in western Pennsylvania; new highways in suburban St. Louis and suburban Maryland that won’t alleviate traffic; all the fancy government-subsidized sports stadiums that have replaced perfectly good existing stadiums. These are the Bridges to (Almost) Nowhere that actually got built.
Here’s how the Democrats get everyone hopeful over Christmas (enough to spend a little money at the mall). Barack and Joe should hold a press conference on Tuesday of next week, just before folks get on an airplane for Thanksgiving. With Pelosi and Reed at their side, they should announce with that they will convene the new session of Congress on January 3, 2009 to begin debating the Rebuild America Act of 2009. The bill will allow the government to invest $500 Billion in 2009 into infrastructure projects which would be funded half as block grants to the states on a per capita basis and half to large federal projects like rebuilding the high voltage electricity grid. Obama and the Congressional leaders would commit to have the bill passed by Inauguration Day and that Barack would sign it as he walks into the Oval Office for the first time as President, on the afternoon of January 20th. Republicans who oppose it over Christmas, would do so at their own peril.
Not even Mr. Buffett gets off easy. That, along with your prior post on GM’s ad costs, is breath-taking.
Not even Mr. Buffett gets off easy. That, along with your prior post on GM’s ad costs, is breath-taking.
I’m all for it as long as Alaska doesn’t get one thin dime.
I’m all for it as long as Alaska doesn’t get one thin dime.
Wow….1/20.09…..the new messiah and with it the parting of the waters….wow , what a great time to be alive. I actually bought BofA , FSLR, and GOOG because I’m so intoxicated by his prospects.
Wow….1/20.09…..the new messiah and with it the parting of the waters….wow , what a great time to be alive. I actually bought BofA , FSLR, and GOOG because I’m so intoxicated by his prospects.
Wow….1/20.09…..the new messiah and with it the parting of the waters….wow , what a great time to be alive. I actually bought BofA , FSLR, and GOOG today because I’m so intoxicated by his prospects.
Wow….1/20.09…..the new messiah and with it the parting of the waters….wow , what a great time to be alive. I actually bought BofA , FSLR, and GOOG today because I’m so intoxicated by his prospects.
I’ve been re-reading Nassim Nicholas Taleb’s book “Fooled by Randomness”. Taleb called bulls**t on the market, hedge funds, economists, leveraged investments, and investment talking heads back in ’04.
Taleb points out that the future is essentially unknowable and completely unpredictable. However, we humans have a tendency to assume a generally linear progression of events unfolding. His classic metaphor is the black swan. Europeans assumed all swans were white. When Australia was populated by the Europeans, black swans were discovered and everyone’s cognitive model had to be re-set. In the case of the black swan, this really isn’t randomness at work, but rather reasoning (or assumption making) without access to the full data set. We humans tend to look to history as a guide to how the future might be.
So now everyone is looking back to the Depression and the path that Roosevelt took to heal the country. We assume that if infrastructure spending worked before it will work again. This is the only model we have to compare against and to reason about the reality we are facing.
But the reality is that this time, things may be different. Obama and Biden can open up the spending spiggot, try to smooth shattered nerves, and build some infrastructure–and it might work. It also might have little or no impact. Personally I’m hoping for the former, but I’m also not deluding myself into thinking that everything will magically turn out fine. We could be heading for a catastrophic system failure.
Let’s take the economy as a system with a multitude of complex, interacting parts. It’s REALLY complex. So complex that no one actually seems to know how the thing really works. Systems are generally stable, but they oscillate. Sometimes things go well, and sometimes they go not so well, but generally the system is able to self-adjust. Every so often, some phenomena in the system sets off a chain of events that cause exponential behaviors to occure (in growth or decline). This applies to political fortunes, economies, ecosystems, weather, etc.
As much as I’m happy about Obama’s election, I think he would likely have lost to McCain if the economy hadn’t tanked. In hindsight, Obama’s election seems almost inevitable, but the rare event of the crash was likely the real reason for his win. Don’t get me wrong. I am in no way belittling Obama’s massive preparation, hard work, and accomplishments.
