Collapse of Financial System?
The central banks around the world continue to pump unprecedented amounts of printed money into the financial system. Why? There are at least 500 Trillion reasons!
The vast, mysterious, and unregulated world of hyper-leveraged financial derivatives are conservatively estimated to total $ 500 Trillion. These remain off-books and constitute a huge black-hole that continues to suck-in all manner of central bank money. Yet, because of it's immensity, perhaps it cannot be satisfied.
So what happens? In the long run (1 to 4 years out) the US Dollar has to be devalued to the tune of about 40% +/-. Keep in mind, that's only if the central banks can manage this in an orderly fashion. If not, well, all bets are off. As mentioned in previous observations, so far the central banks are flying by the seat of their pants trying to stave off marking-to-market these $500 Trillion of exotic derivatives. Why not mark-to-market? Ah, there's the rub. Because these dandies are work only pennies on the dollar. And THAT will hit all asset classes (stocks, bonds, et.al.) like a Mack truck going 90 mph into rush hour traffic!
Summary: expect further deleveraging throughout 2009. It took decades to build the tower of debt, so expecting a quick-and-dirty solution is pure pollyanna! The stock market will test it's November lows. In the event the November lows are taken-out, keep a sharp eye out for just how low things go. A sub-4000 DOW could signal an imminent collapse: Simply too may stressors that are go beyond the systemic ability of central banks to control.
Cheers!
Monday, January 12, 2009
Thursday, January 8, 2009
Do The Math...
$1.2 Trillion Defecit PLUS
$800 Billion Stimulus EQUALS
$2 TRILLION!
... and it's only January.
This is bearish for the dollar. And since you and I have our pay, our savings, our equity and assets in US dollars... beware.
Whether you cheer or jeer at the so-called "economic stimulus package"... hold this thought in mind: it's being financed by debt. These amounts of debt were until recently considered lunatic fringe but are now mainstream.
Again... this huge amount of dollar debt is not good for the dollar, your own personal wealth, or the prosperity of your country and your children.
Do the math...
$800 Billion Stimulus EQUALS
$2 TRILLION!
... and it's only January.
This is bearish for the dollar. And since you and I have our pay, our savings, our equity and assets in US dollars... beware.
Whether you cheer or jeer at the so-called "economic stimulus package"... hold this thought in mind: it's being financed by debt. These amounts of debt were until recently considered lunatic fringe but are now mainstream.
Again... this huge amount of dollar debt is not good for the dollar, your own personal wealth, or the prosperity of your country and your children.
Do the math...
Thuffering Thucotash!
(Apologoes to Yosemite Sam)
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities."
From PLANNED CHAOS by Ludwig von Mises
Thuffering... that's what consumers are experiencing. And who among us is not a consumer???
We are all now suffering from laws and policies preventing the most effecient from supplanting the least ineffecient.
Ineffecient bankers and ineffecient banks? Give 'em Trillions.
Ineffecient auto manufacturers? Give 'em Billions.
And so on and so forth.
So long as the central bank (FED) and the central government (US Congress) promote policies of rewarding inepitude, and in fact implement further permutations and combinations of inepitude, expect further thuffering.
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities."
From PLANNED CHAOS by Ludwig von Mises
Thuffering... that's what consumers are experiencing. And who among us is not a consumer???
We are all now suffering from laws and policies preventing the most effecient from supplanting the least ineffecient.
Ineffecient bankers and ineffecient banks? Give 'em Trillions.
Ineffecient auto manufacturers? Give 'em Billions.
And so on and so forth.
So long as the central bank (FED) and the central government (US Congress) promote policies of rewarding inepitude, and in fact implement further permutations and combinations of inepitude, expect further thuffering.
LOWEST RATE IN 315 YEARS
SINCE 1694!
Today's crazy news out of merry old England is: their central bank has now set interest rates at the lowest point in its history. That's since 1694.
Or, put another way, the lowest in 315 years.
