Two more things：

1。 The Nikkei fell nearly 8%， almost 10% at one point。 I don?t know when their breaker steps in。

2. For the first time in what seems like forever， the dollar is worth less than 100 yen。

 

Wouldn't shock me to see sub 9000 tomorrow on the DOW. In fact I think I'd be surprised if we didn't.

 

 

Well it took an extra day as yesterday the fed fired one of their last desperation bullets by lowering interest rates, and that helped the markets - we only went down 150. Today though....un'freakin'believable. We finished down 600 points and the NASDAQ is now in the 8000s. f*** it, let's just wipe out 10 years of stock market activity and start over. That's where we sit today, exactly where we did ten years ago.

 

As far as the next bullet? I think we should be hearing about us getting checks in the mail any day now as an emergency 'stimulus' package. YAY inflation! At least oil is down below 85 dollars a barrel, but gasoline is still about 50 cents higher than it was when oil was last at 90 bucks a barrel. Not sure I get that one.

 

http://finance.yahoo.com/echarts?s=^GSPC#c...ource=undefined

 

With the credit contraction we're seeing, more than likely we're suffering from deflation now. Of course, just over a month ago we had fears of serious inflation. Now it's the opposite, at least in the short-term. This is probably the wildest economic ride we've been in since the Great Depression, or perhaps even earlier.

 

Crazy times.

 

What will be the bottom of the DOW? Could it go down much further?

 

What I meant by inflation is we will hit it when the government uses one of their last bullets and gives everyone another stimulus check to buy products made in China. I think the DOW does have further to go because 1. The short ban will expire soon (it was supposed to be today, they might have even lifted it) and 2. we haven't had much negative earnings come out yet, once the big companies start coming out with earnings that reflect the poor economy, watch out.

Well, I actually didn't expect the 600-point drop on the Dow today, as I thought trading was supposed to be light for the holiday. I guess the Jews don't run Wall Street after all :devil Anyways, tomorrow doesn't look much better, b/c the Nikkei and the Hang Seng are currently down 7.8 and 7.1% respectively, and who knows what they may be when the last receipts are counted for the Nikkei, which is near close.

 

EDIT: Hang Seng has held, but Nikkei has fallen in last-minute trading by 9.6% of opening value.

Looks like we may be in for yet another rough day.

 

Already down 600 points in less than ten minutes.

 

Unbelievable. I am really nervous.

I'm getting back into the market as you read this...

 

So I take it you think the worse is over? I don't feel confident that it is.

 

I've heard the G7 and other countries may close the major stock exchanges for a few weeks and come up with a new plan for the international financial system. A "Bretton Woods" type of thing.

I just went into underpriced stocks in a big way. I still think people won't get their heads screwed back on until about 6K, but the value of the DOW's assets is now greater than the stock price, so it will get better.

GM.

GM.

 

Credit crunch is the cause.

I'm getting back into the market as you read this...

 

So I take it you think the worse is over? I don't feel confident that it is.

 

I've heard the G7 and other countries may close the major stock exchanges for a few weeks and come up with a new plan for the international financial system. A "Bretton Woods" type of thing.

That's one of the rumors floating around.

In any case, President Bush is getting ready for the G7 talks by being in Miami right now for a McCain fundraiser tonight.

I'm getting back into the market as you read this...

 

So I take it you think the worse is over? I don't feel confident that it is.

 

I've heard the G7 and other countries may close the major stock exchanges for a few weeks and come up with a new plan for the international financial system. A "Bretton Woods" type of thing.

That's one of the rumors floating around.

In any case, President Bush is getting ready for the G7 talks by being in Miami right now for a McCain fundraiser tonight.

 

And word is that the Morgan Stanley deal with MUFJ (Japanese bank) is on the verge of collapse this weekend. If a deal is not consummated by the end of the weekend, I hear Morgan Stanley is TOAST.

 

Only Goldman will be left.

 

Yikes.

 

Depression here we come.

In any case, President Bush is getting ready for the G7 talks by being in Miami right now for a McCain fundraiser tonight.

And McCain is getting the hell out of Miami after hearing this news. :lol

OK,

 

I am a bit separated from my Economics classes, so I have been reading up on the contributing factors to this, and I am colossally pissed off. I already hated the bailout for very good reasons, but now I understand just how amazingly stupid it was. Not only is the enormous bill the wrong way to go about this, but legislation was entirely unnecessary.

