Just kidding.

#38 I voted for 2nd inning. Now I don’t know whether to feel smart that it meshes with Goldman Sachs, or to rethink my answer since none of the insiders have had a clue the entire way through this thing.

http://biz.yahoo.com/rb/080325/usa_credit_goldman.html

Goldman sees $1.2 trillion global credit loss

” U.S. leveraged institutions, which include banks, brokers-dealers, hedge funds and government-sponsored enterprises, will suffer roughly $460 billion in credit losses after loan loss provisions, Goldman Sachs economists wrote in a research note released late on Monday.

Losses from this group of players are crucial because they have led to a dramatic pullback in credit availability as they have pared lending to shore up their capital and preserve their capital requirements, they said.

Goldman estimated $120 billion in write-offs have been reported by these leveraged institutions since the credit crunch began last summer.”

With this in mind, I think we are likely in the top of the 4th inning. Jeff Weaver gave up 5 runs in the first two innings and the manager made a move to the bullpin, but brought in Ryan Feierabend (I don’t know who he is either, but his stats are AWEFUL) who proceeded to give up two more runs in the third.

Meanwhile, the Mariner’s have taken one step forward and two steps back in each inning. With the score at 8-2, Ben Bernanke… errr… Mike Hargrove (note he quits midseason) has to make a decision. Will he make a feable attempt to win the game by burning up his well rested bullpin, potentially leading to greater problems in the long run? Or will he conceed the loss and hope he wins the second half of the double header (aka rebuilding a stable economy).

Disclaimer: By using the Mariner’s as my example, I don’t mean to make the situation appear hopeless – though the Mariner’s appear to be a lost cause once again this season (I’m kinda like Randy Quaid in “Major League” – a fabulous film which earned an Academy Award nomination for Best Foreign Language Film – Note that it was the Japanese Film Academy).

But down 30% YOY, despite it being a leap year, so 3.6% more days.

One more number to drive the media’s “it’s the plateau”. “Get ready for the run-up” theories.

Oh well, “No one ever lost money underestimating the intelligence of the American people.” P.T. Barnum.

And the score is 12 to 0, we’re behind too.

And, just to make a very blunt point. To say there is no economic crunch related to housing is to say that the sub-prime fall-out is contained. Did anyone own BSC stock. I’d bet you’d agree then, finally.

1. Inflation is WAY too high
2. We have way more people borrowing money(too many)
3. We have way too many people coming to this country(not to be racist)

As long as the Fed keeps cutting interest rates, inflation will rise(dollar will weaken). And we hold off the inevitable bad resession(possible depression). We havent seen the worst of this yet.

I’d say we are in the 2nd inning and we are trailing 3-0 with the potential of a 15-2 blowout loss.

Options:

1. Raise the interest rates to 8 or 9% and watch housing fall to Year 2000 prices, and wait 2 or 3 years for the economy to rebound.

2. Keep Cutting rates and watch housing lose only some value in ‘dollars’ because of inflation.

Too many Americans are too short sided and like having the homes they bought for $175,000 be worth 350K today, no matter what inflation says. They will want Option 2. And by judging all 3 Presidential candidates, they will give them Option #2.

We will be like Japan. Overcrowded, leading in technology, but with a severely bloated currency and borderline job market.

Don’t let rising commodity prices cloud your vision.

I fully expect there to be some sharp whip-saw rallies, but the over-all trend for commodities will be down. Bear markets are always punctuated with the sharpest of rallies, but they are always short-lived.

BSC didn’t just go TU because there is tons of liquidity flowing through the markets.

If anyone has seen prices go down then I would love to know about it.

Just ask the mill workers being laid off how well lumber prices are holding up. Concrete prices are beginning to fall too. Then, there are all the tradesmen who are being told they have to accept significant pay-cuts (regardless of their materials costs) from the contractors they depend on for business.

And this isn’t even mentioning both stocks and residential real-estate prices that have been falling all year. Even more bizarely, many private universities are starting to lower tuitions (who would have thunk it).

It seems that prices are indeed coming down in many areas.

Let me ask you this, when Japan was suffering a massive housing correction and they cut their rate to 0, did they suffer hyper inflation?

Inflation: Price go up

If anyone has seen prices go down then I would love to know about it.

Don’t you think we would have been bankrupt years ago if a guy with a printing press decided how much currency to put into circulation and thus the value of the US dollar?

The fed sets the discount rate NOT THE INTEREST RATE . The discount rate is the interest rate that is uses for short term lending to commercial banks (and now Investment Banks. It doesn’t matter who has the printing press only who tells them how much to print and the distributes it. This is the job of the federal reserve as “Central Bank.” What you are refering to is the “Reserve” part of the Federal Reserve System – the amount of money that a commercial bank is forced to keep in the Federal Reserve to opperate. This is immaterial because the fed is not limited to “Reserve” deposits.

Here are sources saying as much:

FROM THE FED WEB SITE:

“The Federal Reserve orders new currency from the Bureau of Engraving and Printing, which produces the appropriate denominations and ships them directly to the Reserve Banks. Each note costs about four cents to produce, though the cost varies slightly by denomination.

FROM WIKIPEDIA

“As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation’s coin and paper currency. The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation’s cash supply; the Fed Banks then distribute it to financial institutions.[17]“

We are in the 2nd inning an extra inning game.

Toad

You are wrong. We will not face hyper inflation but massive deflation. The FED DOES NOT PRINT MONEY! The Fed sets the rate at which money is borrowed. The Fed has approximately 800 billion dollars it can lend, and its already borrowed approximately 500 billion dollars.

Any attempt at hyper inflating our way out of this mess nukes the bond market, the Fed knows this and will not “print”.

Bailout on the way! Six trillion goes to the Fed.

I said that the Fed would print more money and buy the mortgaged backed securities from the banks. Someone on the board said that the US mint prints money. While technically accurate it is the central bank (the Fed) that distributes and decides how much currency goes into circulation. The bank requires reserves from commercial banks which is why it is called the Federal Reserve but the Federal Reserve function and the Central Bank function are two separate roles. The reserves from commercial banks ARE NOT the only funds that the federal reserve has access to.

One of the main reasons the Fed exists is so that the branches of government can not simply print money when it is convenient. Zimbabwe was a developed country that tried printing money and ended up destroying the economy with hyper inflation. Wall Street has been up because the Fed is giving loans to investment banks (terrible idea) backed by mortgaged back securities. In other words the Fed is going to own the junk mortgages. The Fed is creating what in economics is called a “moral hazard”. The investment banks get huge profits as the bubble expands and then dump the investment on the taxpayer when it goes bad.

The Fed has already proven that they are incapable of stopping bubbles because of the pressure from member banks so they WILL BAIL OUT INVESTMENT BANKS and stupid lending will continue for another six to eight months. As hyper inflation hits the Fed will panic, interest rates will rise and the Bubble will suddenly deflate.

But I could be wrong.

The consumer is still strong…Subprime is not a problem…Ok, subprime is a problem, but it will stay contained…OK, it’s not contained, but it will only affect the banks and not the broader market…OK, we will have a slowdown, but not a recession…OK, we will have a recession, but only a short/small one…no banks are in trouble…OK, Bear Stearns imploded, but that’s it, it’s over, it’s contained…”

Hard to hit a moving target!

Happy Easter!

But they still have their wit:
“As yet, we have no confirmation that a new breakfast cereal, Credit Crunch, is replacing the customary Danish and coffee breakfasts at morning meetings across the City and Wall Street.” FT

Happy Egg Hunt!

Interesting how there is almost a normal distribution at the moment. I bet Alan could explain why to me.

Happy Easter everybody.