Asbytec

The Coming Consequences of Banking Fraud

Warm Paw, I'd argue the housing crisis was the trigger, not necessarily the root cause or the problem, setting our over extended financial system into a tail spin. Being over extended, making too much money than can be supported by our economy or consumer debt, is the problem.

Too much synthetic liquidity floating around the globe fueling unsustainable growth, especially in China. Now that the liquidity bubble has burst, we are in real trouble. The central banks simply cannot reinflate to keep up with the deflation.

I am not really a conspiracy theorist, but there does seem to be some collusion between the powerful people in the world to save the banking system. It is a source of great wealth for the oligarchs, as long as folks are employed and pay off their debt. Now that the worker can't pay off debt because of high interest rates or unemployment, the money well dries up fast, doesn't it? That's because the wealth effect is nothing like real wealth. With real wealth, the consumer doesn't need to borrow from those who really are wealthy.

Right on, Jason...I am proud of our constitution and declaration of independence. The Federal reserve act is unconstitutional, in my view. So is a fiat dollar.

A Bear in Bull's Clothing: We're Not Buying This Rally

Good on ya, old trader! :) It is an interesting gold/dollar correlation. I keep reading gold will be near $1300 by year's end. Or did I read it was set for a fall? I think I read both...about gold and the dollar.

Yea, guys, I suspect the credit markets are key. You can track all the green shoots you wish, but the financial sector is still stagnate. Once they start functioning, however, look out for inflation and a sustainable rally maybe back to 14000 rather rapidly. I'm an L shaped recovery guy, but having second thoughts.

The real question for me is what then? I am still dollar bullish as we begin to recover. I am sure excess liquidity will be rapidly mopped up...and 4 to 6 months before a EU recovery.

Someone mentioned oil. Yes, probably a good bet oil will boom within 6 months...peak oil, increased demand, etc. Gold? Anyone know for sure? I'm not sure, yet, why it fell.

Mutual Fund, 8000 a bottom? Maybe. It appears to be the top end of a forming flat formation...we'll bounce between 7-8000 until the bull market takes hold longer term.

So, technically, you could be right. We'll love the price at 7000 then think it's overbought at 8000, especially when some billionaire get's on Bloomberg. Meanwhile, the dollar, gold, oil, and everything else will bounce around, too.

Speaking of oil, again, what's more confusing? Reading reserves are up and seeing oil drop in price as the dollar rallies or reading demand is expected to increase while the market rallies and OPEC cuts production during a dollar sell off? LOL It's gotta be speculation...someone looking for black gold. Probably not a bad bet.

A Bear in Bull's Clothing: We're Not Buying This Rally

While I agree the fundamentals are far from sound, I don't think buying into this rally was a mistake. It may well end soon and we might realize some losses. But, the price was good, if you're in long.

The price might even get better in time. If anything kills this rally, it might be that prices are not so attractive...based on the above argument and other data.

What's up with gold? Is it the anti equity or the anti dollar?

Preview from Europe: Market Futures Bounce

Yea, stunning rally based on Obama's take on what's beginning to show signs of improvement: financial markets, housing, and the list goes on. But, wait till the short sellers take theirs. I dunno, still digesting this whole thing. The fundamentals are still out of whack, but good news coming out of Washington.

I am pleased Obama is ensuring the rest of he G20 will follow suit. This means the dollar might not tank as badly as it should.

10 Reasons Why We Still Haven't Hit Bottom

The author makes some good points. Quite a few things seem not to be acting the way they should. We should have been inflating or be inflating shortly, yet we may not see inflation in the mid term. Maybe not until next year. The dollar should have tanked, and did only a bit. Such things show we're a long way from being back to normal, much less hit bottom or recovering.

10 Reasons Why We Still Haven't Hit Bottom

The author makes some good points. Quite a few things seem not to be acting the way they should. We should be inflating shortly, yet we may not see inflation in the mid term. The dollar should have tanked, and did only a bit. Such things show we're a long way from being back to normal, much less hit bottom or recovering.

CDS: The Sabotaging Asset

Bigmoney, I guess he did, or implied it. He's been doing it, it's just the guys on the roof have been netting the cash. Us in the street, well...

Yes, we are in a precarious situation with respect to hyperinflation. All that is true. There is no need to argue that belated point.

Truth is, Bernie has been the only person acting (rightly or wrongly) in the last year or so. Bush cobbled together a stimulus plan and the Treasury gave our tax money to AIG. Congress failed to act on the GSE problem 18 months ago when Bernie told them of the storm on the horizon. But, beside that, Bernie has had to run our ship aground to keep it from sinking. I understand this...hate it...but understand it.

So, as a result, the current market correction was allowed to take hold. It hurts, but it's needed. This is about the only thing I can thank Bush and McCain for. But, now that's it's taken hold, someone needs to pull back on the yoke and get the nose up.

Obama might have more of a spending plan that a stimulus plan. But, personally, I am pleased he is putting money toward jobs and not toward saving the house of cards built on the "bad money" everyone is talking about.

Ok, so he is throwing some good money after bad, but nothing like the Bush Treasury...which went entirely after bad money. Unfortunately, saving AIG means saving all the instruments tied up in them, such as a plethora of hedged insurance policies and even many retirement packages...all losing money due to entangled spider web of CDSs.

Bernie and his actions mostly were to free up the financial markets. The stock market rallied, then fell. Obama, we'll, he really doesn't care about the stock market. He's not taking action to cause a two day rally.