That’s enough rambling. Let me reiterate that I’m hoping for the best, but also trying to equip myself mentally for a potential world of hurt, economic destruction, and a very different world on the other side of this mess. I hope I’m VERY wrong.
I’ve been re-reading Nassim Nicholas Taleb’s book “Fooled by Randomness”. Taleb called bulls**t on the market, hedge funds, economists, leveraged investments, and investment talking heads back in ’04.
Taleb points out that the future is essentially unknowable and completely unpredictable. However, we humans have a tendency to assume a generally linear progression of events unfolding. His classic metaphor is the black swan. Europeans assumed all swans were white. When Australia was populated by the Europeans, black swans were discovered and everyone’s cognitive model had to be re-set. In the case of the black swan, this really isn’t randomness at work, but rather reasoning (or assumption making) without access to the full data set. We humans tend to look to history as a guide to how the future might be.
So now everyone is looking back to the Depression and the path that Roosevelt took to heal the country. We assume that if infrastructure spending worked before it will work again. This is the only model we have to compare against and to reason about the reality we are facing.
But the reality is that this time, things may be different. Obama and Biden can open up the spending spiggot, try to smooth shattered nerves, and build some infrastructure–and it might work. It also might have little or no impact. Personally I’m hoping for the former, but I’m also not deluding myself into thinking that everything will magically turn out fine. We could be heading for a catastrophic system failure.
Let’s take the economy as a system with a multitude of complex, interacting parts. It’s REALLY complex. So complex that no one actually seems to know how the thing really works. Systems are generally stable, but they oscillate. Sometimes things go well, and sometimes they go not so well, but generally the system is able to self-adjust. Every so often, some phenomena in the system sets off a chain of events that cause exponential behaviors to occure (in growth or decline). This applies to political fortunes, economies, ecosystems, weather, etc.
As much as I’m happy about Obama’s election, I think he would likely have lost to McCain if the economy hadn’t tanked. In hindsight, Obama’s election seems almost inevitable, but the rare event of the crash was likely the real reason for his win. Don’t get me wrong. I am in no way belittling Obama’s massive preparation, hard work, and accomplishments.
That’s enough rambling. Let me reiterate that I’m hoping for the best, but also trying to equip myself mentally for a potential world of hurt, economic destruction, and a very different world on the other side of this mess. I hope I’m VERY wrong.
Other than getting opponents disqualified, what accomplishments? Hope for change and change for hope. What is a recycled Clinton administration a part of hope or change? Does anyone else feel a little snookered by a smooth talking grifter?
Other than getting opponents disqualified, what accomplishments? Hope for change and change for hope. What is a recycled Clinton administration a part of hope or change? Does anyone else feel a little snookered by a smooth talking grifter?
Accomplishments in life, in politics, in organizing his campaign, in his poise, in his rhetoric, in teaching, in organizing.
On the one hand, Obama has clearly worked and prepared very hard and very well. On the other, so have a lot of people out there. However as Taleb points out, randomness is unfair in the distribution of rewards. There is usually a winner-takes-all result. Look at all the software companies out there. Only one Microsoft & Google.
Just look at the Bush administration (although in that case the loser took everything). :-O
Accomplishments in life, in politics, in organizing his campaign, in his poise, in his rhetoric, in teaching, in organizing.
On the one hand, Obama has clearly worked and prepared very hard and very well. On the other, so have a lot of people out there. However as Taleb points out, randomness is unfair in the distribution of rewards. There is usually a winner-takes-all result. Look at all the software companies out there. Only one Microsoft & Google.
Just look at the Bush administration (although in that case the loser took everything). :-O
Billy-Bob, the damned infrastructure needs rebuilding whether or not the economy is in the toilet. Without rebuilding, we’re really fooked. Remember that nice bridge collapse? Well, do some research on the state of hundreds of other bridges in the country. Not good. Think about rolling blackouts in California. Not good. You want to see the economy really go into the toilet? Let the US deteriorate into 3rd world infrastructure. We simply don’t have a choice on that stuff. It may help the economy, and it can’t really hurt to have better roads, bridges, electric wires, etc. Don’t do it, and we’re guaranteed a couple of generations of hurt.
