Open Thread: How About That Fade . . . ?


Mr. Market got the 50 bps he wanted — and after a brief 250 point run up in the Dow, gave just about all of it back.

The excuse du jour was that its the traders fault blamed a Fitch downgrade of FGIC, or WIlliam Ackman’s comments that MBIA and Ambac each had much bigger than reported losses. Maybe it was the report that S&P may lower or cut $534 billion of subprime debt.

Regardless, the gains were all spit up by the bell.

Question:  Will markets rally on this cut, or is the Fed pushing on a string?  Y’all discuss this, while I go out for a few drinks. (play nice)


What say ye?

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Discussions found on the web:
  1. Steve commented on Jan 30

    Wow, WTH(hell) glad I did not take a swing trade position on that one, yeah the bulls should’a got a rally, but there just seems to be overwhelming downward pressure at este’ momento!

  2. scorpio commented on Jan 30

    had to go down. even Kudlow doesnt think you can cut 125 bps per week for very long. and the previous cuts certainly had a salutary effect on Mr Market.

  3. mlnberger commented on Jan 30

    I figure the U.S. economy, between bank losses and increasingly scared consumers, has lost some 200, 300, maybe 400 billions in GDP, on an annual basis. Banks are more cautious, consumers don’t want more debt. Wiley Coyote moment comes when the markets realize nothing the Fed can do will affect the fundamental problems afflicting the U.S. economy. I expect to Europe, especially U.K., to be falling in tandem; but their fall will be healthier because the ECB will not be lowering rates. Asia will stumble, and only moderately recover. The rest of the world will be slow to make up the decline in the U.S. — I’m guessing slow global growth into 2009. No need to rush back into equities for awhile.

  4. Keith Shepard commented on Jan 30

    I vote the Fed is pushing a schwing.

    Schwing! Economics

    The problem is, the Fed can make more money available in the financial system, but it can’t force lenders to lend it out—or borrowers to borrow it. Economists refer to this problem as “pushing on a string.” You can push and push, but the string just collects in a pile. Nothing happens.

  5. Chief Tomahawk commented on Jan 30

    When was the last time the DOW closed down on the day of a Fed rate cut????

  6. Stuart commented on Jan 30

    as I mentioned earlier c) and c) and then d) as they realize they’re pushing on a string. The markets realizing this too is why the fade into closing.

  7. peter from oz commented on Jan 30

    negative real interest rates
    inflation rampant
    banks refinancing themselves thru the fed but still not trusting each other let alone the consumer!
    ummm is nero fiddling while rome is burning?
    rgds pcm

  8. sysin3 commented on Jan 30

    Yep, what Keith said…

    It ain’t a monetary crisis … it’s a credit implosion.

    There’s no cure for that, except time and pain.

  9. Tim commented on Jan 30

    Just one comment about the “rampant inflation.” Not any more. For the last year or so? Absolutely. Going forward? No way. The tide only recently, as in circa January ’08, started to turn, but it be a turning. Make no mistake, it’s a turning.

  10. Ross commented on Jan 30

    Looks like a bunch of traders got caught leaning towards second. Youurr’e out!

    Banks are in bidness to lend money. Given the yield curve, those shylocks will earn a bunch of moola. I suspect, however, you better have a real good payment history and an iron balance sheet…Credit standards worldwide are getting TIGHT.

    I need a question answered…Where is the NEXT bubble? Ideas? I need to get in front of that train.

    Bumper sticker on the back of a former mortgage brokers car “God please let there be another housing bubble. Next time I promise not to piss it away.”

    Oh, the answer to the next bubble may be what grows in Kansas and Moos in Texas.

  11. Advsy commented on Jan 30

    So many things that one can say.

    The bottom line is that there is no way an economy that needs a 1.25% rate cut is healthy!

    The bottom bottom line is that if having low rates caused all this mess than how can low rates be the solution!!!!!

    We very much on purpose allowed poor policies to create a credit bubble. Well, that is over! Why can’t people just get their arms wrapped around that one.

