SWRichmond

197 Comments

    • Nation's Debt: It's Not Being Rescued, It's Being Moved Around [view article]
      "Nation's Debt: It's Not Being Rescued, It's Being Moved Around"

      Yes, and everyone is behaving as if it is possible to print capital. Maybe it's wishful thinking.       Oct 10 09:47 AM
    • On a Return to Normalcy: Dow 8,500 [view article]
      Good analysis. I agree that P/E must normalize; the stock market hasn't made any sense to me since 1987. I'm not buying until the fiscal / sovereign funding / currency issue clears. We'll see a bottom then, and not until then.

      Opinions like yours (which I share) have been ridiculed for years by the majority of the 30- and 40-something investor class who believed they were stock market geniuses but really were riding the wind, and are now reaping the whirlwind.       Oct 10 09:19 AM
    • Who We Should Blame for This Crisis [view article]
      Public education:

      - for least-common-denominat... educational policies
      - for teaching American kids to be workers and not thinkers
      - for teaching socialist economics and government-love
      - for their pivotal role in turning Americans into idiotic sheep       Oct 10 09:10 AM
    • Friday's Bond Outlook: Bursting of the Treasury Security Bubble? (Update) [view article]
      Waiting and watching.

      Default = currency collapse.
      Inflation = currency collapse.
      Failed bond issue = currency collapse.

      What am I missing? Someone tell me please, I really want to know.


      Disclosure: owns TBT       Oct 10 09:02 AM
    • Bond Expert: Thursday Wrap [view article]
      "more and more it seems likely that the resolution of this crisis will be an historic financial calamity."

      I hate to say it but I agree. And perhaps for the first time in history it will be one that occurs globally and simultaneously.

      I'm not a doomer, well I wasn't, but my immediate concern is the food distribution system here in the US. It is well known that at any time there is about 3 days worth of food on the shelves and in the chain. Credit is how trucks and ships get loaded. Motor fuel would disappear as it would be commandeered for trucking. Things would grind rapidly to a halt. Martial Law. We've never been here before.

      Anyone care to offer alternatives, given a systemwide credit stoppage? I'd really like to hear them.       Oct 09 05:36 PM
    • Nouriel Roubini Predicts (Surprise!) a Long Recession [view article]
      I've been watching this intensely for the past 14 months. My overarching question has been: How deep? I've looked for the answer in history: LTCM, Japan, S&L, etc. How much capital destruction caused how deep a "recession"? Best estimates I've read were that Japan Depression was caused by a loss of about $1 Trillion. The Nikkei is STILL a basket case, 18 years later.

      A few months ago Roubini said that he expects losses to be $1.5 - $2 Trillion. I think he is unwilling to raise that number publicly, but his predictions are becoming more dire.

      I'm a layman, so if creds mean anything to you then I don't know crap. But based on history, if our ultimate losses from this debacle go into the $3-5 Trillion range I think it's "global economic thermonuclear meltdown". And isn't that exactly the way the politicians and CB's are acting?

      The fact remains that debtholders are going to suffer very real and very deep losses, either from default or from inflation. Pick one.

      Default means that money doesn't buy anything, and foreigners become your landlords. Ask Iceland (in October in the Northern Hemisphere, for Christ's sake). Inflation means that money buys very little, savers are punished (punishing capital formation), and foreigners become your landlords.
       Oct 09 10:04 AM
    • Next Up, an Ownership Share in Banks [view article]
      "Indeed there is no cure other than time, price, and replenishing the pool of savings."

      Then bbzz24 said: "buying up banks should have been the only option.
      why? better recapitalize and do not interfere in the pricing in the stuff they're trading and wipe partially or fully their shareholders"


      Mike,
      Please explain to this guy that we COULD recap the banks if we had savings (delayed gratification) to recap them with. But recap'ing them with printed new money (since we're already in debt up to our eyeballs) is mathematically pointless: if we could print genuine capital, we'd all be rich beyond our wildest dreams. In fact, just a year ago we thought we were.

      bbzz24, can you see how it doesn't work?       Oct 09 09:44 AM
    • The Beginning of the Endgame for Monetary Policy, Redux [view article]
      Mr Kedrosky quite correctly points out the deteriorating asset quality at the Fed. The Treasury has supplanted the Fed as "lender of last resort", and that is probably why. I suspect also that much of the $850 Billion bailout will go to replace the junk on the Fed's books with more treasuries so the game can begin anew. Remember, the Fed is a private bank, and the owners want their money back, plus the usual profits, backed by the full sweat and blood of the American Taxpayer, not some bundle of worthless McMansions in Encino.

      The real question is embedded in Mr. Kedrosky's article. Through it runs a basic premise regarding the creditworthiness of the US government, and the quality of the debt it issues, US Treasuries. This appears to be the presumption that Mr. Kedrosky wishes to question, and if that is the case then I concur that it is time to question it.

      US Treasuries have for our generation been the standard by which the others are measured. Dollar bulls go into Ventricular Tachycardia whenever anyone suggests that the US Government is losing its creditworthiness. But this is just another paradigm that will be broken, slowly and over time. The last paradigm to be (recently) broken was that US Stocks always go up, except for when they briefly correct, and only to quickly resume going up again. I was amazed at the time it took to break that paradigm among a critical mass of investors. Some still cling to it; they can be seen still, here at SA and elsewhere, calling bottoms in US stocks.

