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Note to CNBC Commentators
One of the regular reporters on CNBC was comparing Greece to the
subprime "crisis" of 2007, in that "investors" (I am sure that term is
being used very loosely) are not going to make the same mistake as they
did in 2007 by underestimating the "contagion" that subprime contained.
I feel compelled to correct him. There was no contagion from subprime.
This is not a toxin nor infectious condition. The reason why many people
missed the boat and failed to understand the speed of the spread of
devaluation was because they failed to realize that the cause of the
subprime drop was poor underwriting of loans. If anything was a
contagion, it was the greed born from the ability to pass around risks
that were poorly underwritten using other people's money. Read up on the
entire history in my"Asset Securitization Crisis " series.
The same issues are applying to Greece, Portugal, Spain, Ireland,
California, New York and the CEE countries. Poor fiscal prudence was
abound in the bubble boom times, with budgets and asset prices bulging.
When the bubble pops, the revenues and asset values deflate but the debt
and deficits remain the same, no they actually grew.
When (not if) the sovereign debt and deficit issues become more
prevalent in the media (as opposed to just BoomBustBlog subscribers), it
would be inaccurate to label it as a contagion when the reality of the
situation is that it is simply the natural progression of poor fiscal
management after a credit, real and financial asset bubble. I will try
to put my CEE research and opinion out by tomorrow to exemplify how far
and quickly this can roll through Europe.
I have been warning of this since this time last year, with my BBVA and
Spain macro analysis. See the refresher that I released about a week
ago, just in time to take advantage of the melee': The Spanish Inquisition is About to Begin.
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CNBC on days like today are worth watching. They make Baghdad Bob look credible. The entertainment is priceless.
+ $400 Trilllion, Reggie. As for regular CNBC reporters saying investors “comparing Greece to the subprime ‘crisis’ of 2007 are not going to make the same mistake as they did in 2007 by underestimating the ‘contagion’ that subprime contained,” investors are still underestimating the “contagion” from the 2007 subprime “crisis.” IMHO, we’ve only seen the tip of the $400 Trillion derivatives iceberg—the bulk is still lying unseen beneath the surface, and the good ship American Empire is just now approaching it.
Wow Reggie. You should be the Editor of CNBC. You're the greatest. You would straighten out those bad guys over there.
In fact I think you might be a good politician. Your articles are fantastic. Quality work every time. Awesome images. Charts and such. Lots of links! YOU are the greatest, you give us hope for change.
I have a song for you. I'll post it later. Bye for now. (Oh, and do you have an 900 number so we can call and ask you questions?)
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The other side of infinte Government credit expansion is credit contraction/depression/foreclosures/civil unrest. Which one will the politicans choose? Expand credit or die!!! The amount of money involved Greece/Spain/UK is nothing compared with the trillions the USA needs to finance. This issue will be a non issue next week. My opinion is this sell off is a set up to better than expected employment report tomorrow and a surprise EU announcement over the weekend for the normal blow out upside rally on Monday.
Thank you Reggie.
Can't wait for the municipal bond market report. Sacramento. Harrisburgh. East Berlin. The list goes on.
My guess is that Carlsbad could be safe. Unless they went apesh*t too. Quality people really need to step up and run for elections. There is still a chance that we can save our children's grandchildren if we erase these people off the face of the USA. Do what the British did. Ship the whole freak show the Caymans and chum the waters on the way out.
mr. october goes deep once again. great article, thanks.
but did you see the 3-way they got into after the close? Ensana, Santelli, and Simon? The notion that liquidity was being withdrawn by the EU was not challenged. The argument then deteriorted into Santelli screaming fiscal sanity and and Ensana citing the 1937 comparison. Simon urged Santelli to not be so "parochial", and at that point somebody hit somebody with a chair, and Maria came in and body slammed them both. It was a WWF (financial) scrum, which is refreshing.
They shook hands and agreed that Bernanke should learn some lessons from this episode, and keep the spigot open indefinitely. The other side of the question is will the PIIG countries accept fiscal austerity??
Arnold was just saying the other day that California was ready to turn things around and head into recovery after he leaves..... That state acts like the federal govt except they dont have a printing press...
The federal government does NOT have a printing press. If it did, the USA would have no debt - not one penny. The printing press belongs to the private bankers who call themselves "The FED". They got the printing press in 1913.
