Investors
should be buying individual stocks, not indexes because there is still
more coronavirus-driven volatility ahead, economist Mohamed El-Erian
told CNBC.
“If you feel it’s the all clear, go out and buy the
index ... I don’t think we’re there yet,” the chief economic advisor at
Allianz said on “Squawk Box.”
El-Erian said investors should sell companies that could go bankrupt and buy those with “rock-solid balance sheets.”
people in palookaville are binge watching mr. robot...
richie : hey ponzie...how come everyone stopped shoppin man?
ralf malf : yeahhhhhhh...crummy Christmas anna sucking new yeah...
potsie : whooeeee ponzi i think my strings have snapped...
ponzi : y'all jus stop suckin dudes...i gotta scheme ta get us outa this jam...
THE PONZI CHAPEL CEILING
paintybollox : shoot! ....ah jus bin onna ticker blog...anna bin shocked and awed...
zooneh : wot fo yo bin frazzled man?
beulah : at f**kin ticker jus blowin offa steam innit? ...he allus inna bate...
laverne : ah dunno beulie babe him n mish be two offa best bloggers onna planet...
spidah : onna web yo kin scare yo self...iffn yo aint street smart...
peteyangelo : that ole ticker gotta ponzi scheme all laid bare...itta woik o art...
ticker : ..."This is an uncomfortable reality, but it is reality.
Mr. Madoff stands accused of (in his own words) running "a Ponzi Scheme."
In fact, our entire economy over the last ten years, and really back to at least 1987, has been roughly equivalent to what Mr. Madoff was doing.
So has our government.
Let's go down the list of things that have been inflated beyond their natural boundaries, and look at how each and every one of them was destined to collapse - and why they're all collapsing at once:
The Internet Bubble.
The Housing Bubble.
The Stock and Credit Markets Generally.
Our Government's Finances.
There are many who say that our government debt-bubble will not collapse, and they list a whole host of reasons.
Why would you believe that?
Can you show, through history, one speculative bubble that has not popped?
Can you find one time - just once - that such a bubble was able to be grown without limit?
Simply put: No......
.......Americans have, as a nation, become fat, dumb, "entitled" and lazy.
There are many who argue that those who live "hand to mouth" don't have that choice. Really? Here are two statistics that make clear that this is simply false:
In 2003 there were 159 million cell phone subscribers in the United States, and the average monthly bill was $49.91. Penetration has since grown to approximately 70% of the population (from ~60% in 2003.) Since 25% of all persons are under the age of 18, the majority of the non-subscribers to cellular services are in fact children under the age of 10.
In 2002 58 percent of persons age 18 and over were overweight, and 23 percent were considered medically obese.
.....So in fact we have two "inconvenient facts" that contradict the claim that those who live "hand to mouth" and yet are working could not save for their retirement and old age if they decided to do so - the first being that they spend nearly $600 a year on cellular service - a luxury, and the second being that nearly 6 in 10 are consuming significantly more food (and paying for it) than their body demands for metabolic balance......
.........As the embedded (and fraudulently-concealed) debt continued to mount banks and other institutions found themselves performing a Madoff - that is, issuing new credit (debt) to be able to "show earnings" that in fact were a phantom. Unlike Madoff they did not have to go find someone new to put money in to be able to issue the checks to existing investors, since a bank that can operate with no reserve requirements imposed on it is capable of issuing as much credit as it wants, effectively "printing money."
.....Regulations and leverage limits are supposed to prevent this, but they were systematically and intentionally dismantled in the name of "financial innovation."
In truth they were dismantled in the name of a massive financial fraud that permeated every corner of our credit system, from credit cards to student loans to automobiles to housing.
This ponzi scheme even extended to individual consumers - that is, you.