    Lowering rates just buys one a little time before one has to face the music. However, it is also a shortsighted approach because the longer we wait to deal with this the worse the pain will be!!!!

  12. Zed commented on Jan 30

    The US government is bankrupt, municipal governments will soon be bankrupt, the entire credit and investment system is bankrupt. The financial system in the US is finished. Dead. We’re just at the beginning of the complete elimination of wealth and the economy. Gold, food stores and plenty of ammunition in a defendable position are your only prayer.

  13. Winston Munn commented on Jan 30

    The answer lies more in psychology than in interest rates.

    There are over 300 million here in America – has any TBP reader stopped to take his own risk pulse – what is your perception of liquidity? Are you unconcerned about upping your credit card debt because it’s been easy to pay, or are you feeling more cautious about taking on new debt? If you refinanced your home right now, would you use the extra money to go on a spending spree or would you eliminate as much other debt as possible and “wait and see”. From moods around me, the answer would be to take the bunker mentality approach, so it appears the euphoria of spend and pay later has collapsed, along with the changes in liquidity perception.

    The Fed can do what they wish with rates, but until the prevailing feeling is that it’s safe to get back into the water, the economy will sit on the sand and wait for more inviting surf, smaller waves, less risk.

    Perception change.

    I believe where most are miscalculating this deflationary pressure is looking strictly at the hard asset – the house falling in value or the CDO with no bid – what is neglected is the fact that layers of paper assets have been utilized as real assets, and piled atop those are more layers of leverage, creating an inverse and unstable pyramid of debt. Anyone who has traded the markets knows how fast paper profits can disappear.

    Imagine those paper profits leveraged 5, 10, 20 times to further incease the position size – how much downward pressure on the papaer profit would cause a systemic collapse?

    If this inverted debt pyramid starts to unwind seriously, a squadron of Ben’s B-52s won’t be able to drop money fast enough to keep up with the collapsing debt.

    And that is what has the Fed spooked.

  14. Michael commented on Jan 30

    C. Tomahawk:

    “When was the last time the DOW closed down on the day of a Fed rate cut????”

    Uh…a week ago Tuesday?

  15. PeterR commented on Jan 30

    OK, a couple of drinks — I can vote for this.

    Buffet’s Hair Trigger quote becomes more important every day IMO.

  16. JasRas commented on Jan 30

    This market is trading on technicals only… It’s like flying instrument only. I don’t like it, but it is the only thing trustworthy when looking at the indices… Yes, individual stocks have given head fakes…mmmm, like financials, but if you started from macro, then worked to micro, you would have been extremely cautious and borrowed those stocks only for a trade.

    It really didn’t matter what the Fed did today. The indices had run up to massive resistance and did so on very week internals. The sum of the parts would have led you to believe the risk was all to the downside and take some chips off the table…

    We have a long way to go, a lot more head fakes, a lot more volatility, and a lot more blood to leave on the street. Believe it or not, what we’ve experienced so far is only a “flesh wound”.

    Good luck to all. If you are reading Barry, you are at least feeding your brain good discourse.

  17. Ross commented on Jan 30

    Someone take the bong away from Zed…..

    What Winston said and redoubled.

  18. Pierre Daillie commented on Jan 30

    I think the market continues to be weak and down on the continued need to raise cash and unwind carry trade, and will be punctuated by short covering. As long as the AMBACs, MBIAs and ACAs are in need of hundreds of billions of dollars, so will the banks…

    Watch out below…and put on a pair of Ultra-shorts.

  19. StocksRider commented on Jan 30

    ADP is foreboding a pretty good number for payrolls. Besides Bill Ackman who is talking crap about ABK and MBIA is a short seller. The market will sooner or later realize that too. And then of course there are the negatives that readers have been pointing out. Bottomline to me is that market is going to have huge swings either side. So I say my money is on the sidelines for intermediate term trades but am putting my money on extremely short term trades for extremely short term waves.

