Tony Soprano

Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan

sammyg123

"verge of a black swan event - meaning, and major once in a lifetime terrible financial problem that will have a big tail

I LOVE THIS PAINFUL NEGATIVE STATEMENT -- ITS TIME TO START BUYING. PAINFUL NEGATIVE STATEMENT = PNS – HOWEVER, I DO NOT LOVE PAIN UNLESS SOME GOOD WILL COME OUT OF IT

“The only way out is creative destruction - the companies holding toxic debt must be destroyed.”

MORE ‘PNS’ AND I MUST SAY I REALLY LOVE THE WORD DESTRUCTION, ITS SO PAINFULLY BULLISH. ALSO, I’M BEGINNING TO SENSE A FEELING GLEE IN YOUR DIRE PREDICTIONS. THIS IS “PPNS”, PAINFULLY POWERFUL NEGATIVE STATEMENT

“Other financial institutions will suffer the same, just like the mortgage lenders who closed their doors and sent their employees to the street.”

MORE “PNS”, YOUR PIECE IS BECOMING A LITTLE REDUNDANT BUT I’M GETTING THE POINT

“Meanwhile, low interest rates are putting upward pressure on inflation. Inflation is a problem that is difficult for the fed to contain, and results from tight monetary policy have a long lag time.”

THE SECOND SENTENCE IS A BIT CONFUSING TO ME AND IF YOU DON’T MIND I WILL REPHRASE IT FOR YOU: Inflation will be very serious and very difficult for the Fed to contain. When the Fed does start to fight inflation and tighten monetary policy it will take a great deal of time. Time that we may not be able to afford.

“You can debate this all you like, but there is only one reality, and it is bigger, and worse, than what I have described. There is hope at the end of the tunnel, but we are going to have to live through some tough times here. Perhaps you are lucky, and wealthy, and don't have to worry about it. I really hope so.”

THANKS FOR YOUR CONCERN – I APPRECIATE IT. I HOPE THE BEST FOR YOU AND OUR NATION AS WELL.

In my heart of hearts I feel and know that the Fed is doing the right thing. A serious recession would be very ugly and this is why the Fed will try every tool they have. If a string of banks go under and we dip into a very bad recession unemployment could rise to 10 percent or “God forbid” 20 percent.

This could bankrupt the NATION over time. Deflation can be much more destructive than inflation.

Inflation hawks and dollar hawks all say that the Fed is destroying the NATION. To me what the Fed is doing is the less of two evils. I’m not happy about it.

Jan Hatzius (gs) was asked on Bloomberg, Friday, about the crashing dollar. He said it was normal for the currency of a country to devalue when it’s going into a recession.

Below are two stories about our choices concerning this financial crisis. Basically, its about the two poison pills and which one should we take. They are both fictional. One simple and one complex and from another blog and blogger (NoFate) on this site.

First story:

"Here is an analogy ...your teenager has maxed out their credit cards and is to a point they can no longer make payments. You step in as a co-signer and get the limits on the cards doubled.

Is this the right decision? This is what the Fed did for the banks yesterday. from NoFate

Second Story:

The son does use a credit card but instead of spending it on himself he wants to lend out the money and become loan shark. His idea is to lend out as much money that he can. In the mean time people that he is lending out to all live on an island. The island depends on a dike system to keep the island from going underwater. The dikes take an enormous amount of power to run. The islanders are taxed a lot to keep the power going..

The loan business is slow starting and the son wants it to grow much faster. His rich daddy is still backing him up and thinks his son is remarkable. The son's new business plan offers loan owners interest in a new waterfront country club if they barrow more. They see it as a steal and it makes them feel rich so they barrow more. His new business plan is a success for many years. The new country club is well under construction. Most of the people on the island are happy and think they have it made. The son pockets a good deal of wealth but he always wants more and more.

As more time passes, the cost of the power to run the dikes starts to increase rapidly. Sadly some of the islanders become sick. The doctors on the island suspect the Avian virus. Some even die and others cannot work. Unemployment starts to rise dramatically and the power for the dikes continues to rise.

Not all of the islanders owe money to the son. Many are still wealthy and never liked what the son has done and they are very much concerned about the rising cost to power for the dikes. More time passes and construction cost for the country club increases as well. Construction on the project starts to slow down. Many on the island start to become angry.

Taxes receipts to pay for the power for the dikes starts to diminish. Some of the islanders want to raise taxes to pay for the power. The islanders that are sick are not paying taxes. A meeting is called. The meeting is a failure and the son goes into hiding. However, the islanders come up with another plan but still many on the island do not like the newer plan as well.

The newer plan requires the islanders to barrow more money but from the mainland. The wealthy on the island do not like this plan because it will require them to pay more taxes in the future. However, some of the middle class people on the island become restless and crime increases.

The islanders are at a serious crossroad. Damned if they do and damned if they don’t. Many on the island say the island will sink completely underwater if new monies are not borrowed. Others do not agree and feel the island will be fine without the additional debt.

I will let your imagination do the rest.

Tony Soprano