In fact, as has been duly noted, stocks are off. So what. Build some bridges, educate some kids, actually produce something, and the market will take care of itself. This is gonna be long term stuff, more sound economic fundamentals...not the quick buck, profit taking based on the value of paper.

The house of cards it tumbling. We need to rebuild a solid foundation before we can see real gains in wealth, again. And, in doing so, the dollar will take care of itself, despite QE and zero interest rates. And we'll probably beat the EU to the punch.

The Risk Biggest Source: Government

Biggest Risk Source: unregulated AIG Financial Products Division. Any questions?

CDS: The Sabotaging Asset

To hear it from Bernanke, CDSs are ground zero for the current crisis...in AIG's financial products division...in London. It made him angry, me too...

I must say, I agree mostly. Gotta pay those out beeatches. Can't loan any, just yet. They're screwed and we're screwed.

So, what do we do, bail them out or help folks keep their (overpriced) homes? I say, the latter.

Mortgage Cramdowns: A Disaster in the Making

Well, Bosun, I am with you on this one. I am for anything that stands a chance of stabilizing home prices. That being said, free markets are a good thing, too. So, if prices stabilize...let them float naturally, again. Yea, a close eye needs to be held on this development.

Stable home prices should help thwart the fall into deflation. That is, if banks begin lending and jobless claims curtail. That's a tall order, but without some measure of stability the housing market can fall much farther. The ends justify the means in this case...at least temporarily.

Preview from Europe: All Eyes on Non-Farm Payrolls

Vne? Hardly. Vfe...carb heat on...flaps 30 and power to idle. Oh, and nose up, too.

The Difference Between TARP and TALF

Can I still get in on a CDS that guarantees me a return if Paulson turns out to be a nice guy? I'd like to bet against it.

If I understand correctly, it sounds like he's trying to short circuit the CDS failures so banks won't have to pay on bets against consumer default? What about paying out on bets they will not default? Is he ensuring someone will still have to pay? This is getting confusing.

My understanding is the banks are weighed down heavily by debt they already owe. The banking system should never engage in insurance functions and gambling. I hope the act of congress approving such activity is repealed and burned.

Man, this is a mess. Maybe another great depression is just what we need to reboot our economy.

The Sun Is Shining on Wall Street

Well, one more thought...a little off topic, I guess. Some have hit on American consumer spending habits. Let me tell you, no consumer will ever become wealthy spending someone else's money.

Sure, we need credit markets. Business needs investment capitol, etc. And the consumer probably needs a home mortgage and an auto loan, but that's about it.

If one is employed, one can certainly pay cash for a bag of groceries. Unless, of course, most of our paycheck is paying debt before we get a chance to rub the money between our fingers and kiss it good bye.

If one is not strapped with life long income loss, then one can afford a 40" LCD HD flat screen by saving for a month or two. Meanwhile that 29inch TV will tide us over as it did for e last 6 years. One could save to pay cash for a car in a year or so while we get the most out of our old one.

And I said life long debt. Once we pay down one loan, we'll just "feel" wealthy and borrow more. This is the trap. This is wealth redistribution done the 'free market' way, I guess...from our pockets to theirs. Less credit and more saving reverses that flow into your pocket.

I am happy to be truly free of all debt. Banks pay me interest on my own money instead of the other way around. It's a good feeling more folks should know. So, when Paulson wants to get back to business as usual and open up the jammed credit markets, I fear for the consumer. I fear for our nation.

The Sun Is Shining on Wall Street

Prudent, Henry Ford could not build a car, either. But, he gathered those around him who could. Whether or not you appreciate Obama's team, the idea is he doesn't have to have the solutions. But, he must understand the problem and recognize the proper course of action.

Smarty, cutting, taxing, spending, whatever...wouldn't you agree job one is to tighten up on the problem that got us into this bubble in the first place? And don't say failed mortgages, the problem is much deeper. We need to regulate the derivative markets and get excessive credit spending under control. Well, after we begin to get the economic nose above the horizon. My biggest fear is, and I hear Paulson say this, we need the credit markets to flow again...prosperity on the backs of American debt is what he means, I think.

Gemonk, it seems, just the mere mention of Obama's name can rally the markets. I am a Ron Paul guy, too, but I'll certainly give Obama a chance. He offers a little of that Camelot feeling, again.

Smarty, some of the loan was used for a down a Hummer, I bet. Sure, the equity is in your home, but you still must borrow the money from someone else. That's just heavy debt. Maybe every 7 years we ought to forgive debt, too, as Fellow Americans. Naa...

Moon, I share your disgust. As I understand it, banks are strictly forbidden to engage in insurance, in the spreading of risk. In order to get those MBSs off their books and build liquidity, they had to guarantee the drivative to investors. The banks had to retain the risk.

Yes, they should have been let to fail. It is rhetorical. Our economy would have gone into a flat spin, for sure. But, it's the system that's broke. Too much money was being made and everyone looked the other way. I pray Obama will not work to get us back to that failed system. However, we must move smoothly from a failed way of doing business to a better one.

Enough for today...

Do Paulson and Bernanke Really Understand What's Going On?

I was so angry when I posted I forgot to complement the author on an interesting take on the crisis. I came back to re read it.

I just haven't bought into the solvency argument. I see it as a liquidity problem. Money created through mortgage backed derivatives is now fast disappearing. Most of the money floating around the world is fiat money. Imagine if the entire derivative market failed.

I get the feeling Paulson wants to buy up he bad debt to pump money into the banking system so we can continue down the road of excess consumption. Get back to business as usual. I think that's a mistake to rebuild the house of cards.

The "alternative" Paulson speaks about is depression. I think congress understands this but just won't use the "D" word.