US recession?

[Biggest Fan]

An interesting side bar to all of this govt. intervention i.e. increased dollars in the market i.e. inflation. Pretty interesting idea. The bank bail-out of 300 billion in tax dollars plus we will also be hit by an already abundant number of 'dollars' floating around increasing the price on just about everything.

[Blane]

An interesting side bar to all of this govt. intervention i.e. increased dollars in the market i.e. inflation. Pretty interesting idea. The bank bail-out of 300 billion in tax dollars plus we will also be hit by an already abundant number of 'dollars' floating around increasing the price on just about everything.

On that exact subject:

Wall Street's laughing all the way to the bank

FABRICE TAYLOR

July 23, 2008 at 6:29 AM EDT

The credit crisis really puts the free in free market. The freest market is supposed to be the United States, and the evidence in favour of that argument is mounting. It's just not what you think. Free, in this case, means a free ride for a select group of people. Wall Street never looked so good, or bad, depending on your perspective.

From early 2004 until mid-2007, the big Wall Street investment banks made $250-billion (U.S.) in profits. (That's Bank of America, Citigroup, JPMorgan, Morgan Stanley, Goldman Sachs, Lehman Brothers and Merrill Lynch.) During the past year, they've written off $107-billion. Keep in mind as we follow the money that if you include smaller dealers and commercial banks, the profit number swells and the writeoffs are even bigger.

As fate would have it, the writedowns, mostly garbage subprime loans, equal almost perfectly the amount of money Washington will dole out in stimulus cheques to get the economy going again. The House of Representatives Speaker said last year that the stimulus package would create 500,000 jobs. She got the number more or less right, but it was actually a loss of jobs.

Meanwhile, recent figures show that of the money that's been mailed and spent, only a 10th has gone to new spending.

The rest of it has been consumed by inflation (that is, because prices have gone up, even if consumers take their money to the mall, they're not helping the economy much).

Inflation is partly a product of easy money or low interest rates. Why does the Federal Reserve keep interest rates low? To stimulate the economy, which is being ravaged by the housing recession. The housing recession, meanwhile, was fuelled by Wall Street's greed and recklessness, aided and abetted by the easy money and the fraudulence of builders, appraisers and mortgage brokers.

Back to Wall Street to start connecting the dots. According to the New York State Comptroller's Office, the big banks paid $33.2-billion in bonuses in 2007, down only slightly from 2006, an even more splendid year for subprime origination. During the past four years, bonuses closed in on $100-billion, not far off the writeoffs and the stimulus package.

Back to Washington, whose coffers are bare, meaning that $107-billion is borrowed money. Borrowed from whom? Savers, mostly foreign. Borrowed by whom? The taxpayer of course. So in effect, the stimulus package is simply a matter of the cash-strapped, highly indebted U.S. consumer borrowing to spend (or pay debts) to save the economy.

It's pretty clear what's happening. Ultimately, the people are borrowing to pay Wall Street bonuses. After all, these handsome rewards are based on the earnings of the banks, but they're not real earnings, since the assets that produced them are subsequently written off.

The bubble that created these bogus earnings was inflated with the help of low money costs and lax supervision of financial firms.

The bursting bubble is roughing up the economy so badly that the government has to borrow to stimulate spending, which it fails to do. It might also have to borrow $25-billion to bail out government-sponsored mortgage insurers, including Fannie Mae. And since the government is really just the people who are getting hurt by the slowing economy, with no bonuses to comfort them, is this not the greatest transfer of wealth in history?

And we haven't touched on other largesse the people have extended Wall Street, such as the loan guarantees that helped JPMorgan buy Bear Stearns.

Marx has nothing on these people. And you can argue that some of the losses are marked to market and might be reversed and that some of the bonuses were paid to people who had nothing to do with subprime. Probably true, but hair-splitting I say.

We Canadians can learn a lot from our friends to the south, including what not to do.

Fabrice Taylor is a chartered financial analyst.

[d_rawk]

September 1929

"There is no cause to worry. The high tide of prosperity will continue." -- Andrew W. Mellon, Secretary of the Treasury.

October 14, 1929

"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." -- New York Times

December 5, 1929

"The Government's business is in sound condition." -- Andrew W. Mellon, Secretary of the Treasury

December 28, 1929

"Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression." -- Associated Press dispatch.