  20. ilsm commented on Jan 30

    There is nothing worth financing out there.

    Maybe if there is no need to ever pay it back, and the fed pays interest to use their money, people might find something to borrow money to acquire.

    The suckers are no longer solvent, if they ever were.

    Dow 7500………..

  21. Farmboy commented on Jan 30

    NEXT BUBBLE: The farm bubble is a couple of years old and not strong IMHO. In other words it might be too late to make much money by buying farm assets.

    Cost of putting in corn this year went up
    60-70% in my part of the world. Either farmers are going to get $4.00 plus for corn or the party is over fast…..

  22. Pat Gorup commented on Jan 30

    “Just one comment about the “rampant inflation.” Not any more. For the last year or so? Absolutely. Going forward? No way.”

    Kraft said today that the cost of dairy products has increased by 40%. They are letting margins take a hit rather than passing on the increase to consumers due to the poor economy.

    The dollar took another hit today, thanks to another rate cut. Oil, then eventually gas is priced in dollars so expect it to go up accordingly.

    IF the FED manages to reinflate the old economy,corporations postponing increases to consumers will pass them on.

    Food and energy inflation are a given. Your dollar being worth less six months from now is too.

  23. Farmboy commented on Jan 30

    NEXT BUBBLE: The farm bubble is a couple of years old and not strong IMHO. In other words it might be too late to make much money by buying farm assets.

    Cost of putting in corn this year went up
    60-70% in my part of the world. Either farmers are going to get $4.00 plus for corn or the party is over fast…..

  24. SINGER commented on Jan 30

    (1) Everyone I talk to about the market who is “a layperson” regarding it, says “Good time to Buy”…so I’m skeptical about the lack of further downside.

    (2) It feels like the central banks are going for the scenario where we eventually get much higher equity prices but only nominally and that in essence things are not good vis a vis purchasing power but the average Joe looks at the Indices and sees higher prices and doesn’t understand whats so bad about it…

    ***For instance the DJIA has gone from 1,000 to 14,000 but the cost of living is so much higher that economic life is worse not better than it was with the DJIA at 1,000***

  25. Guy M. Lerner commented on Jan 30

    225 basis points and the markets are still lower; when Kudlow and crew completely throw in the towel that the Fed doesn’t work anymore and they are part of the problem is when you buy.

  26. Andy Tabbo commented on Jan 30

    The market failed perfectly into the 38.2% retracement of the entire decline after holding the 38.2% retracement of the entire 2002-2007 advance.

    1314 – 1295 is now the must hold zone for S&P bulls. A break of 1295 will trigger a rapid decline 1213 for the completion of fifth wave of a five wave decline down.

    Be careful out there.


  27. alex norman commented on Jan 30

    I think it was Paul Mc Culley who pointed out recently that the housing market was the primary transmission mechanism through which the Fed stimulates consumption by lowering interest rates — indirectly by making people feel wealthier, and directly through cash-out refi/heloc.

    Unfortunately now that is pushing on a string because consumers are tapped out, up to their eyeballs in debt, and afraid that home prices will be falling indefinitely.

    Another interesting piece recently stated that the Fed is not cutting aggressively to support the equity markets, but is basically trying to keep the banks in business by keeping the yield curve as steep as possible.

    This makes a lot of sense if we consider that the Fed may finally have come to the realization that the Wall St. Securitization/Structured Finance system of credit creation may be fatally flawed and/or in need of serious regulation. In other words, Greenspan was horribly, terribly wrong.

    If we are going back to a financial system based on balance-sheet lending, the banks are going to need as much help as they can get from the Fed as they try to stay in business while their balance sheets continue to deteriorate.

  28. mhm commented on Jan 30

    Something novel, surprising, is needed to prop up the market. Fed cuts and stimulus pack are too predictable and take too long to show results; they can be priced into the market action.

    So, what would you do to bring it up. A mega merger between banks? A mega bail out of bond insurers? Bush stepping down? (hey, that would work!)

