Take a look at David Merkel’s chart of the Fed’s balance sheet.
Merkel is a very smart investor, but he has been against the bailout for political reasons. Now he is in a panic. My question to Merkel is: what did you think was going to happen? Did you think that the Fed would allow the global financial system to collapse just to indulge your naive political views?
So, now we have a pattern:
Day 1 – The “voter”, “taxpayer”, or Depression Advocate instructs his representatives in Congress to implement a depression.
Day 2 – The same fool panics as he sees his investments threatened.
Day 3 – Said fool races to his failing bank to see if his money is still there.
And it is there. But only because his public servants (Chairman Bernanke) have defied his wishes.
The USA was not founded as a democracy, and it is not hard to see why that system of government was not chosen by our Founding Fathers.
George,
The wealth and genius of Silicon Valley has turned to building electric cars. Tesla Motors builds their electric supercar in England now, but they will be building passenger cars in Silicon Valley soon. It is still early, but these people will change the world.
Tesla has an announcement on their website about the new plant:
http://www.teslamotors.com
Matt
Dblwyo;
“George – check out this Fortune story on the Southern gas shortages and the refinery problems: http://tinyurl.com/3et6yk”
Hey, great job getting this article. I think EVERYONE should read it.
Give us a break Matt. Most of us know that we need to get more liquidity to the banks. I think you are missing the point. Most of the intelligent opposition is based on the form not the end goal. Count me in as one of those who oppose the current bailout. Yes, let the whole system freaking burn. Let the people who are in safe cash with real new money pick up the pieces. They deserve the opportunity. I am in favor of the 10 point plan that Nouriel Roubini proposes not the embarrassing plan our formal Goldman Sacks CEO proposes.
Pardon me for being an ass
Senate sends $612 billion defense bill to Bush.
The bill, which maps $612 billion in defense spending next year, shows how lawmakers would rather go home and campaign than wage a prolonged battle in Washington with Bush over Iraq policy.
http://news.yahoo.com/s/ap/20080927/ap_on_go_co/defense_bill
WTF I guess that is what is taking them so long to make a deal.
Happy weekend guiys.
Any predictions for next week’s markets?
bounce turned to a crash friday
right again Matt! thank God we have a Republic at this time of need.
If Mr Merkel wants to panic he should choose the right reasons. The govt’s left hand tears down what the right hand is trying to build. There is no reliable pattern in how banks are taken out / over by the govt. No one knows in advance who will bear the losses and therefore:
“In the process the OTS and the FDIC have effectively removed the main low-cost source of funds of pretty well all banks in America. They will have put the fear-of-Government into such people globally. This is the opposite of moral hazard. In the Moral hazard case people take too many risks because they believe the government will reimburse their losses. But in this case people are going to take too few risks because they know that government might unilaterally remove their rights and property.”
http://brontecapital.blogspot.com/2008/09/reckless-irresponsible-seizure-of.html
Fortis to fall this weekend / next weeks. Total assets Fortis = WaMu + Lehman. The dominos are getting bigger…
Without credit I don’t expect any market rally to have legs.
David – here, here. And kudos to Matt.
George – da nada. My usual weekly gleanings.
Weaving some threads together I’d argue, and did, that the combination of denial plus institutional failure is the root cause of the three crisis we’re whaling on here. Security, Credit Collapse, Energy. Rather than leave that as a bald assertion if anybody’s interested in the details plus backup readings and some great pointers to a Harvard panel on the 911 Commission try this:
http://preview.tinyurl.com/4pauoc
As for next week, dunno. But in the prior thread did put up links and observations. Looks to me like we might get some bounce but thin BUT people are being too calm about this. Found we’re bumping up against the Fib resistances and still in downtrend channels from Oct and 3Mo.
FWIW.
Matt;
OMG! That is an awesome car. I’m salivating. Throw in a couple of solar panels to recharge, and we have icing on the cake.
My wife recently got a Dyson vacuum cleaner. I thought it was a bunch of hype like Oreck, which I’ve used (Electrolux was my choice over the years).