 

The SEC has a mark to market rule that limits the value of assets because they are held through bad debt. Indisputably, the properties that secure the loans are worth something, but under current rules they were functionally worthless. As a result, $500b was removed from the balance sheets of the market. But it doesn't end there.

 

Under fractional reserve banking (basically how much a bank can loan based upon deposits), those mark-to-market items are levered at 10 to 1. Basically, for every dollar that is removed from the balance sheet, ten dollars is removed from the bank's lending capital. So that $500b (give or take) amounts to $5 TRILLION dollars of lost liquidity. Even fractionally easing mark-to-market rules (doable by the SEC chairman - without the pork-loving Congress) would open up more than the $700b the government just authorized.

 

Democrats are to blame. Republicans are to blame. Rich Wall Street types are to blame. Everyday citizens with poor spending habits are to blame. This is everyone at fault, even us.

Mark-to-market is a disaster and deserves a lot of the blame here. In the past if a company intended to hold a debt security to maturity they would value it at its amortized cost. I think if that was the current rule a lot of the write-offs would have been avoided because companies would only need to write-down the loans that actually went bad and not the entire pool of loans being polluted by a few bad ones. I may be wrong but that's how I understand it.

http://www.nytimes.com/reuters/business/bu...financial3.html

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IMF Warns of Imminent Financial Meltdown

I definitely blame the Democrats for believing that everyone in this country is entitled to a house despite not having the means to pay for it.

Bush was the one pushing that through his 'ownership society' policy. I don't recall Clinton doing as much as he did in that area.

Fannie/Freddie....and the push to extend home ownership to "subprime" buyers, whether you agree with it or not, or feel the Democrats or Repuplicans are more responsible......is not the root problem of the current economic crisis. If the crisis was just "subprime" it would be a crisis on par with the Keating 5 Savings and Loan crisis from 20 years ago. It's much more than that.

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The real problem is the pervasive attitude in Washington under years of Republican control in the White House and Congress to let the free markets roll. Let the good times roll. Damn the regulations, or any hint of sound banking. Hello to corporate greed and the creation of dangerous new financial derivatives. Filled with all manner of loans. Alt-A loans. Top-tier loans. Under Bush and a Republican Congress it's all been about making more money for the already wealthy. As if this wasn't bad enough, they gave them extra tax breaks. So what if this causes massive deficits. It's been an ongoing disaster. 100 more days.

I agree that the recent idea of creating these artificial 'bubbles' is a really dumb idea. Every time one of these bubbles bursts (which they always do), we have a crisis.

Obviously the problem is much greater than that.

 

However, if you want to analyze the big picture I would argue it can be pinned to our absurd monetary policy of essentially overborrowing and propping up a failed fiat system that promotes artificially induced malinvestment from one bubble to the next without any foresight regarding the impending consequences.

It was you that brought up Fannie/Freddie. I was just responding.

Bubbles and bursts have been around markets for hundreds, if not thousands of years.

It's only recently, under MIA govermental regulation, have the bubbles been allowed to grow to such perverse sizes that it threatens the system. But, we only have 100 more days of this failed administration. If you want to anlyze the big picture, it's the explosion of growth of the quasi-insurance credit default swaps that threaten the system and are at the root of the crisis. Insiders, and those who understand, know that thiere's nowhere near enough money to pay off on all these CDS. 100 years ago, people would be tarred and feathered for selling insurance without the ability to pay off. Not under Bush and 14 years of Republican Congress policy.

For now, if we can begin the process of de-leveraging and more of a sound money policy, then we can escape the prospect of these CDSwaps ever coming due, as they did with Lehman Brothers. The first step is restoring confidence. We'll see.

Unfortunately, we're stuck with the failed fiat system. If I was to go back in time, I would not have been in favor of events of 1914. But as we have it, it's frankly naive to think that we can do away with it. Not until it fails. Which will happen. Maybe not this week or this month, but surely within the next 1000 years.

Mark-to-market is a disaster and deserves a lot of the blame here. In the past if a company intended to hold a debt security to maturity they would value it at its amortized cost. I think if that was the current rule a lot of the write-offs would have been avoided because companies would only need to write-down the loans that actually went bad and not the entire pool of loans being polluted by a few bad ones. I may be wrong but that's how I understand it.