  29. red95king commented on Jan 30

    Last time I remember the market closing down after a rate cut was 2003 I believe.

    When CNBC is showing infomercials 20 hrs per day – buy stocks.

  30. Stormrunner commented on Jan 30

    Winston said
    >>Ben’s B-52s won’t be able to drop money fast enough to keep up with the collapsing debt.

    justification for the helicopter “medi-vac” approach, if taken in context with all recent US engagements. Recent actions have undoubtedly been “spoiling wars”, the aim is not to win but to inflict enough damage as to counter your oppositions proliferation.

    It is difficult to believe after the removal of very valid regulation under the pretense of financial innovation, that we are not in a theater of economic warfare. Real intention to fix the problem is not even being discussed, Hillary is crying foul at the banks, never admitting that Bill signed off on the legislation that put legs on this fraud. McCain is adding staff members who are liason to Mexico in support of a loose regional economy. The globalists are winning the pain we will undoubted experience will be the carrot for acceptance of the loss of our sovereign identity.

  31. GregorSamsa commented on Jan 30

    Cramer said we would “ramp” in the 3:00 hour. Guess he meant “boat ramp”! Booo-yah!!!!!!!!!!!!!!!!!!!

  32. Steve Barry commented on Jan 30

    Doesn’t get any worse than this for bulls. They have blown 125 basis points and Nas futures are down 18 right now. 10 day put call fell again and we are further from a bottom. What can save you now? If Google disappoints tomorrow and NFP aren’t great it may get even worse.

    I said two weeks ago GOOG would hit 500 soon…someone bought the puts I think. Glad I sold my muni fund too…starting to roll over. If you are agressive hold 1/3 cash, 2/3 QID. If you are conservative, hold 1/3 cash, 1/3 very short term treasuries, 1/3 QID.

  33. Vermont Trader.. commented on Jan 30

    This volatility rocks!


  34. Crim Jamer commented on Jan 30

    Suge? Suge?

    Where are Suge “Bernanke’s Boy” and Borchers. They told me we’d be up 500 by now.

  35. Steve Barry commented on Jan 30

    Now the fun will start…former mortgage employees are spilling the beans on massive fraud!!! Where is the Fed in its role to foster a sound banking system and practices????

    Fired Worker Sues KB-Countrywide

  36. 12th percentile commented on Jan 30

    Where is Suge? Maybe he had a meeting with his parole officer? His predictions seem a bit off. Guess some time in the joint tossing salad can make life on the outside always seem like good times.

  37. Stuart commented on Jan 30

    what say ye, I say you’ve gotta be an complete fool to buy 10 year treasuries… no, worse than fool, for deliberately trying to lose money.

  38. FT Woods commented on Jan 30


    Is there a proper name for what’s happening? (besides sh*t hitting fan)

    It’s not inflation as wages are stagnant and RE is dropping. It’s not deflation because commodities and living expenses are rising. If it’s stagflation, rate cuts will only make it worse, no?

  39. wabrew commented on Jan 30

    The market should move sideways for the next 4-6 months (+- 2-3 % moves). Why?

    Inflation is dead, Petrol will slowly come down, pricing power at all levels will shrink. Lower earnings baked in the cake – but market will look over the valley to a big boom starting in 2009.
    No housing starts for the next few months means supply shrinks, even though foreclosures increase thereby increasing units available. Interest rates have bottomed, but will not start moving up till late summer (big window to refi/do new purchases in housing market.)

    Investors will get 8% CAP rates on home rentals with potential of substantial appreciation from these undervalued levels. Why invest in a ten year @ 4% and get a dollar back in ten years when you can buy 1600 square feet in Las Vegas for less than $125/foot, rent for $10/foot (approx 8% net return) and sell for > $250 /foot in ten years?
    They are giving away houses in Las Vegas and the supply will be there for the next six months. — As long as the grey haired new retirees in California can continue to get >$400/foot for their overpriced property in the costal areas they will sell and move to Vegas. There are only about 25,000 properties for sale, not including condos, the supply is not increasing due to new construction, and more than 4,000 new people are moving to LV each month– easy pickings.

