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How Many 2008 Similarities Can We Find? A Lot
The markets exploded higher late in the day yesterday on yet another rumor that China will save Europe. We’ve seen this rumor several times already and until the “unidentified sources” are named, we’ll stick to the reality which is what Italian Finance Minister stated: Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank."
The similarities between 2008 and today are growing even more eerily similar. We’ve seen a mega-bailout similar to Hank Paulson’s “Bazooka,” we’ve also seen short-selling bans and sovereign bailout rumors (China and Middle East for Wall Street in 2008 vs. China for Europe today).
Investors need to be aware that the credit markets are discounting a sharp depression and that stocks are on very thin ice. We’ve broken to the bearish flag formation which predicts the S&P 500 at 1,000 or so in the future.
Gold is struggling to maintain its highs because of Greek default concerns:
Greek ‘Orderly’ Default Can’t Be Ruled Out, Roesler Tells Welt
An “orderly insolvency” for Greece must not be ruled out for the sake of stabilizing the euro, Die Welt reported, citing German Economy Minister Philipp Roesler.
“To stabilize the euro there must be no taboos,” the newspaper quoted Roesler as saying in an article to be published in tomorrow’s edition. “If need be, that also includes an orderly insolvency of Greece, provided the instruments needed for that are available.”
Defaults are deflationary. Gold has been pushed higher by hedge funds and others anticipating QE 3 or Operation Twist 2 at the Fed’s September meeting next week. The Fed has disappointed at its last two meetings. There is no reason to believe anything has changed. Oil is at $90, Gold is close to $1,900. Food prices are up sharply. How can the Fed unveil another measure now?
More importantly, what difference would it make? Interest rates are at all time lows for the 10-year and approaching all time lows on the 30-year.
Obama’s jobs plan: Timely, targeted, but incomplete
The dismal state of the economy is the main reason many companies are reluctant to hire workers, and few executives are saying that President Obama’s jobs plan — while welcome — will change their minds any time soon.
Among the business leaders attending President Obam'a jobs speech Thursday in Washington were, from left, Jeffrey R. Immelt of General Electric, Kenneth I. Chenault of American Express, Steve Case of AOL and Darlene Miller of Permac Industries.
That sentiment was echoed across numerous industries by executives in companies big and small on Friday, underscoring the challenge for the Obama administration as it tries to encourage hiring and perk up the moribund economy.
http://news.yahoo.com/blogs/exclusive/obama-jobs-plan-timely-targeted-incomplete-142154562.html
$800 billion wasn’t enough to fix the economy. $500 billion isn’t either. Private sector jobs haven’t increased in a decade. That is the real economy. More Government spending cannot fix the structural issues plaguing the US economy today.
Instead Obama is making a political move: a jobs bill that is small enough in size ($500 billion) that he can try to push it without infuriating the populace. The GOP will reject this plan, allowing Obama to claim that the Republicans hurt the economy in his 2012 election.
Expert-Networker Jiau Should Get 10-Year Term for Passing Tips, U.S. Says
Winifred Jiau, the former Primary Global Research LLC consultant convicted of passing inside tips on publicly traded companies, should be sentenced to prison for as long as 10 years, U.S. prosecutors said.
Jiau, 43, of Fremont, California, was convicted by a jury in June of one count each of conspiracy and securities fraud in federal court in Manhattan. She was found guilty of passing earnings and other information about Nvidia Corp. (NVDA) and Marvell Technology Group Ltd. (MRVL) to hedge fund managers Noah Freeman, a former SAC Capital Advisors LP portfolio manager, and Samir Barai, founder of New York-based Barai Capital Management LP.
The political tide is turning in the US. Jail time is now a potential reality for Wall Street (see Lloyd Blankfein’s hiring of a criminal defense attorney).
Future lawsuits will be brought against the banks, Wall Street execs, and even the Fed. This will intensify going into the 2012 election with primary focus on Wall Street and the Fed (see Perry’s and Bachmann’s comments regarding the Fed).
Goldman Sachs slapped over robo-signing
The Federal Reserve sanctioned Goldman Sachs on Thursday, saying the investment bank must investigate questionable lending and foreclosure practices in its former mortgage unit.
The action orders Goldman to review foreclosure proceedings by Litton Loan Servicing between 2009 and 2010 to address "a pattern of misconduct and negligence relating to deficient practices," the Fed said.
Rick Perry Wants to Get Ugly With Ben Bernanke
Republican Presidential nominee Rick Perry spoke in Iowa tonight and had some nasty words for Ben Bernanke. Think Progress first reported Perry's unusual words for the head of the Federal Reserve. Perry told supporters at the end of his first full day campaigning in Iowa that he wasn't a big fan of the head of the Fed, and suggested that Texans would probably beat Bernanke up if he prints anymore money before the next election.
“If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”
http://news.yahoo.com/rick-perry-wants-ugly-ben-bernake-053900247.html
Traders will likely look to push the market higher tomorrow and Wednesday as the usual options expiration games commence. The primary issue is if the break-down in Europe will trump these games. We’ll see…
For more insights and investment ideas, swing by http://gainspainscapital.com/
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Actually the treason began in 1913 when Congress and President exceeded their Constitutional powers and granted the FED (i.e. a European banking cartel) the monopoly of managing the US currency/credit supply (and by extension post WW2 global trade as well). The Constitution does not permit the delegation of this Federal power anymore than it would allow the ‘privatization’ of national defense by simple majority vote.
Regardless since this little experimentation in violating the Constitution has been underway, this cartel has been busily exploiting what should be an exclusive sovereign power alone in order to extract the wealth of our nation and others via the pumping action of inflation/deflation of the currency/credit supply.