Not so, I found.
I am amazed at how well this Dyson is constructed, ease of use, power, and the engineering of each little piece. Virtually, a vacuum cleaner re-invented – in a way that everything makes sense, if you know what I mean.
I look forward to the re-invention of automobiles. Electric, hydrogen and magnetic technology.
George, I got my mom a Dyson. when she found out the price she said she didn;t want it. Boy after she saw how well it worked she’s loved it.
I research many items thoroughly before buying and that was one of those.
I want that car.!
Matt, this arbitrary gov’t intervention is what is freezing up the market. See what happened to bondholders at WaMu. People don’t know where the elephant will turn, but the elephant sure favors JPM, GS and MS. The best interventionist solution for USA is a promise to nationalize banks as they go under and thereby save depositors and bondholders. This will get credit flowing at a minimum and stop bank runs. Start with the fraudulent GS and MS. Wipe out their shareholders to zero. Investigate the fraud.
As for Ron Paul, well he walks the talk. And has done it for 35 yrs. Last week he voted no to an Hurricane Ike aid package for his home region Galveston. Try influence the 434 others instead.
As for IMF and U.S. style reform on other nations? I guess that won’t happen again.
As for hyperinflation, dollar-nominated commodities and world hunger? We must hope rest of world gets it. But they won’t because they don’t understand monetary policy.
As for Kurt Richebacher who predicted this every week for 10 years, R.I.P.
As for Marx, Neo-cons, Keynes and Friedman: screw’em all. Power corrupts. Absolute power corrupts absolutely.
K;
You’re a good son for helping your mother out. Kudos.
I’ll get that car as long as it is $50,000 or under. I looked at the Volvo Hybrid – $125,000. Nice luxury car, but not worth the price for the gas mileage.
I don’t want a hybrid, I want the real thing.
Are we on a slippery slope here?
All of this sudden nationalization of institutions has put our Fed into the mortgage, banking and insurance business. And quite a large chunk, too. All of those assets are out of the private sector the way I understand it. Okay, the private sector botched it.
So, does the Fed have the responsibility to manage these assets, or do they use a private sector company to do that? The reason I ask is how prepared and educated is the Fed to deal with the daily administration of billions of assets consisting of individual mortgages and things like that? Do they auction off foreclosed homes, collect payments – how does that work?
There exists a similar situation in my town of local city government intervention. They built, own, operate and profit from a very nice aquatic center. It has every exercise machine you can think of and has 2 swimming pools. Very nice. However, it put most of the other gyms and fitness centers out of business. Only 2 remain out of about 8 and those 2 are barely hanging on.
My problem with this is not only are they competing with the private sector, they used tax payer’s money to build it. Who can compete with that? Membership is $40 per month per individual. I suppose that’s to pay back the borrowed taxes.
I think it is great for governments to generate income, but not locally. They should have gotten together with the Chamber and encouraged local business owners to build, own, operate and profit from this facility.
What’s next, automobiles?
all i know is that until obama (or mccain but market likes the other better) gets elected the market will be on a down slope.
I want to start using MACD and not look at 5min frame charts but look at 1day frames like i did when i invested “long” term.
the thing is right now it is a trading market and not a trending one so I don;t trust MACD for long trades as much as Stochastic.. need to find out if 21,3,5 are good values for it tho.
i think am sleepy.. lol something doesn’t sound right about what i just said
maybe i mixed things up a bit. goodnight
Hey guys, what’s wrong with you? The world is saved now and you are all sleeping??? Let’s have a big party. LOL
http://biz.yahoo.com/ap/080928/financial_meltdown.html
K;
I used to trade the daily chart exclusively. I use the stochastic but I always waited for the weekly stochastic to confirm a good entry. Then you can follow the MACD or MAs if you want to catch a longer trend.
What used to fake me out at first were the down days. I thought price was reversing on me. Most of the time, they are merely down days in an uptrend of a stochastic cycle. You’ll know because the stochastic will still be moving up as well as the weekly. Make your indicator (stochastic kiss or reverse down to 80, MACD cross, etc.) take you out.