January 13, 1930

"Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today." - News item.

January 21, 1930

"Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington.

January 24, 1930

"Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast." - New York Herald Tribune.

March 8, 1930

"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch.

May 1, 1930

"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover

June 29, 1930

"The worst is over without a doubt." - James J. Davis, Secretary of Labor.

August 29, 1930

"American labor may now look to the future with confidence." - James J. Davis, Secretary of Labor.

September 12, 1930

"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor.

October 16, 1930

"Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment." - Charles M. Schwab.

October 20, 1930

"President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President's special committee on unemployment." - Washington dispatch.

October 21, 1930

"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington Dispatch

November 1930

"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co.

January 20, 1931

"The country is not in good condition." - Calvin Coolidge.

June 9, 1931

"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

August 12, 1931

"Henry Ford has shut down his Detroit automobile factories almost completely. At least 75,000 men have been thrown out of work." - The Nation.

[Kanada Kev]

[Biggest Fan]

A sign to show how bad our economy is at the present... oil continues to drop and so does the stock market. I wonder if the 'fed' is thinking about working on the fix (ha ha)? I'll answer my own question. I sure hope the h@ll not.

[bradm]

And Now Brace For the Bigger Wave of Mortgage Defaults.

Aloha,

Brad

[Biggest Fan]

I've heard that we are about half way through all of the 'defaults' mess. The number I have heard is that banks are in for a trillion dollars. Sounds like we have about another year before this all shakes out. Now if the fed gets involved maybe we could put the pain off for a while (ha ha).

[d_rawk]

SEC naked short restrictions for the financials expire on Aug. 12. Very interested to see if the 13th is the day they start getting bloodied up again in anticipation of the next wave bad news.

[Kanada Kev]

Have no fear ... the US is in capable hands with the True Cowboy!

[d_rawk]

A billion is a difficult number to comprehend but one advertising agency did a good job of putting that figure into perspective. Here it is:

A.

A billion seconds ago it was 1959.

B.

A billion minutes ago Jesus was alive.

C.

A billion hours ago our ancestors were living in the Stone Age.

D.

A billion days ago no-one walked on the earth on two feet.

E.

A billion dollars ago was only 8 hours and 20 minutes ago at the rate [the US government] is spending it.

Now think about the size of the notional value of the mountain of all derivative of which 95% are OTC Derivatives: One Quadrillion, one thousand one hundred and forty four trillion.(Source: The Bank for International settlements).

Many people out there are resting assured that all financial problems have been solved by the use of public funds to sustain those that created these problems in the first place. If you can sleep soundly with such a brew boiling while believing there are no consequences, you are taking some heavy duty sleep medication. Public money will not solve all problems and if there isn't enough we will simply print more. That's a recipe for disaster.

Looks like the beating has started. Today was an ugly day for the financials.

[d_rawk]

epic fail. Absolutely mind boggling to see the US dollar continue to strengthen in the current environment - while I hope it can be sustained, I can't see how it can be.

Friday, Aug. 8 2008

NEW YORK (Reuters) - Fannie Mae, the largest U.S. home funding source, on Friday posted its fourth straight quarterly loss as home loan defaults increased and said it would slash its dividend more than 85 percent and take other steps to shore up its capital position.

Just three weeks after U.S. authorities took sweeping measures to support Fannie Mae and smaller rival Freddie Mac, the Washington-based company reported a greater-than-expected loss of $2.3 billion, excluding preferred dividend payments, or $2.54 per share in the second quarter.

That compared with a profit of $1.95 billion, before preferred dividend payments, or $1.86 a share, a year earlier.

Analysts polled by Reuters Estimates expected Fannie Mae to report a loss of 97 cents per share.

The loss, exacerbated by $5.3 billion in credit expenses stemming from the worst housing market since the Great Depression, follows a loss of $2.51 billion, or $2.57 per share before preferred dividend payments, in the first quarter of 2008.

"Volatility and disruptions in the capital markets became even more pronounced in July," Fannie Mae Chief Executive Daniel Mudd said in a statement.