    Expect to see Dow 15,000 by November 2009.

  40. Suge Knight commented on Jan 30

    Suge is here smokig a fat cuban cigar, it’s all good. My boy Bernanke will cut rates by 75bps next week if the market is not up by Friday. What cha’ say about that??

    Suge aka “Bernanke’s boy” LOL!!

  41. sanjosie commented on Jan 30

    The facile among traders took er’ up. But the reality of the credit malaise (credit insurance insolvency) burst their short-lived run.

    Mick Jagger is singing to a forlorn Ben Bernanke “You can’t always get what you want…”

    The Fed tools of control only work if they’ve maintained regulatory control of the tools of finance. Greenspan left the new tools of finance unregulated, therefore the current Fed is left marginalized, without regulatory coverage of the entire finance system. Control of margin, aka leverage, aka gearing is crucial for the Fed. These Fed-ademics have let that get by them — what do they need to be reminded of that lesson – a new social revolution?

  42. Stuart commented on Jan 30

    What is the likelihood the Fed already knows what Friday’s jobs report will be?

  43. phil commented on Jan 30

    Schwing(string) economics. That’s funny.

    Here’s my take on Bernanke’s plan:
    1)Lower short term interest rates creating a profitable yield curve for the banking system he represents(the fed doesn’t represent us).
    2)If and when foreigner’s dump our long term bonds that’s ok because the spread increases helping the banks further. Of course volume will decrease but profitability will increase.
    3)Now here’s the beauty of it all. You’d think the dollar would drop. Right? Maybe not. Look at Japan. My bet is Bernanke thinks the USD has a floor beneath it because it may become the ‘carry trade’ currency, replacing Japan, with our short term rates so low. The international banks are all co-ordinating and may explain why the ECB keeps talking tough about holding their rates steady.

    What do you think?


  44. Suge Knight commented on Jan 30

    Wabrew, let me add to your comment:

    Expect to see Dow 15,000 by November 2009 AFTER Dow 10,000 in 2008.

    Suge aka “Bernanke’s boy”

  45. Winston Munn commented on Jan 30

    FT Woods wrote, “Is there a proper name for what’s happening? (besides sh*t hitting fan)”

    There is not a name, per se, but Prudent Bear described it well:

    “The misallocation of resources caused by interest-rate manipulations, however, cannot go on forever. The State lowers the interest-rate below the market interest-rate which would reflect consumer preferences in several parallel manners. They debase the dollar by reducing its gold backing, directly inflate the monetary supply by printing out more money, and pump that money into the fractional reserve system, which pyramids on top of that inflation. What happens as a result of this increased credit is that the “price” of loans is lowered, due to increased supply. That is, via these methods, interest rates are lowered indirectly.

    Because of this, projects that are actually unprofitable now appear to be profitable to businessmen. Thus, an economy-wide misallocation of resources occurs, as businessmen nation-wide invest in unprofitable ventures. This state of affairs cannot go on forever. What is actually happening is that both investment and consumption are increasing beyond a sustainable rate. That is, there is more investment than the rate of savings can actually support. Eventually, many ventures will run out of capital, and the businessmen will realize that their investments were actually unprofitable and liquidate them. Or, if the inflation stops, businessmen will realize that the investments they previously thought were profitable are in fact not. This results in a deflationary contraction of credit, in which the fractional reserve process reverses itself, faciliating the re-allocation of resources to efficient uses.”

  46. donna commented on Jan 30

    They would be better off just giving us all the helicopters.

    Seriously. Just buy us all our own helicopter.

    It’s gotta be cheaper.

  47. wabrew commented on Jan 30


    No – the dow will bottom at 12070 – possibly before feb 20th. It will stay in a range of 12070 to 12,840 until early summer. Then everyone with buying power will load up for a 2008 year end rally to at least 13,800. Think about it, we were above 14,000 just a couple of months ago!