Beyond that, what Perry doesn’t seem to understand is that under the current debt based monetary system; to pay down the debt is to destroy the money supply, thereby deepening the depression and plunging tax revenues even further only widening the fiscal budget gap. As it is now the interest expense on the existing debt now exceeds the net wealth generation capability of the nation. On the other hand just printing money to cover the fiscal deficit will only drive inflation higher. Hence the catch-22 inherent in all debt based monetary systems.
The fact is that in 2008 the world’s debt based monetary system received a fatal blow, but as with all fatal blows to big systems (say like the Titanic), the unavoidable death is not immediately apparent to those on board including the Captain. Even once this fact becomes know to the Captain the natural response is to strike up the band in order to lull the passengers on board so as to not create a panic thereby giving plenty of time for the rich and powerful to make it off the ship.
Reminds me of this scene in the Movie the Titanic;
Ismay: [Andrews enters room with crew behind him; he lays out architectural drawings on table, with Ismay behind him] Most unfortunate, captain!
Thomas Andrews: [perspiring and trembling] Water... fourteen feet above the keel in ten minutes. In the forepeak, in all three holds and in the boiler room six.
Ismay: When can we get underway, damnit!
Thomas Andrews: That's five compartments! She can stay afloat with the first four compartments breached, but not five! [tersely to Smith]
Thomas Andrews: Not five. As she goes down by the head, the water will spill over the tops of the bulkheads at E deck from one to the next. Back and back. There's no stopping it.
Smith: The pumps... if we opened the doors...
Thomas Andrews: [interrupting] The pumps buy you time, but minutes only. From this moment, no matter what we do, Titanic will founder.
Ismay: [incredulously] But this ship can't sink!
Thomas Andrews: She's made of iron, sir! I assure you, she can... and she will. It is a mathematical certainty.
What we are witnessing is the first bulkhead breach with Greece right now. Not to worry we will all soon be joining the party and for the same fundamental reasons. Meanwhile those that caused the problems in the first place are going to the boats while we wait our turn and listen to band.
Back to the present problem;
The solution is for all nations to kick this international banking cartel into the dust bin of history and start printing their own sovereign debt free currency again. If combined with balanced budgets and ‘net’ global trade (i.e. you can’t sell more than you buy or the reverse at the global level) we can turn this corner. Anything else just delays the inevitable.
I'm also reminded of similarities to the 1929 crash.
Beware of the "incantations" identified by John Kenneth Galbraith in his book, The Great Crash of 1929. The market was abuzz with the incantation that Great Men were joining together to create "Organized Support" for the market.
Today, we hear the term "orderly insolvency" being thrown around as an incantation. QE3 is another. Incantations are one sign a market is nearing the end.
My reference is the Long Depression of 1873-1979 (or 1873-96):
http://en.wikipedia.org/wiki/Long_Depression
It was due to a real estate boom & bust combined with the packaging of railroad securities that were sold around the world.
By that measure, the "New Long Depression" of 2008-14 should be lovely. Or is it 2008-2031?
This article is completely on target...amazing that the rumor that China will save the bond auction raises the market, then they don't buy and that raises the market and finally the auction results are "tepid" but that raises the market. Ye who defaults first and defaults hardest will rise from the ashes first and fly higher...this should be the gathering idealogy across the western world these days..
An orderly Greek bankrupcy is bullish for stocks. A bailout is not. If they keep the status quo and let the death spiral unravel, stocks wil test new lows...
About ObaMao's 'jobs plan'...you can't centrally plan it and say youll give $5,000 to hire someone when theres no reason to fill that job in the first place. *Fail* again for the central planners, most all of whom have never held an actual job in their entire lives.
We're run by textbook lunatics, and everyones trying to make sense of it. The only sense here is we're at the edge of total collapse and the next push to print more will be the final act to push it all over the cliff.
ALL news is bullish
And 'no news is good news'!
But bad news is supposed to be bullish....
Well... in 2008 the small handful of guys predicting collapse were generally very smart.
Now some of the guys predicting collapse (cough... graham summers... cough) are cheesedicks who hustle newsletters from suburban Arizona, and clutter Zerohedge with spam posts comprised of almost no content, and plenty of sales-pitch.
So that's one difference between 2008 and now, I guess...
1) what have you got against cheese?
2) While no longer a christian, I was raised to believe in the redemption of souls. If Mr. Summers et al. are getting smarter with time, good for them.
3) The worse things get, the more obvious things get, so the more eyes are opened. But don't worry, Still a Lot of denial about.
'Almost treasonous'? Monetizing the debt is total treason, even when not in wartime as we are now.
At least $2 trillion QE has been priced into equities since Feb on every bit of bad news, and it wont be delivered. Thats the real story I think.
In the meantime till Sept 21 faceplant, theyre keeping 401K/pensioners calm, after reality smacks everyone in the head when they realize money printing to monetize stocks is over, it will be too late to sell to an empty bidless market.
Im watching from the bleechers nosebleed section, good luck to anyone on the playing field, youll need it.
Since treason in the US is limited to giving aid and comfort to the enemy and most world players are actually hurt by the Fed's actions I don't think that is a fair assessment. Whether you like the Fed or not, Bernanke's actions are at least within their mandate and therefore legal. Of course there are plenty of things that are both legal and reprehensible at the same time.
The penalty for debasing the dollar, or making it "be of less weight or value" was death:
http://en.wikipedia.org/wiki/Coinage_Act_of_1792
"...even when not in wartime as we are now."
When did we declare war?
Rip Van Winkle wakes up...