"In addition, credit performance has continued to deteriorate and, based on our experience in July, we anticipate further increases in our combined loss reserves," Mudd said. "Given this volatility and the build-up of our reserve, as well as the uncertainties inherent in the U.S. economy and the housing market, we are taking a series of additional actions that reflect our ongoing focus on conserving and enhancing our capital, as well as managing our credit risk through the balance of this cycle."

By year's end, Fannie Mae will stop buying Alt-A mortgages, riskier mortgages that require less proof of borrower income. These loans made up about 11 percent of the company's total single-family mortgage credit business, but spurred about half of the company's credit losses in the second quarter.

• 
  

[SaggyBalls]

How come this thread still has a question mark in the title?

[SaggyBalls]

in a couple of years anyone with strong savings will be able to invest heavily in some great real estate.

What a flip of a party!

[Kanada Kev]

Recession??? What Recession???

What me worry???

http://www.nbcolympics.com/beachvolleyball/photos/galleryid=185837.html

[bradm]

How come this thread still has a question mark in the title?

If you're worried that we might somebody run short of questions marks, and so should conserve them wherever we can, I think your fears are overblown.

Aloha,

Brad

Edited August 9, 2008 by Guest

[d_rawk]

What's a futures contract in punctuation going for these days? And what does it look like when you take delivery?

[d_rawk]

Very interesting interview with Matt Simmons (author of "Twilight in the Desert") about why energy prices are still too low. If you are even remotely interested in the subject, there are certainly worse ways to spend an hour.

MP3 link

[SaggyBalls]

You're presuming I'm scared.

When reality presents a challenge, focusing on fear is a waste of time.

I believe this will become a much bigger problem and those in power don't want to lose their grip on those they have power over.

Not to approach it like a conspiracy theory, but money is a concept and system. It's not real and it is used to keep us distracted much of the time.

That being said, I wish I had more of this imaginary thing called money.

with all this time spent on this recession thread I bet d_jango could've written an award winning short story. I'm always impressed when I poke around this part of the board.

[d_rawk]

You're presuming I'm scared..

Nah, I was addressing the universal 'you' (ie. 'If [anyone reading this] is even remotely interested ..'). I agree though, I don't think the situation calls for panic or fear. There are a lot of opportunities here - not the least of which is for a much overdue transformation of the way we do things, the way we value things, and a re-assessment of those things that we take for granted. Healing is always uncomfortable, but necessary when dealing with a malignancy.

On a related note: Russian jets are reportedly targetting pipelines in Georgia, and the Baku-Tbilisi-Ceyhan continues to burn.

"Russia Invades Georgia: Oil Falls, Dow Rises". It's a headline worthy of The Onion, yet that's what yesterday looked like.

[d_rawk]

Jaw dropping. I feel like I must have woken up crazy today, and am seeing everything in reverse.

Money flows where money flows ...

[SaggyBalls]

what do you mean exactly?

[d_rawk]

what do you mean exactly?

Russia / Georgia & Iran instability hit, more pipelines burning, terrible financial and broader economic news continued to roll out - and yet oil, precious metals, agriculture, base metals, pretty much everything tangible not only declined but were mercilessly slaughtered, the US dollar rose sharply, the DOW was way up and resource based economies way down. Not just a little. Way way up and way way down. Backwards.

For a couple days since then there have been attempts at a reversal, but for the most part, it continues on. I've been whining about the weak US $, so I can't really complain about it, but I don't think I deserve to have that strong US $ I've been coveting given .. well .. reality.

Election years are magical, I guess. And the hedge funds seem to be liquidating holdings to satisfy their loans gone bad, which means a run for cash.

[Biggest Fan]

I have not yet heard why the dollar has been making a 'come back.' Kinda wierd.

[SaggyBalls]

Doesn't the dollar always come back right before serious international conflict?

[Biggest Fan]

I heard a great line while watching the news... We (the USA) bail-out companies that are in the red and call those who are making money (oil) evil. We seem to be heading away from capitalism in a major way. Its got me 'bumbed out'. Side note Frannie and Freddie seem like there about to get there 100 billion in bail-out money. A guy from the IMF says a big USA bank is about to go under. I'd love to be counting this all up... we seem to be near the half a trillion towards the financials. We the tax payer bail them out and some individuals walk away with cash. Sorry for the vent.