If you HELOC'd out money and paid down your credit cards with it, then charged anew or cash-out refinanced, you were a Madoff. If you bought a house with an Option ARM, knowing full well you could not make make a fully-amortized "recast" payment, you were a Madoff. If you played the balance transfer game with your credit cards, rolling balances from one zero-interest offer to another, you were a Madoff.Tens of millions of Americans did one or more of these things - and each and every one of them - if not you then someone you knew - was running a personal version of Madoff's scheme.
Every organ of our government and regulatory system was involved in this knowing deceit and the complicity required for it to occur - Congress, The White House, Treasury, The Federal Reserve - and still is.
So why did the bubble collapse, if these institutions are able to continue to literally "print money" and the regulators were intentionally ignoring all of it?
The fundamental problem with all Ponzi Schemes, even those in which the operator is able to issue credit at will, is that it relies on people not challenging the books.
It requires "belief" - that is, confidence.
Thus the phrase "con game".
When Bear Stearns two hedge funds collapsed, the house of cards began to shake. People started looking at balance sheets and asking lots of very inconvenient questions, including exactly how one can have a mortgage-backed security rated "AAA" when 40% of the loans in it are either delinquent or in foreclosure. A few people started to listen to those who had analyzed the math, such as myself and Mish, and the light came on in their head - "Oh My God, they're right!"
See, while credit spends like money, it is not money. ........
.............You would think that Bernanke and Paulson would recognize what is going on - and that they are unable to stop the inevitable collapse.
Here's the problem - they do recognize it, but they are two of the architects of it, and admitting the truth means taking responsibility for what they have done.
That's not going to happen so long as they believe they can manage to keep the "con" going with someone.
The group of "someone's", however, is shrinking rapidly. Commercial and Investment bank loans, then Fannie and Freddie, then commercial paper issuers, and now various sorts of consumer loan products such as credit cards, automobile financing and student loans are all being shunned by those with actual money as they start to peek under the kimono and find not a pleasant sight but rather something both ugly and hairy staring back at them.
Thus, the transfer of all of this "credit" (really bad debt) no longer backed by money (as the producers have taken their ball and left) from the institutions that created the ponzi scheme to "the sovereign" - the Government - in all of its forms, whether it be Treasury or The Fed directly.
The latest announcement came on Friday, when The Fed loosened the terms of the TALF (one of its alphabet soup programs) and effectively allowed hedge funds to borrow from it.
This, incidentally, is why Bloomberg has had to sue The Fed to try to get disclosure of the crap they have taken on their balance sheet, and why Fox News announced that it is suing Treasury to gain disclosure of what they have taken on.
It is also why Markit has announced that they're "postponing" the listing of performance data on "Prime" mortgages - they were pressured to do so (by their own admission) because a published price means no more lying about values, and that could mean immediate (and monstrous) new writedowns for banks which hold trillions of dollars of "Prime" mortgages yet are valuing them pretty much "however they want."
As I said before, evil requires secrecy.
There is real (and justified) fear that should the truth of what is being held in these "Fed and Treasury programs" be disclosed in full that those with money (that is, producers) would flee United States Treasuries (and dollars.)
This is not an unjustified fear; it is, in fact, fear of exactly what has happened thus far and led to the collapse of AIG, Lehman, Bear Sterns and the near-collapse of Fannie and Freddie.
And what is The Fed using for its "credit grade"? Ratings from the same agencies that graded as "AAA" toxic subprime debt that all blew up.
If this last gambit fails so does our government's ability to deficit spend.
There is a near-100% probability that it will fail - we are simply arguing about the "when", not the "if".
See, without evidence that the debt (not deficit) they are asked to back will be paid down at some date-reasonable in the future, eventually the people with money will flee.
It is simply a matter of exactly when their confidence fails (that is, at what leverage ratio do they say "screw this!"), not if it will fail.
Removal of the ability to deficit spend, when the government will be running a $1 trillion+ deficit next year, would result in a roughly 25% instantaneous reduction in the government's budget - assuming tax receipts will be maintained. The problem is that they won't - with unemployment skyrocketing and GDP collapsing, tax receipts are likely to fall 30% or more, meaning that in all probability the government will find itself having to cut its budget in half on an immediate basis.