    Dow 15,000 by Nov 2009 – you heard it here first.

  48. Suge Knight commented on Jan 30


    I smoke good weed and drink the best cognac you can find. Would you mind sharing the name of your weed supplier so I can get my hands on that weed you’re smoking? must be really strong (just my type of speed). I’m so glad you figured out what the market is going to do the rest of the year, and it only took you a few minutes, not bad at all and you even provide a bottom for the Dow, AMAZING!!!

    Suge aka “Bernanke’s boy”

  49. Vermont Trader.. commented on Jan 30

    The Dow will bottom 3 times tomorrow and 2 times on friday. That streak will be broken over the weekend and the Dow will not bottom again until Monday.

  50. Suge Knight commented on Jan 30


    So once the Dow hits the magic number 12070 I should go on margin and buy as much as I can then sell when the Dow hits 12840 (early summer). Then wait until the Dow goes back down to 12070 again(testing the bottom I guess right?) and hold it all until it hits 13800 (end of year rally). Now at what point do I sell before the Dow hits 15,000? Do I just hold after it hits 13800?


  51. Chief Tomahawk commented on Jan 30

    C. Tomahawk:

    “When was the last time the DOW closed down on the day of a Fed rate cut????”

    Uh…a week ago Tuesday?

    Posted by: Michael

    Uh, my bad. I had gotten used to “Fed rate cut means market celebrates”.

  52. FT Woods commented on Jan 30

    Thank you Winston.

  53. a guy called john commented on Jan 30

    economy-wide misallocation of resources occurs, as businessmen nation-wide invest in unprofitable ventures

    doesn’t this depend on (foreign) funding or said unprofitable ventures? if a town in norway doesn’t by mortgages, or china refuses to invest throw good money after bad, or diligence says “don’t write the loan, cuz we can’t sell it off” then misallocation doesn’t occur, right?

  54. James Hogan commented on Jan 30

    What is happening here is exactly the same thing that occurred in Japan in 1990/91. The Nikkei was at 39,000+ then, but but it fallen to no higher than 19,000. A fall of at least 50%.

    The Dow, which topped out at something over 14,000 will fall to no higher than 7200, and the trading range will be between 5800 and 6800 for the next 10 years.

    No one guaranteed anyone a bull market.

  55. gary commented on Jan 30

    The fade was because of the spike in the Yen in the last hour. The market is currently slave to the carry trade. Kind of mysterious that big spike in the Yen right into the close as everyone was leaning on the long side. I wouldn’t put to much emphasis on today’s reversal. If the Yen is down tomorrow the market will probably finish the rally that started today at 2:15. Personally I’ll just sit with my gold which by the way didn’t participate in any of the last hour shenanigans.

  56. FT Woods commented on Jan 30

    a guy called john,
    economy-wide misallocation of resources occurs, as businessmen nation-wide invest in unprofitable ventures
    I believe those events are now past-tense. They’ve already happened. We’re on to the next stage.

  57. wabrew commented on Jan 30

    Surge – just finished a bottle of red zin – so maybe I got carried away – Maybee the dow goes to 12,000 instead of 12,070 – OK?

    winston said

    They debase the dollar by reducing its gold backing, directly inflate the monetary supply by printing out more money, and pump that money into the fractional reserve system, which pyramids on top of that inflation””

    But look at this report from the fed and tell me where you see “printing” of Money

    Dow holds at 12,000 this year.

  58. Winston Munn commented on Jan 30


    FT Woods asked a question and I was tying to help answer it. The quotation: “They debase the dollar by reducing its gold backing, directly inflate the monetary supply by printing out more money, and pump that money into the fractional reserve system, which pyramids on top of that inflation” explains how we got here – it has already occured.

    This is where we are now: “Or, if the inflation stops, businessmen will realize that the investments they previously thought were profitable are in fact not. This results in a deflationary contraction of credit.”

    This is supportive of you views that the market has further losses ahead.