Note that the stochastic will cycle and trend within the MACD and MAs. I determine beforehand if I am going to swing the stochastic or stick with the MACD and trendlines. Often, the daily stochastic will make many cycle swings while pushing the MACD up. That’s the key.
The only thing about the daily is, often you have to wait a long time before a setup comes along, especially in a bear market. Of course, there are always sectors and stocks making moves up and you can scan for those. I still have automated scans that give me setups based upon the MACD.
Bonne Chance
so now that the world is saved we will see 1000 pts on monday?
i still think gold will be a good choice.
lucky guys that got in on friday at banks will hopefully make some awesome profit.
http://econompicdata.blogspot.com/2008/09/we-have-bailout-no-more-fear.html
George Nubert,
Re: “let the whole system freaking burn”
You know that by saying the above you have declared yourself to be a shithead, right?
Phew i thought you called our own George a shithead.
hehe, LOL.
Either I’m already one or don’t know enough to be one.
I can’t wait until the market opens tomorrow. I may not be able to sleep tonight for all the excitement. The suspense is intense. Anything can happen.
The $200 Tank of Gas;
I finally got some gasoline for my car. I had a guy (handyman) who helps me with repairs and he had some gas in his truck. I talked him into a “plan” to get gas.
We got several 5 gallon cans and a funnel from HD and Lowe’s. Drove 2 hours to SC, drove around and found a station that had gas. There was a line, but not too long. Filled the truck and the cans up with regular. We didn’t know if we would make it there, so my backup plan was to call AAA to toe us back home.
I put some in my car and my wife’s. Hers takes a higher octane so I got an octane booster.
Total cost – $120 for the gas and octane booster, $80 for his time and truck.
End of saga.
HEHE;
Not “toe”, “tow” – told ya I’m excited.
that was great plan george.
Rep. Marcy Captur: “They Want MaMa To Make It All Better”
http://tw.youtube.com/watch?v=mbD62gNi9WE
Aljazeera’s News Channel used this video with the caption “WALLSTREET BAILOUT – America is going down the toilet”.
Aljazeera can go pound sand.
I would rather go down an American toilet than live in a Middle East outhouse.
David, well said.
As for Rep Captur, it is clear that she either does not understand our credit economy, or she is just going for voter brownie points (like the House Pubs), neither of which give me a favorable view of her.
George, OT but what kind of car does your wife drive that needs premium? Just curious because I also have a car that needs it.
Matt,
You should moderate your comments. Profanity typically indicates a lack of intellect, is offensive, and highly undesirable. Certainly the profanity and name-calling doesn’t induce the will to comment further and will diminish the integrity of your blog. Ultimately this will limit the richness of your comment section. I have a thick skin so here is my reply.
Admin,
Are you so afraid of open market price discovery that you need to resort to your primal instincts and start name-calling? I threw the Nouriel Roubini bone out there for you to gnaw on and was looking for some meaningful comment. It looks like I am not going to get any on this forum.
Are you a supporter of socialism for the wealthy? Do you like your markets overtly managed by the government so the downside is minimized and the upside is endless? I bet you have become used to the Sunday night interventions and the little shots of lower interest rates just when things were getting iffy. I guess you support the short selling ban also. You must not be prepared for the inevitable.
What a pity the markets are going down further. Let me tell you a secret. The bailout won’t work. Price fixing won’t work. The market will adjust. Maybe at best it will be a little more orderly but in return you will pay with a lower standard of living over a longer period of time. This will give you the illusion of well being and you will start feeling comfortably numb. At the end of the day only one thing will resolve this great borrowing binge; a conversion from excess consumption to excess productivity and savings. I have faith that America will make it through but it is going to hurt.
For those of us who are prepared and did not participate in the party, free market price discovery is a very healthy event. We welcome it. It may even induce us to put that fresh capital everyone needs to work. In the old weightlifting terms no pain no gain and the market has not inflicted enough pain. Unfortunately the pain will be commensurate with the euphoria experienced on the upside and from what I observed the euphoria was pretty good.