 

I agree that mark to market has contributed to this crisis, but what do you propose? How else are you going to value these assets? I have my own thoughts on this, but am curious about your thoughts.

Mark-to-market is a disaster and deserves a lot of the blame here. In the past if a company intended to hold a debt security to maturity they would value it at its amortized cost. I think if that was the current rule a lot of the write-offs would have been avoided because companies would only need to write-down the loans that actually went bad and not the entire pool of loans being polluted by a few bad ones. I may be wrong but that's how I understand it.

 

I agree that mark to market has contributed to this crisis, but what do you propose? How else are you going to value these assets? I have my own thoughts on this, but am curious about your thoughts.

 

Right out of school my first job was as a CPA working for one of the big six accounting firms and back then when a company acquired a debt security they had to classify it as either Trading, Available-for-Sale or Held-to-Maturity. If you acquired it with the intention to sell it you had to include it in the Trading or the Available-for-Sale portfolios and you had to mark-to-market it. The unrealized gain / loss in the Trading portfolio hit the P&L. The unrealized gain / loss in the Available-for-Sale portfolio went to a section of Capital (no P&L impact). If you acquired the debt security with the intention and ability to hold it to maturity then you had to classify it in the Held-to-Maturity portfolio and this one you did not mark-to-market... it was valued at amortized cost. That was fine back then and I don't see why it wouldn't be fine today.

Mark-to-market is a disaster and deserves a lot of the blame here. In the past if a company intended to hold a debt security to maturity they would value it at its amortized cost. I think if that was the current rule a lot of the write-offs would have been avoided because companies would only need to write-down the loans that actually went bad and not the entire pool of loans being polluted by a few bad ones. I may be wrong but that's how I understand it.

 

I agree that mark to market has contributed to this crisis, but what do you propose? How else are you going to value these assets? I have my own thoughts on this, but am curious about your thoughts.

 

Right out of school my first job was as a CPA working for one of the big six accounting firms and back then when a company acquired a debt security they had to classify it as either Trading, Available-for-Sale or Held-to-Maturity. If you acquired it with the intention to sell it you had to include it in the Trading or the Available-for-Sale portfolios and you had to mark-to-market it. The unrealized gain / loss in the Trading portfolio hit the P&L. The unrealized gain / loss in the Available-for-Sale portfolio went to a section of Capital (no P&L impact). If you acquired the debt security with the intention and ability to hold it to maturity then you had to classify it in the Held-to-Maturity portfolio and this one you did not mark-to-market... it was valued at amortized cost. That was fine back then and I don't see why it wouldn't be fine today.

 

When was this rule changed? And do you know the rationale for the change?

I believe the current rule was implemented in '06. What I described was the rule through '96 but there may have being changes between '96 and '06.

 

In other news, the market is up 15% from the bottom.

Up 20% from the bottom.. WOW.

IMHO, I don't think we are at the bottom....we may be on a short term bottom

 

on 1929....the market rebounded 60% from the initial crash and then sold off for years....be suspect for now, and look for additional confirmation.

FF, you are one of the few people I know (besides myself) that has a pessimistic outlook about this. I'd like to know the basis for your pessimism, as you don't strike me as a pessimistic person by nature?

FF, you are one of the few people I know (besides myself) that has a pessimistic outlook about this. I'd like to know the basis for your pessimism, as you don't strike me as a pessimistic person by nature?

 

I don't have a lot of time...but

 

to me, it all boils down to credit...We over borrowed (both Gov and the public)..We spent that money, we can't take away the excess. Most people don't have any savings, which will bite us in the rear end.

 

We are running an economy on a financial house of cards. The Government strategy is to facilitate credit, which will re-inflate the bubble.

 

The only factor stopping the whole thing going down is the government 'promise' of backing up the financial institutions.

 

As we all know, we have to keep borrowing money and running record high deficits..At some point, the fed will have to raise interest rates in order to entice people to lend us money. That's going to keep the economy down for a long time.

 

also, we will probably enter a deflationary period (which is why Depressions happens). For example, a small business may need to sell assets at heavily discounted prices to pay for debt and avoid bankruptcy. think about how foreclosures is depressing the entire real state market, and lowering the house prices for every one.

 

I'll add more to this later.....