      The beginning of this paradigm break may have come today at the Treasury auction that didn't go quite as well as expected:
      www.cnbc.com/id/270815...
      "Bonds Plunge on Debt Supply Plans, Note Sales"

      The credit needs of the US government going forward may be better understood by our (previous) creditors than we at first suppose. No one in the MSM has been talking about the debt explosion at Treasury in the past few weeks. No one has been talking about the intergenerational debt.

      If we continue down this path, borrowing our way to rescue and prosperity, we will destroy what is left of the US Dollar. Since I hold my assets (most of them still) and earn my living in US Dollars I'd like to see this trend stopped, then reversed. But the folks who run the show, and the Congressmorons who are their enablers, think otherwise.
       Oct 08 07:05 PM
    • How Bad Is the Fed's Balance Sheet? [view article]
      Jason, you refute your own points.

      "..that approach obviously isn't working. And the reason why is clear - British semi-nationalization, Wa Mu, AIG, Lehman, Fannie, Bear - all of them scream that the authorities will simply pick a fate out of the air for any financial institution they please, each one different from the last,"

      Absolutely agree. No one is smart enough to manage an economy, and therefore no one should have the power to try to do so. And I agree that one would have to be an idiot to put money in this market, when the loose cannons at Treasury and Fed roll about the deck, smashing indiscriminately and unpredictably everything they come close to.

      And then you go on to deride "populism" three or four times; the unwashed masses are obviously too stupid to know what's good for them, yes? So the chosen ones will make decisions for all, yes? Just like Paulson, yes? You agree with central control, you just don't think they're doing it right.


      "The western world has to decide, this instant, whether is wants to have a financial system or not."

      My answer is Yes, but not THIS one. I want a truly private one, not one that is in the hands of an international banking cabal made up of overeducated underachievers who went to ivy league schools, ran and profited from the very schemes that are crashing the world's economies right now, and yet somehow still believe they know how to run a world economy.

      DIRECTED ECONOMIES DON'T WORK, and no amount of pining for the old days will make it work. When money itself requires massive intervention to retain its credibility, the problem lies in the (fiat) money itself, and in the mechanism put into place to make it possible (the central banksters).

      We are now in the throes of massively unwinding decades of malinvestment, made at the direction / control of the morons that run the current system. Hang them, from piano wire, right fricking now.       Oct 08 11:10 AM
    • Lehman's Lies [view article]
      Next bubble: piano wire. Oct 06 10:12 AM
    • Bailout Bill Passes; What Happens Now? [view article]
      bearfund,

      "other channels will have to be found to support it, and those channels will involve the Fed lending to the Treasury, which will in turn give away money. Don't believe for an instant that they won't do it. TPTB are determined not to allow deflation, and there is extensive precedent for varying forms of "fiscal stimulus", many of which amount to nothing more complicated than borrowing money and using it to cut checks to some subset of the citizenry. It's remarkable that you can't see past your academic biases about how the market works to the obvious conclusion."

      I agree with you. Mike's an excellent researcher but is limited to "thinking inside the box".

      Forgive me, mike, but you're too rational. The people who run this show will do a anything, including things that will ultimately destroy the currency, to try to retain their hold on power. Currency destruction is where we're headed, and it really doesn't matter whether we name it "inflation" or "hyperinflationar... depression" or whatever. The historic deflationary forces in play will be met, can only be met, by an historic inflationary response. Mike, in other postings you've argued that an attempt to massively reinflate will be stopped by quickly rising interest rates. So we will have a Treasury bond apocalypse as a side dish to our Depression. The SWF "US is on sale, everything's marked down!" shopping spree will not be allowed to proceed to its logical conclusion. Deflation cannot be allowed, as it would result in inability to pay off US debt. Foreign ownership of the means of production and the greatly depressed wages that would accompany it wouldn't make it possible for the government to pay off debt. Repudiation of debt by US gov destroys the currency. It doesn't matter that that destruction isn't technically named "inflation". What matters to those of us holding dollars is that the dollars aren't worth anything.

      As far as I am concerned, the question remains this: how deep will the world's rejection of paper become? At what point do we begin to repudiate contract claims? Modern economic activity is based on, is made possible by, a legal system that enables non-violent contract enforcement. It should be obvious by now that there isn't enough money in existence to cover all the contracts (CDS) floating around.

      Will the swap auctions coming this month provide the basis for repudiation of contracts?

      Will these auctions provide yet another opportunity for the government to step in and pick winners and losers?

      Will the Fed's contention that its balance sheet is "infinite" be put to the test?       Oct 05 09:58 AM
    • More On Rising Dollar, Declining Gold [view article]
      Paulson's money will, among other things, be used to make whole the gold shorts on the Crimex, so they can short some more.

      The flood of dollars coming from the Fed will be mopped up with a flood of oil coming from SPR and Saudis. Dollar strength encourages people to buy Treasuries.

      Short term, it will work. Long term, not at all.       Oct 02 08:02 AM
    • Whether Bailout Passes or Not, Implications for USD Are Bad [view article]
      The dollar is redeemable in oil. Expect a flood of oil to mop up the flood of dollars coming from the Fed. This will work until USD collapses under the weight of the leverage working against it. Oct 02 07:35 AM
    • Update: Crude Oil, Priced in Gold [view article]
      In other words, the Fed is flooding the world with new dollars, so they mopped some of them up with oil. Oct 02 07:28 AM
    • Update: Crude Oil, Priced in Gold [view article]
      poet1

      I hadn't seen that, but it makes perfect sense. They acted to strengthen the dollar, to raise global confidence in the dollar, to keep people buying treasuries, and to pound 'real money' gold. Their action is pure currency manipulation, and confirms my thesis.       Oct 02 07:16 AM
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