Billy-Bob, the damned infrastructure needs rebuilding whether or not the economy is in the toilet. Without rebuilding, we’re really fooked. Remember that nice bridge collapse? Well, do some research on the state of hundreds of other bridges in the country. Not good. Think about rolling blackouts in California. Not good. You want to see the economy really go into the toilet? Let the US deteriorate into 3rd world infrastructure. We simply don’t have a choice on that stuff. It may help the economy, and it can’t really hurt to have better roads, bridges, electric wires, etc. Don’t do it, and we’re guaranteed a couple of generations of hurt.
I never said don’t spend an re-build. Spend away. What the hell, we’re already so cluster-f***’d it couldn’t hurt. It might even help. The home infrastructure definitely needs it. We need a clean energy industry for sure.
We must immediately stop the spend in Iraq AND Afghanistan and build the infrastructure here. Billions on the table daily for the boom-boom. What a shite-pool, criminal gang BushCo is.
I never said don’t spend an re-build. Spend away. What the hell, we’re already so cluster-f***’d it couldn’t hurt. It might even help. The home infrastructure definitely needs it. We need a clean energy industry for sure.
We must immediately stop the spend in Iraq AND Afghanistan and build the infrastructure here. Billions on the table daily for the boom-boom. What a shite-pool, criminal gang BushCo is.
OK, we’re on the same page, BB.
OK, we’re on the same page, BB.
Congress needs to bail out the auto companies now–the economy can’t take their destruction–the dems have it in their power to release the $25 billion already approved for fuel improvements for general corporate purposes which Bush has said that he will approve but they have so far blocked that in some crazy poker game–if the autos go down it will be on the democrats hands
Congress needs to bail out the auto companies now–the economy can’t take their destruction–the dems have it in their power to release the $25 billion already approved for fuel improvements for general corporate purposes which Bush has said that he will approve but they have so far blocked that in some crazy poker game–if the autos go down it will be on the democrats hands
If the autos go down, it will be because the execs of the big three guided their companies right down the toilet from the comfort of their private jets, and the electorate knows that. We’ve already voted on that with our collective pocketbooks. They won’t be able to give those guzzlers away, even if gas drops below $2.00 a gallon because everyone knows that gas will be back up to $4.00 before you know it.
If the autos go down, it will be because the execs of the big three guided their companies right down the toilet from the comfort of their private jets, and the electorate knows that. We’ve already voted on that with our collective pocketbooks. They won’t be able to give those guzzlers away, even if gas drops below $2.00 a gallon because everyone knows that gas will be back up to $4.00 before you know it.
FYI, gas is below $2/gal here in Burky. Do I think that’s a good thing? No. Except that it says something about a lot less consumption (of both gas and stuff). Do I think it’s gonna last? No (once again I am in violent agreement with Rick Turner).
If the $25 billion is targeted for fuel improvements and the .gov decides to give it to the Big 3 it should be under the condition that they do not produce another car that gets less than 25 mpg and that 30% (does that seem reasonable) get more than that and that trucks and SUVs are marketed (if they’re marketed at all) for work (I live in New Mexico, there are ranches, there are people with horses and horse trailers, we need trucks), not as commuters, mommy mobiles, and toys and produced in proportions that support only work-oriented demand levels.
Oh yeah, and no more bucks for lobbyists and corporate jets (or big fancy holiday parties, or spa retreats, or…). And the oversight to cut them off at the…knees if they put one toe out of line. This will not happen, so just don’t give them the money. In all the news I watched yesterday (which wasn’t much, I’m trying to keep on the sunny side) I didn’t hear one word about oversight of the Big 3 if they got the money.
FYI, gas is below $2/gal here in Burky. Do I think that’s a good thing? No. Except that it says something about a lot less consumption (of both gas and stuff). Do I think it’s gonna last? No (once again I am in violent agreement with Rick Turner).
If the $25 billion is targeted for fuel improvements and the .gov decides to give it to the Big 3 it should be under the condition that they do not produce another car that gets less than 25 mpg and that 30% (does that seem reasonable) get more than that and that trucks and SUVs are marketed (if they’re marketed at all) for work (I live in New Mexico, there are ranches, there are people with horses and horse trailers, we need trucks), not as commuters, mommy mobiles, and toys and produced in proportions that support only work-oriented demand levels.
