Black Monday on Wall Street/London?

[Lefty]

(katoeylover @ Sep. 30 2008,03:16) House rejects bail out plan - Dow down 700pts

When the Senate passed it, I think most average folks just figured the House would do the same.

What's the next step for the Govt now? Does Dubya come back with an amended version of the bill?

[jaymee]

(rxpharm @ Sep. 29 2008,22:36) Jaymee, thanks for the analysis. Are you saying that buying into precious metal assets and financials would be a good strategy for the near term?

Also do you see a similar period of inflation that happened in the 1980's happening again? Scary thought, as daily necessities have already gone up a lot.

Yes to precious metals.

Financial assets is not financials though - its assets like stocks etc but do get the evergreen kinds like power grids, mining firms - i.e companies, with a decent dividend yield, which are cash rich and can pass costs on to the people.

[Anthony_Mustang]

As the great Kent Brockman once said

"I've said it before, and I'll say it again: democracy just doesn't work."

[jaymee]

Stogie, I do feel like a geek.

Just as a caveat, my ideas are based on Austrian School as opposed to Bernanke who's a keynesian. So I do believe money supply increase causes inflation. Not many people buy that these days

Anyways, I forgot to add as well that from the gold/dow ratio chart, it shows that dated june 11th, it takes 14 ounces of gold to buy a unit of dow.



But the bottoming process will begin when the ratio lowers to about 1-2 ounces. You can see we are on the way there.

This means, both the gold and dow should likely start to converge at a point. Its just a reference btw, and looking at gold prices now, the dow has some way to go down, and gold has some way to go up. Its tempting to probably buy alot now to keeps, but for non-trading purposes the markets are gonna tank further. Do buy Gold though or even silver those will shoot through the roof.

Its good really they didn't pass the bill, otherwise the next bubble would be probably hyperinflationary and it would be quite impossible to recover from. You could technically borrow $10m to buy a house, and ten years later you'd realise the $10m owed with interest can buy you a loaf of bread.

[Stogie]

Here is the final score...

If you voted down 5% then you win the black gavel...

Who would have thought the NasDaq would be under 2,000 again. When my company was prospering in Dallas in 2000 it was over 5000!

I bailed then and went to Mexico! (Unintentionally clever thing to do!)

We have a long way to go in this story though...

[jaymee]

(Stogie @ Sep. 30 2008,11:12) Here is the final score...

If you voted down 5% then you win the black gavel...

Who would have thought the NasDaq would be under 2,000 again. When my company was prospering in Dallas in 2000 it was over 5000!

I bailed then and went to Mexico! (Unintentionally clever thing to do!)  

We have a long way to go in this story though...

I agree with long way to go. Me thinks the dawn of a new bubble is at hand. My humble analysis of whats to unfold.

First, we know that we entered this mess with certain situations.

1) Massive debt= a massive deflationary backdrop

2) A weak economic cycle based on the above

3) A large cesspool of derivatives mainly based on interest rate defaults, though now called sub-prime.

4) The Fed and Uncle Sam having made the choice to "inflate their way out."

Secondly, we had two choices....

A) Let the debt fail and unravel naturally like 1929 which would have simply been a deflationary depression, but a much deeper one due to the deeper debt metrics at hand - this outcome is very unlikely with keynesian economists at the helm now.

B) Use Dollar inflation to try to convert deflation to stagflation- much like the 70's except for the "degree" of the situation. May result in hyperinflation, not like Weimar Germany, Zimbabwe or Argentina but alot more like the French Assignat. http://en.wikipedia.org/wiki/Assignat

Once the Precious metals bubble goes parabolic above its trading highs (in an attempt to balance the budget), it would be nicer to be selling then rather than rushing to buy.

Remember real interest rates are at historical lows, and what comes down has to go up. I do believe that inflation would bring everything down in the end like it did for the french.

On a brighter note, things could possibly work out though, if by the rare chance, wage inflation spikes up sharply enough such that people could pay off their mortgage debt in a timely manner.

[manarak]

HOLY SHIT - they dared not to approve the plan!

not that it changes anything... the central banks already injected at least 600 billion into the system.

is commerzbank next?

[Looker]

(jaymee @ Sep. 30 2008,12:30) Once the Precious metals bubble goes parabolic above its trading highs (in an attempt to balance the budget), it would be nicer to be selling then rather than rushing to buy.

We much appreciated your very competent and elaborated view about a possible scenario to come. However, the fat cats CEOs in Wall St. do not quite give a damn about what you, all the Forum members and I are actually thinking
What they only care it's how they can pull together those 50-60 mil. $ to pay for houses, a jet, and a yacth.
So, don't expect any logic and any forecast to be be truly predictable.

What only remains it's to have the common sense to -believe or not - buy low and sell high..part of it you have nicely put in the sentence I quoted. Unfortunately THAT common sense it's not that...common

[jaymee]

(Looker @ Sep. 30 2008,16:19)

(jaymee @ Sep. 30 2008,12:30) Once the Precious metals bubble goes parabolic above its trading highs (in an attempt to balance the budget), it would be nicer to be selling then rather than rushing to buy.

We much appreciated your very competent and elaborated view about a possible scenario to come. However, the fat cats CEOs in Wall St. do not quite give a damn about what you, all the Forum members and I are actually thinking
What they only care it's how they can pull together those 50-60 mil. $ to pay for houses, a jet, and a yacth.
So, don't expect any logic and any forecast to be be truly predictable.

What only remains it's to have the common sense to -believe or not - buy low and sell high..part of it you have nicely put in the sentence I quoted. Unfortunately THAT common sense it's not that...common  

Yup. So the caveat applies of course. I'm not a professor or economics expert. *wink*

[thegame925]

Where it all began..........Note the date !!

From The New York Times
By STEVEN A. HOLMES

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.

Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

"Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer (and current Obama advisor ) . '
'Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Pass the salt, please!

[Looker]

Ah! never saw that..we are talking about 9 years ago. No wonder it has snowballed in this mess

[Looker]

(jaymee @ Sep. 30 2008,16:37) Yup. So the caveat applies of course. I'm not a professor or economics expert. *wink*

No, jaymee, you know more than enough but unfortunately too many "beyond control" factors are playing in to economics nowadays.

[Snick]

This is the best line I've seen in ages

I've always believed that America's government was a unique political system €” one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.

http://www.nytimes.com/2008/10/01/op...iedman.html?hp

[Stogie]

That's a good article. But the guy is preaching to the middle class already probably converted.

There are not enough ordinary tolerant voters to care about trust funds, pensions and what ever the fuck goes on Wall Street.

Most Americans can't see the difference between having fuck all WITH Wall Street and having fuck all without it!

Anyway - the vote on Monday was just a ploy to assuage the man in the street and keep him from rioting. They'll get what they want soon enough.

Reminds me of the EU and Ireland... the EU keeps telling the Irish to have as many referendums it takes till the EU gets the result it wants!

[Stogie]

Just when you thought there was a light at the end of the tunnel... I just heard that the Japanese bank Origami has just folded.

Makes you wonder...