  59. chad commented on Jan 30

    we’ve found a bottom for a few weeks……..i think the ackman/S&P/FGIC trifecta was the perfect backdrop to unload those financials everybody bought last tuesday. Q1 earnings in April should bring us to new lows for the bear. I really think the fed is gonna take a break here. We’re gonna need a complete explosion in ABK and MBI AND everything they underwrote for the fed to cut big again.

  60. R. Timm commented on Jan 30

    Assuming that the US economy slid into recession in December or sometime in Q1 ’08 seems reasonable to me. In the past recessions have typically caused stocks to fall coincident with the start of the recession or slightly prior to the recession. The stock market in past recessionary periods does not typically bottom until 18-24 months from the start. I think we have a long road down with a few sucker rallies in between. I don’t plan on looking at US stocks until the second half of ’09. Cash, TIPS, ultrashort ETFs, and long-short funds are the only things I’ll be in for awhile.

  61. Crim Jamer commented on Jan 30


    I was just looking at some S&P P/E charts you posted in 05…about reversion to the mean stuff. It might be time to post that series again. :)

  62. mddwave commented on Jan 30

    Oh well! If the FED lowers rate enough and mortgage rates are below 4% for 30 years, I can refinance my mortgage. The only trouble then will be if I still have a job?

  63. Chris commented on Jan 30

    Why the hell do we have to prop up the markets? Given today’s access to information, and the wide availabililty of risk control measure like options and inverse funds, anyone in the market should know how to manage risk. The fact is the subprime market clearly topped in ’05, the finanicals broke down in summer 07, along with the small caps, so whoever wasn’t taking profits should stick all their spec cap under their mattress as they clearly can’t read the writing on the wall. The US “investor” (and I use the term loosely) is so beholden to THE FED it makes me sick.

    America: you reap what you sow. Wake the f*ck up. The financial economy produces nothing and is generally a wealth transfer mechanism from lower wealth individuals to higher wealth individuals. Yes, we all want to get rich and not have to work at our sh*tty jobs everyday, and that is why most of us are here reading this. But really, society should be applying itself to something more useful than propping up the goddamn stock market.

    Most people in the world can’t get something for nothing. If you gain an edge in the markets, then you are a lucky one who can get something for nothing. A big part of the problem with the declining markets is that the middle class has a lot riding on the retirement plans and pensions being solvent, but again, that assumes that you can get something for nothing. We need to face reality: our system is set up to transfer wealth to the rich…..end of story. It is not sustainable, and the FED is a red herring as it can not keep the game going forever.

    So, we can ride the bubble cycle or we can call a spade a spade and ask ourselves: what kind of world do we want to live in?

  64. P. K. commented on Jan 31

    Someone asked, the next bubble? GOLD. Let’s see, the world’s reserve currency forced to slash rates how much (while the ECB and British hold firm)? With the freight trains of SS and Medicare bearing down on us with no solution in sight? Tell me where I’m wrong.

  65. P. K. commented on Jan 31

    Someone asked, the next bubble? GOLD. Let’s see, the world’s reserve currency forced to slash rates how much (while the ECB and British hold firm)? With the freight trains of SS and Medicare bearing down on us with no solution in sight? Tell me where I’m wrong.

  66. tom a taxpayer commented on Jan 31

    Incredible! Now the Feds are aiding and abetting bank fraud and cover-up of bank losses.
    Excerpts from Jan 30 Bloomberg article by Jonathan Weil.

    “Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission’s staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
    In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover.”

    This is a must read article, but please, lay down and take your blood pressure medication before reading the article. Your blood will boil.

  67. Tiny Tim commented on Jan 31

    Schwartzenegger Backs McCain

    John McCain — Date of Birth: 29 August 1936
    Age at Inauguration – 73 years and 4 months

    Actuary Odds of Surviving Two Terms in Office
    73 0.037855 0.962145 –
    74 0.041397 0.958603 0.922315083
    75 0.045443 0.954557 0.915041204
    76 0.049973 0.950027 0.906854923
    77 0.054805 0.945195 0.89796077
    78 0.059912 0.940088 0.888566477
    79 0.065457 0.934543 0.87855266
    80 0.071687 0.928313 0.867548416



    Ergo, your odds are better of winning in Vegas,
    than of avoiding Fiscal Apocalypse with McCain.