Oh yeah, and no more bucks for lobbyists and corporate jets (or big fancy holiday parties, or spa retreats, or…). And the oversight to cut them off at the…knees if they put one toe out of line. This will not happen, so just don’t give them the money. In all the news I watched yesterday (which wasn’t much, I’m trying to keep on the sunny side) I didn’t hear one word about oversight of the Big 3 if they got the money.
If we hand the big three the $25 billion they’re crying for, here is what will happen:
Step 1: Massive bonuses paid out to departing executives.
Step 2: They file for Chapter 11.
If we hand the big three the $25 billion they’re crying for, here is what will happen:
Step 1: Massive bonuses paid out to departing executives.
Step 2: They file for Chapter 11.
If we hand the big three the $25 billion they’re crying for, here is what will happen:
Step 1: Massive bonuses paid out to departing executives.
Step 2: They file for Chapter 11.
If we hand the big three the $25 billion they’re crying for, here is what will happen:
Step 1: Massive bonuses paid out to departing executives.
Step 2: They file for Chapter 11.
An auto industry bailout is looking to be a necessary boondoggle. I read the 1 in 12 jobs in America can be tied to the auto industry in some way. . . thus letting that sector tank could ripple badly.
On the other hand, while foreign car leaders spent the last twenty years building more efficient cars and planning for shift off gas; American companies fought improved mpg standards and cleaner emissions and didn’t try to research for the future.
They don’t deserve to be rewarded for refusing to evolve, but what kind of ripple will it create in the advertising and manufacturing sectors.
An auto industry bailout is looking to be a necessary boondoggle. I read the 1 in 12 jobs in America can be tied to the auto industry in some way. . . thus letting that sector tank could ripple badly.
On the other hand, while foreign car leaders spent the last twenty years building more efficient cars and planning for shift off gas; American companies fought improved mpg standards and cleaner emissions and didn’t try to research for the future.
They don’t deserve to be rewarded for refusing to evolve, but what kind of ripple will it create in the advertising and manufacturing sectors.
Gonna sound like I’m in the back seat singing 99 bottles of beer, but…
Chapter 11 first
Business plans that look viable second
Then loans with plenty of hooks favoring the lending body (as in “we the people”).
Anybody who says this will take too much time isn’t paying attention to how well rushing money to the Financial Asylums (I’m hesitant to call them Institutions any more without clarifying the type) has worked to date.
We’re hosed if we act slow. We’re potentially hosed even deeper and harder if we act precipitously. That would seem to argue for slower.
Gonna sound like I’m in the back seat singing 99 bottles of beer, but…
Chapter 11 first
Business plans that look viable second
Then loans with plenty of hooks favoring the lending body (as in “we the people”).
Anybody who says this will take too much time isn’t paying attention to how well rushing money to the Financial Asylums (I’m hesitant to call them Institutions any more without clarifying the type) has worked to date.
We’re hosed if we act slow. We’re potentially hosed even deeper and harder if we act precipitously. That would seem to argue for slower.
Gonna sound like I’m in the back seat singing 99 bottles of beer, but…
Chapter 11 first
Business plans that look viable second
Then loans with plenty of hooks favoring the lending body (as in “we the people”).
Anybody who says this will take too much time isn’t paying attention to how well rushing money to the Financial Asylums (I’m hesitant to call them Institutions any more without clarifying the type) has worked to date.
We’re hosed if we act slow. We’re potentially hosed even deeper and harder if we act precipitously. That would seem to argue for slower.
Gonna sound like I’m in the back seat singing 99 bottles of beer, but…
Chapter 11 first
Business plans that look viable second
Then loans with plenty of hooks favoring the lending body (as in “we the people”).
Anybody who says this will take too much time isn’t paying attention to how well rushing money to the Financial Asylums (I’m hesitant to call them Institutions any more without clarifying the type) has worked to date.
We’re hosed if we act slow. We’re potentially hosed even deeper and harder if we act precipitously. That would seem to argue for slower.