Since a goodly part of that budget is in fact interest and it cannot be cut (without causing a general default) the consequence would be a requirement to slash all government programs immediately by approximately 60% - including Medicare, Social Security, the military, education, other social programs (e.g. Title I) and everything else. In addition The Fed would be forced to immediately disgorge all of its bad assets into the market at whatever price they could be sold for, lest The Dollar become "de-currencied" almost instantaneously.
Think about Iceland and how quickly their situation unraveled.
hamish macrae : ..."I don't think Gordon Brown has any idea of the contempt in which he is held in the rest of the world. I sat at lunch next to a top European politician a few months ago and his assessment was unrepeatable. (He cheered up noticeably when I said that the PM couldn't win an election.)
carmen macrae : There'll be no tomorrow, no matter how we pretend....
....Tomorrow brings sorrow, and loneliness without end....
beulah : WTF...aint no carmen macrae onna vid.....ya limey b*stard...
Louis MacNeice : "Their knickers are made of crepe-de-chine, their shoes are made of python,
...Their halls are lined with tiger rugs and their walls with heads of bison...
...the story so far...trust in banks, financials has evaporated...
...panic has set in...an markets have tanked and now...
EVERY DAY ISWHACKDAY...
...is everybody happy?...no we're f*ckin not!
simon : ..."Let there be no doubt about the extent of Gordon Brown’s culpability for the crisis. As Chancellor, he raised huge sums and borrowed yet more in order to build a client state of tame Labour voters on the public payroll – whether as employees or claimants. He pushed Britain to live way beyond its means not merely in this way, but by putting excessive amounts of money into circulation that banks could lend on with cavalier irresponsibility. He then failed properly to regulate those banks...
The debt mountain he created has yet to wreak its full horror on society. He spent so wildly that when things went wrong – not that he ever managed to predict that they would – we were desperately short of funds to make repairs. As a result, taxes will have to go up, and public services may have to endure damaging cuts. Finally, when the time came to clear up the mess, he dithered and brooded while the stock market went into free fall and banks went to the wall." ...telegraph
louis : ..."It's no go the Government grants, it's no go the elections...
...Sit on your arse for fifty years and hang your hat on a pension...
A MAN WITH A PLAN
market ticker : The Genesis Plan..."While there were a few signs of credit market stress easing (a bit) today, (friday) there were also more anecdotes of things getting much worse. I see nothing to suggest that short-term lending has returned to normal, and until I do, I remain on high alert for the sort of disruptive events that can impact your life in very undesirable ways.
Yes, the market bounced hard today. Twice. Artificial? Maybe. Inside knowledge? More probably. Will whatever the "crackberry network" was buzzing about work? Likely not for more than a few days, but with the market this jittery, it doesn't matter - when the VIX is this high anything that makes people jump causes this sort of reaction - in either direction.
Get on it folks - plaster the media and your elected officials with the fact that we now have hard evidence that this path forward will not only work on a technical basis, but if it is adopted it will clear the credit markets almost immediately, which is the key element of this mess that must be resolved." market ticker
louis : ..."It's no go the merry-go-round, it's no go the rickshaw...
...All we want is a limousine and a ticket for the peepshow...
POETRY OF THE 1930's
john authers : ..."A deeper irony is that there may not have been any need to update the book. Stock market conditions look ever more like the 1930s.
The noughties are much more similar to the 1930s than commonly thought. In morning trading on Friday, the S&P 500’s fall for the decade was almost identical to its fall for the decade on the same date in 1938. The pattern of the two decades is freakishly similar, with a big sell-off followed by a prolonged rally and then a fresh bear market. The key difference is that the sell-off in this decade before the “fools’ rally” began was far less severe than in the 1930s.
This, we can now see, was because cheap credit had inflated a new bubble.
This is what followers of Graham had argued. They said the market during the twin lows of the WorldCom crisis in 2002 and the invasion of Iraq in 2003 was still not cheap. Dividend yields, for example, were still barely half their level of the mid-1990s, before the tech bubble took hold.