As the discussion proceeds about the depths of this economic downturn, (for example: how deep, how long...) hold this thought: through all the economic ups and downs of the last three centuries in England, which does include both World Wars and The Great Depression, now the rates are set the lowest.
Again, watch bonds.
As the central bankers of the most of the world print paper like crazy, they fail to explain how this is going to play out. In fact, they are flying by the seats of their pants, and probably lighting candles down at the local cathedral while praying for a miracle.
Stay turned.
So far, they are finding it beyond their abilities to dispose of the hundreds and hundreds of trillions of dollars of off balance sheet derivative debt instruments. They are fighting a cancer that is not responding to their voodoo chemo.
Cheers!
Today's crazy news out of merry old England is: their central bank has now set interest rates at the lowest point in its history. That's since 1694.
Or, put another way, the lowest in 315 years.
As the discussion proceeds about the depths of this economic downturn, (for example: how deep, how long...) hold this thought: through all the economic ups and downs of the last three centuries in England, which does include both World Wars and The Great Depression, now the rates are set the lowest.
Again, watch bonds.
As the central bankers of the most of the world print paper like crazy, they fail to explain how this is going to play out. In fact, they are flying by the seats of their pants, and probably lighting candles down at the local cathedral while praying for a miracle.
Stay turned.
So far, they are finding it beyond their abilities to dispose of the hundreds and hundreds of trillions of dollars of off balance sheet derivative debt instruments. They are fighting a cancer that is not responding to their voodoo chemo.
Cheers!
Wednesday, December 24, 2008
Thorough credit summary without HYPE
100% Thorough Analysis
Here's an important summary of the present state of credit markets. LIBOR, TED-spread, US Treasuries, and many more indexes. The article is rich with graphs, so it's easy to see where we are and where we have been. It's written matter-of-factly which makes it non-inflammatory.
If you're looking for something over these holidays to sit back with for a few minutes and take stock of the situation, it's extremely worthwhile.
One final reminder... continue to watch the credit markets, not the stock markets, for a most true reading on the economic state of the world.
MERRY CHRISTMAS!
The photo is of our home's entrance... lots of snow!
Here's an important summary of the present state of credit markets. LIBOR, TED-spread, US Treasuries, and many more indexes. The article is rich with graphs, so it's easy to see where we are and where we have been. It's written matter-of-factly which makes it non-inflammatory.
If you're looking for something over these holidays to sit back with for a few minutes and take stock of the situation, it's extremely worthwhile.
One final reminder... continue to watch the credit markets, not the stock markets, for a most true reading on the economic state of the world.
MERRY CHRISTMAS!
The photo is of our home's entrance... lots of snow!
Tuesday, December 23, 2008
On Coming Train...
Exports Collapsing
From the New York Times...
Japanese exports collapsed 27% in just one month! If you think the bottom is already in the stock market and dollar, there's this bridge in Brooklyn you might wanna buy.
I hope to pen an extended prognosis on our political economy before the New Year is upon us. The general thesis will be: for the past 25 years or more, stock market return have been abnormal by historical measures. Therefore, the market indexes are going to reveret to the historical norms. Can you visualize the Dow at 2000?
Cheers!
From the New York Times...
Japanese exports collapsed 27% in just one month! If you think the bottom is already in the stock market and dollar, there's this bridge in Brooklyn you might wanna buy.
I hope to pen an extended prognosis on our political economy before the New Year is upon us. The general thesis will be: for the past 25 years or more, stock market return have been abnormal by historical measures. Therefore, the market indexes are going to reveret to the historical norms. Can you visualize the Dow at 2000?
Cheers!
Sunday, December 21, 2008
Not Cheerful or Hopeful
Severe Recession
Bloomberg Japan reports a record drop in exports, a record rise in the Yen (which = a record fall in the USD), and the Japanese central bank is now buying corporate debt (the FED is doing that here in the US).
Bloomberg Japan reports a record drop in exports, a record rise in the Yen (which = a record fall in the USD), and the Japanese central bank is now buying corporate debt (the FED is doing that here in the US).
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