VP of Common Sense

10 Reasons Why We Still Haven't Hit Bottom

Ok, serious question for those that see this as a simple bear rally: what would you need to see to be convinced otherwise?

10 Reasons Why We Still Haven't Hit Bottom

mac.barron

The inflation of corporate titles is real! I actually work in the mailroom.

You can create doomsday senarios for anything, and the impact on the economy/markets/whatever will of course be negative.

China won't dump our debt because they need us. They probably hate our guts, but since they pegged the yuan and their economy is a house of mirrors that depends on a nation 1/4 their size, I really don't care.

Unemployment is a valid economic indicator, but peaks in unemployment do not generally line up with equity troughs.

As far as derivitives go, frankly, I think you are guessing.

Added Debt Won't Rescue the Great American Ponzi Scheme

According to the OCED numbers our debt load is about 9th of 30 relative to GDP, and before someone says "but look at the total amount", income is generally considered relevant to how much one is allowed to borrow. Regardless, it appears that 50% more government debt will not lead immediately to anarchy.

Otherwise, yes we have overspent. Yes, we will need to pay it back. But no, I don't believe there is any reason to take advantage of the credit bubble bursting to intentionally collapse the economy for some so-called moral reason. If that's what you believe, why are you on the internet? You should be hard at work on that bunker in the backyard with the spam, water and ammo. You also should have no debt and no investments other than gold. If that is not the case then you unfortunately NEED our wretched immoral economy to stagger onward until you're free and clear.

Our government services are about what one should expect given the relatively low tax rates that we have. In order for health care, infrastructure, education, debt reduction etc. We are going to need to cut spending as soon as possible (war, space program, no-bid government contractors, etc.) and increase taxes. I have more friends than I can count from europe, asia, and canada, tax rates are very much related to services. If you have traveled the world, made friends with the natives, talked to them about their services and tax rates, and still believe otherwise, please share. If you're a GWBush-esque american with no passport who simply doesn't like paying taxes, put a sock in it.

Our gas tax is a joke, as are our cigarette/alcohol taxes in most of the USA. Want better roads and lower medicare/medicaid costs? DUH! Health care related tort reform wouldn't hurt either. Some say a higher gas tax would unfairly target the poor, whereas I think the poor should be driving eight year old civics and corrollas.

The article claims: "In the aggregate, the same is true for Western economies. Their debt loads are now so huge, they are simply unpayable." The author did a much better job explaining Madoff's scheme than giving any explanation of exactly how the western world's debt load is unpayable. And then 25 people post something to the effect of "hear hear, you da man!". Every day on this site an article (or articles) is posted with massive leaps of faith in between the facts and the conclusions. THINK! Find those holes, make people explain them. The alternatives to not thinking are pretty simple: pollyanna optimism or bunker/ammo/spam pessimism.

10 Reasons Why We Still Haven't Hit Bottom

1. The Alt-A etc. problem is fading. Sure there are more out there but there were triple the recasts in 2008 as there will be in 2010. Plus I think we are ALL aware of this issue at this time, it's "baked into the cake".

2. Credit card defaults are also baked it, and frankly not much of a problem compared the RMBS and CMBS. My wife and I have no credit card debt, she has a card that charges 35% interest if we did, I'd say those supplying that credit have something of a cushion.

3. Unemployment is a symptom, not the disease. And yeah, we are aware of that one too.

4. China: So? Hold on, you say if we print more money our currency devalues, no way!

5. Oil prices will go back up with demand, supply is not currently a problem. Even a 3MM barrell a day "interruption" would not be a big deal right now. At the peak a 0.5MM interruption out of Nigeria frequently moved the market $5-10, now it doesn't even make the news.

6. All the derivitives are not going to blow up. Consider the government is simply not allowing banks with significant counterparty risk to fail right now.

I know I've struck a sarcastic tone, but the six points mentioned below are very old news at this point. For the bears out there, show me something new! The biggest thing I see is setting the pricing side of the equation in motion for selling RMBS and CMBS at this point. Just because there's a plan to buy doesn't explain why anyone would want to sell.

On Mar 22 09:26 PM mac.barron wrote:

> If you think that the market is at or near the bottom right now please
> explain how each the following situations are going to be worked
> out:
>
> Alt-A and Option AR Mortgages are still causing the housing market
> to correct and that process still has another few years to play out.
> Government Programs do not seem to be "helping" even the so-called
> "responsible" home owners.
>
> Credit card defaults are about to start to cream the consumer sector
> financial industry this year
>
> Unemployment continues to rage.
>
> China itself is calling the viability of U.S. Treasuries into question.
>
>
> Oil prices are edging up and will explode if any interruption to
> supply occurs.
>
> Add to all of that the reality that the about eight trillion dollars
> worth of derivatives (mainly credit default swaps) seem likely to
> still blow up. Even after U.S. taxpayers pumped two trillion dollars
> into the banking system the shortfall against those potential derivative
> losses is over four trillion dollars.

AIG Bonuses: The Tipping Point Toward Decisive Action?

Well, except for Bush also was responsible for most of AIG's bailout. Other than that you're on point.


On Mar 19 12:07 AM William Cowie wrote:

> Bush had his Iraq War. Obama now has AIG.
>
> Let us count the similarities:
> Expensive (has anybody compared the dollar cost of the two exercises?)
>
> Politically unpopular (am I the master at understatement, or what?)
>
> Led by the nose by so-called experts
> Oblivious to unintended consequences
> Over promised, under delivered
> Establishing new benchmarks of Big Government's inability to pull
> anything off
> No way to win the thing
>
> Please feel free to add to the list...

AIG Bonuses: The Tipping Point Toward Decisive Action?

If you believe Liddy:

The bonuses in question were agreed to to retain the employees until AIG's highly leveraged ($2.7 trillion) positions could be wound down (currently $1.8 trillion). That's all. These bonuses are not for performance or anything like it, which we can all agree was sorely lacking.

The only question in my mind was: was $165MM necessary? Would $25MM have cut it? Where exactly where were these people going to go? Otherwise I don't have much of a problem with the concept. They thought they needed them to stay, they promised them money to stay, and they stayed. How is that wrong?

What really happened here is the management at AIG failed to set the bar high enough.

Ashamed of AIG

Ahhh AIG, good times all around, eh? Feel free to correct me where I am wrong, because I would love to know what is really going on.

So as I understand it the personal insurance business (life, annuities, etc.) was unrelated to division that insured CDO's, CDS's and the like. So here we are with a personal insurance division that is more or less thriving, and a London based derivitives division that is hemoragging many many billions.

The outrage is because the majority of the disputed bonus money is to go to the derivitives division that is responsible for the giant turd in the punch bowel.

The only reason not to cut these folks loose is all the asset swaps need to be executed. Supposedly even some fully "in the money" assets have been paid off. Which makes me wonder: why are these people being paid again?

Anyway the reason behind paying people money is to get something you (or I) want, right? I would renegotiate the bonuses so that they get paid based on how much of the governments initial outlay is recouped. Sure they may not see any money for three years, but at this point where are they going to go? I can assure you that less than 10 people employed by the company I work for make >$1MM, and the company has annual revenues of about $8B.

Federal Reserve Buys AIG

I'm with Capricorn, at least we bought something. The insurance side of the business throws off $6-20 billion a year. Sell off everything else to pay back as much as possible of the initial investment, spin off and fold the CDO side of the business as a total loss, and IPO the insurance business. With any luck WE might even break even... Well, maybe not, but here's to optimism!