  68. fallon commented on Jan 31

    MBIA Posts Record $2.3 Billion Loss on Subprime Slump, Seeks Fresh Capital

    Jan. 31 (Bloomberg) — MBIA Inc., the world’s largest bond insurer, posted its biggest-ever quarterly loss and said it is considering new ways to raise capital after a slump in the value of subprime-mortgage securities the company guaranteed.

    The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern the Armonk, New York-based company will lose its Aaa rating at Moody’s Investors Service. The loss came a day after FGIC Corp.’s insurance unit became the third company to be stripped of its AAA credit rating.

    MBIA is seeking to convince Moody’s to retain the Aaa on its insurance unit as Chief Executive Officer Gary Dunton tries to shore up capital through stock and bond sales. Without the Aaa stamp, MBIA would be unable to lend a top rating to new securities, crippling its business and throwing ratings on $652 billion of debt into doubt. The threat of losses prompted the New York State Insurance Department to call a meeting of banks last week to discuss a rescue.

  69. John D commented on Jan 31


    You are bang on.

    Fed’s plan:

    -improve bank gross margins through steep yield curve
    -act as lender of last resort through TAF, etc to keep bank reserves on life support
    -don’t let long end get too high — i.e. don’t exacerbate the mortgage availability housing problem

    Negative feedback in the system is big problem/risk right now.

    Example, as each monoline loses AAA it accelerates mark-downs at the banks — damaging them in their already weakened condition.

    The banking system taken as a whole is on life support.

    The depth and duration of any recession could make this a whole lot worse — like the cold that turns into pneumonia.

  70. Street Creds commented on Jan 31

    MBIA lost $2.3 BILLION in the third QUARTER.
    Wow, game, set, match.

  71. badhaikuguy commented on Jan 31

    You all are real smart.
    eeni meeni mynie moe.
    Long! Short! Long! Short! Cash!

  72. John D commented on Jan 31


    Another thing…

    The view that a 1% FF rate caused this whole mess is way too simple.

    Banks were hugely profitable when short-term rates were at historic lows, but the yield curve was no longer a source of profits when it was so flat for so long. And Greenspan did not anticipate the “sticky” long bond when he began to raise rates a few years back.

    In response to the disappearance of that revenue/profit, many players stretched to keep the good times rolling. Mortgage brokers to banks were all faced with the same situation, and all searched for revenue/profit/margin/yield, and did so by pushing the risk envelope. Nothing exemplified this more than the huge growth post 2003 in stated income, >90%CLTV, option ARM, etc products to feed the securitized finance machine.

    I wonder what the world would be like today if long bond had moved and the yield curve had remained relatively steep after the Fed started hiking rates…

  73. Movie Guy commented on Jan 31

    So, Barrie, what were we drinking?

  74. Movie Guy commented on Jan 31


    Headed out the door for the Moultrie, Georgia car show and swap meet held twice a year. Gotta get there early for the best deals of the four day meet. Taking the 24′ Featherlite.

    The collector car market is still alive and kicking. More relaxing than stocks and bonds. More profit, too.

    Big Blue, the #1 ’67 442 4-speed arrived via Reliable Carriers last night. It’s the best original condition ’67 442 know to exist, having won its category each year until the category was eliminated from Olds Club national events due to Big Blue so they say. Covered up in the garage now after running the traps about 11 hours ago. Fast. Very Fast. And beautiful.

    I suspect that you’re in the wrong line of work for a while.

    If you want a Moutrie report, shoot me an email.


  75. jojo commented on Jan 31

    buy the dips, and sell the rips

  76. Doug Watts commented on Jan 31

    In other words, the traders deliberately made Greenspan horribly, terribly wrong.

    — Ben Stein

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