I don't remember Thelma & Louise making any turns but as soon as it became apparent their destiny was to become vulture delicacy - sun-dried human pancakes - I switched the channel. I may have missed the ending.
Good point on the contagion...the way I look at it is, say you built a completely deficient structure for a school. Say the foundation was on poor soil, the footings were missing re-bar, there were too few columns, the walls were to thin, there was too little cement in the concrete, the steel beams were undersized and of questionable quality from China. Say the guy you hired to do the structural engineering of the building was really cheap and always gave you really cost efficient designs, but he was old and had cancer and did not have errors and omissions insurance. Say your contractor didn't have a single employee that could read and they never even looked at the questionable engineer's plan or specs anyway. You do all these things because they make you money, but they raise the risks of failure.
Now say one day the teachers have a rally at the school and they bring too many kids into school, and the one last kid steps onto the stairs, and the school collapses. Did that kid cause the failure? Was the overloading due to the rally the complete reason for the failure? Was the progressive failure that started at the stairs a contagion?
No. The structure was an accident waiting to happen.
It was under designed, under built by people that did not have to live or work in it, but made loads of money by not spending to cover reasonable risks.
Everybody's mad at the teachers for packing the rally, but what about the building inspectors, the lame engineer, the rich contractor, corrupt school board, the guy that sold the land, with the crappy foundation soils, to the school district?
The last student that stepped up and started the failure was not a termite unleashed to eat the structure, but rather, he is simply the straw that broke the camels back.
"...but what about the building inspectors, the lame engineer, the rich contractor, corrupt school board, the guy that sold the land, with the crappy foundation soils..."
They should be prayed for, forgiven, and hanged so as to not be a further burden on the peoples' pocket book.
Easy on knocking the engineer and contractor. They produce. The framework is spelled out.
Besides the scenario you present resides in bureacracy which generally makes most points. Governement is the problem and never the solution. If the school didn't require unions and the presence of real market conditions did exist then we mitigate the bullshit mess.
Are you confused about the point the comment, or what?
Reggie! Reggie!! Reggie!
I bet 90% of mom and pops around the world where toxic cnbc broadcasts are aired/cabled must be cursing and swearing too. Story always the same, the bad news get forgotten quickly, everyone believes the Fed and governments won't let the stock market tank, and boom, the squids and friends got them again, sucked the moms and pops dry. But inventory of bonds to sell next week, every other week for the next 2 years, at least until Mr O finishes his one and only term. So stocls would be up and down every other week. Argh nice for ST, for those with a camel's stomach.
Other than Melissa Lee and the traders she interviews, the cast of cnbc is pretty fuckin' ignorant about what's going on in the market. Oh, and Santelli gets props too, but that's it.
“It is difficult to get a man to understand something when his job depends on not understanding it.” Upton Sinclair
your surely not including Kudlow
Melissa Lee? Please....She's just a shill and repeats whatever the cue cards say. And she's completely clueless about finance and economics. The traders are pretty good, though in the last few months they've tried to keep the bearish comments to a minimum.
I like when Santelli lashes out at LiesMan. Other than that, they all dumb!
Exactly. Will they stop telling us that little Johnny is going to Vegas again to kick the cocaine habit. He promises not to drink.
Santelli knows that Mom has said this 50 times before and she better stop saying it. We've all had enough. Raise the rates.
By continuing the "contagion" theme, they can blame poor people and currupt Dems/Frannie etc. Both and all are corrupt,of course, but no more so than the corrupt Repubs.
What they don't get is that the whole system is subprime. Did anything rally more than junk bonds March through January? Well, Spain might have, and anything else close to bankruptcy.
What may shock us all, even those expecting this, is just how fast this drop might be. There is a vacuum under this market.
Max had a note too...
Listen to John Perkins..sounds like we were hoodwinked!
Talks @ Paulson
http://tinyurl.com/ydhamkm
Fiscal prudence? Isn't that an oxymoron in regards to goobermints?
Uh...Roubini beat you to it but thanks.
Ron Insana has to be one of the most stupid human beings in the face of the earth!!! This guy is a complete IDIOT!!!!!
CNBC just SUCKS... BUNCH OF STUPID, IGNORANTS!!! Always late to the news, FUC#$NG RETARDS....YES RETARDS!!!!!!
That why a watch with the TV on MUTE