But the similarities between the market tops in 1929 and 2000 are compelling. Both saw wildly overvalued stock markets and economies that were still in decent shape.
Measures based on cash, such as dividend yield or cash flow multiples, show that the market is now much cheaper than it was during the false bottom of 2002-03, even if overall indices are still higher.
We are not, therefore, in a new 1929. Our position is more similar to that of the late 1930s. That is not so encouraging: in the decade after October 10 1938, the S&P gained 5 per cent.
But at least we have a clear historical comparison, and a clear guide for how to proceed. Providing you are not using borrowed money, and you can afford to wait a matter of years for Mr Market to thrash out his problems, then Security Analysis is all you need.
Do not try to work out how long the market will take to recover or when it will hit bottom – that task is impossible. Use basic balance sheet methods to work out how much a stock is worth and how much it would be worth if the worst came to the worst. If that calculation leaves you with a margin of safety, then buy it. Don’t let the hand of history gripping your shoulder stop you." FT
paintypension : yo!...right on ...innit!...
...oh yeh!...read a disclaimer at top...none o this is advice...an don blame me if ya f**k up ya pension...
louis : ...The glass is falling hour by hour, the glass will fall for ever...
...But if you break the bloody glass...you won't hold up the weather..."
...sherlock holmes is puffin on is pipe an watson oilin a old shot gun...inna drawrin room...
watson : WTF..?...birdbrain!
holmes : elementary my dear watson...there was no money...it was all an illusion...fueled by credit conjured outa nowhere by a leverage machine anna bunch a cunnin bastards...
watson : yo mean a bankers dude?
holmes : no jus a bankers man...politix anna developers anna media an alla suckers wot believed inna dream...
watson : i say!...wots ta be done?.. holmes old boy?
holmes : elementary my dear watson!...we gotta make a banks own up an TELL THE TRUTH...
market ticker : "They(the credit markets) remain frozenbecause the root cause of the problem is that banks and other financial firms have been lying for more than a year, each quarter claiming to have "kitchen sinked" their losses only to report more the next quarter, and in some cases have gone on national TV to proclaim they're "well-capitalized" only days or weeks before they collapse!
The first question anyone asks when someone wishes to borrow money is whether or not they will get paid back. If the lender does not believe they will be able to be paid back then that loan will not be made, no matter how much money someone has available to them.
It really is that simple folks and yet this fundamental principle has been willfully and intentionally ignored for more than a year.
THE UNDERGASM
beulah : yo! painty shugga...why is alla em screens red?
painty : honey...thats cos a whole wurl is shittin itsen ovva a complete seizure o a financial system...
beulah : yeh..but it not gon fect us nah is it?
sadsakkapaintysh*t : nah...yo goo back a sleep honey it all be ovva by a time yo wakes up...innit!
zooneh : yo! dude...i don think it be ovva fo a while man...
saddy : i knows it man...but i aint gotta heart fo ta tella a troof...
so...nah we see wot come o buckin a market...instead o takin a likkle hit o recession nah anna gen...we create a permanent boom onna nevva nevva an massage a markets to a point o undergasm...a whole wash day...shot ta hell...
...a illusion lost...anna crisis convulsin a suckers...a f**kin whiplash o tension explodes... an causes iss sunami o debt...ta puke up all ovva a table cloth...
TRUST = CONFIDENCE...LOSS OF TRUST = DISASTER...
barry : "...The thing roiling markets today is not the lack of confidence; It is capital, or more accurately, the lack thereof. Thanks to a series of very poor trades—excessively leveraged and absurdly risky to boot—banks are now dramatically undercapitalized.
As we have seen in just about every historical financial crisis, the shortage of capital is the underlying cause of monetary mayhem. Too much debt, too little equity, makes any financial system cease to function." the big picture
nouriel: ..."The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the US but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression...." over at mish's