The difference between you and I is that I and other Americans might just be a little more prepared for free markets than you are. Yes there are a lot of ignorant people out there and our system depends on them but don’t think for a minute that all of the people that take the time to write their congressional delegation are stupid or ignorant. Did you write your congressional delegation? I bet you didn’t. I did. They know I don’t want what was proposed and no name calling will change my informed opinion.
There are a lot of people out here in heartland America that did not experience the high and well, we just won’t experience the low either. We just keep investing when the risk to reward ratio is in our favor and avoid running with the herd just before it runs off the cliff. We just don’t have much empathy for those who lied and cheated their way to fast money. We know that once the rest of the herd is driven to their death the grass just gets greener and we can start slowly grazing again.
George N,
It is clear that you are not a regular reader of Matt’s blog. If you were, then you would realize that most of the government intervention has been criticized by Matt and many of the commentators. So most of your latest comments are just preaching to the choir.
The latest proposal is one exception, because we realize that if the we “let the whole system freaking burn,” the consequences would spread everywhere, including the special people in the heartland. Even Nouriel Roubini seems to understand this, as step 1 of his plan was: “As with the Treasury TARP plan, you need to buy illiquid/toxic assets and take them off the balance sheet of banks and financial institutions to reliquefy them and allow new credit creation.” It doesn’t soound like you and Roubini are on the same page.
“What a pity the markets are going down further. Let me tell you a secret. The bailout won’t work. Price fixing won’t work. The market will adjust.”
Aww really.
Paul,
Things are not so clear. I have read Matt’s blog for a few months each and every night. I find Matt amusing and willing to go out on a limb with predictions. I like to read the opinions of a trader and technician. I read about six trader blogs to balance my market research and his is one of them. His method of deploying capital is the complete opposite of my investment style and I like to keep track of the predictions.
I have read about the opposition to the short selling ban and so on and so forth. However, I do take exception to this almost desperate approval of the first bailout proposal. Doing something, anything was not the correct course of action when the something is just as stupid as letting the freaking thing burn.
I read Merkel also. He never strikes me as panicking. He just sees how flawed the original plan was and was in a state of despair as we all watched the idiots in Washington. He is a thoughtful and insightful read. His writing has helped me quite a bit. So that part of the post triggered a reaction.
The moral hazard is a really big issue with my associates who are in similar investment positions. We are waiting to enter when the market is allowed to do what it needs to do. I am certain that there is a lot of private money waiting out there to deploy. The first proposal was completely unacceptable. The proposal at hand is a little better.
Given the chance I would place all hope on Nouriel’s 10 part plan. He makes so much sense it is pathetic. If you have a chance, listen to his latest conference call posted on his web site. I have followed him for two years and he is primarily responsible for saving me a whole bunch of money. I am not much of a trader, but this time, for the first time since I have been investing, I slowly scaled out of equity and real estate investments into cash equivalents starting the winter before last for real estate and ending just about a year ago for equities. The last bear market taught me something. I saw this one coming. I was too young last time. Still, I credit pure luck in timing with some thoughtful action. I guess if I were still exposed my tune would change and I may be a little more anxious but for now I have to admit there are times I just say the let it come down fast so my associates and I can pick up the pieces. Hanging out earning two to four percent hurts but I guess it doesn’t hurt as bad as ultimately loosing 45%.
K,
So you think it won’t work either? How far do you think we will go? How much of a contraction are we in for? Is our financial system safe now that we have spent the big bucks or is it just a 700 billion dollar delay of the game? What have we accomplished? Purchased time to fix the CDS and other derivative markets? How many useless ways have we figured out to gamble with our future and when are we going to unwind them? Were we really going to a great depression II or have we just been taken. I am not so sure and a little more cynical. I think we have just been taken in more ways then one.
This will be my last rant on this one. Thanks for hearing me out.
George N, many thanks for your explanations.