Financial topics

[aedens]

I will recheck the local real estate numbers I did a few months back and posted.
It was bad then and we already know how things are now. I remembered your
post that you called to cancel. On another note I am thankfull that the storm
is not hitting the midwest since the harvest is needed beyond words.

[OLD1953]

The junk bond market has totally tanked.

(You'll probably have to search Google News for "A Rush Out of Junk" to read it)

http://online.wsj.com/article/SB1000142 ... lenews_wsj

After pumping more than $43.8 billion into high-yield funds between March 2009 and February this year, retail investors have pulled out a record $4.6 billion so far in August—a pace that could surpass the $7.3 billion outflow in June, the highest monthly outflow on record—according to fund tracker Lipper, which began keeping track in 1992. The junk market, which is far smaller than the stock market, is particularly sensitive to mutual-fund flows.

American corporations have a cushion to withstand a bumpy high-yield market. Companies are far stronger than they were in 2008 because they have cut costs, and taken advantage of years of low rates to refinance their debt.
*******

And that last is another positive bit that QE has accomplished. Admitted, it could have been done much more cheaply, but at higher political cost, by simply setting up a direct loan bank of the US, but such practical measures would be "socialism" while throwing the money to the winds and hoping some settles in the right places is not - at least according to the people who worry about such labels. As far as I can tell, the US is in better shape than all but a few countries to weather the coming storm. And the ones in better shape are tiny, not huge.

And an absolutely NASTY study focussing on Moody's has popped up. Conclusions aren't surprising.

http://finance.fortune.cnn.com/2011/08/ ... ings-bias/

Even more damning is their conclusion that assets that generated greater proceeds for the ratings agency were rated more leniently than less lucrative securities. "Ratings optimism (leniency or inflation) increases in the revenue generation by asset class," wrote the authors. "The evidence overwhelmingly suggests that while ratings of structured products were significantly more generous (optimistic) than those assigned to corporate issues, those assigned to municipals and sovereign issuers were significantly less generous (more pessimistic)."

[Higgenbotham]

I can't prove this, but in my opinion there never was anything Bernanke could do except make it worse. He had a plan, the plan was poorly conceived and outdated, said he could prevent a Depression which he couldn't, people believed it and threw their faith behind that, it's now obvious he couldn't, as well as becoming obvious he made it worse.

[aedens]

I read way back they knew in 2005 on senate floor commentary. Thus Ben "FED" knew.
http://hotair.com/archives/2008/09/17/m ... c-in-2005/

McCain managed to predict the entire collapse that has forced the government to eat Fannie Mae and Freddie Mac, along with Bear Stearns and AIG.
Ben wants his thesis and politics did not care. This is democrats and republicans. We all knew....
I have warned many to wait until 2013 and see whats left. One said then before the first wave, no way, 2 listened and 7 got wiped out.
This was when Pete Peterson railed on the current status quo. Currently 25 percent of my equity is at risk.
I read Olds M&A link and it suggests what we posited. This is a event as when In the GD things broke down.

[Higgenbotham]

I read way back they knew in 2005 on senate floor commentary. Thus Ben "FED" knew.

What Ben seemed to think he knew was the same thing Greenspan knew: wait for the problem to hit and throw the rescue at it, then everything goes back to normal. If the problem is bigger just whack it with more money and voila, prices go back up and the economy recovers better than it was before. Oh, real estate might go down a few percent before it comes back like Texas or California during the S&L crisis. Bernanke was Time Man of the Year in 2009 and he saved the world. Buffett et al said the crisis was over and buy stocks. Throw enough money at it and problem solved.

[aedens]

Yes, credit shock "faith" as Old conveyed for the lower grade bond markets.
Most Company's are ahead of this and secured there line if they need it
for supply chain shock support if needed. Navigation lights for some.

http://www2.warwick.ac.uk/fac/soc/econo ... _1930s.pdf

[bluebird]

I'm a rare poster, but IMO, I believe Bernanke knows exactly what he is doing...for the rich banksters and the very wealthy 0.1%. He knows the global Ponzi is going to eventually implode, but first he needed to do QE1, QE2, QE? to steathily transfer the bad financial investments from the private sector to the public sector. He couldn't transfer all the bad investments at one time because it would have been too obvious. So that's why we have had multiple QE programs. In other words, the QE programs were never designed to trickle down to help the small businesses nor to help we the people. It was designed so that the rich get richer, and we get poorer.

[Higgenbotham]

Reality sets in.

http://www.marketwatch.com/story/jackso ... 2011-08-25

Economists said that the recent weakness in the economy stems from structural issues like foreclosed properties and an unskilled pool of unemployed labor that are immune from monetary policy stimulus.

“I hope he talks about the limitations of monetary policy,” said Mickey Levy, chief economist at Bank of America.

Fed policy is very effective at preventing a downturn but once weak demand is in place, monetary policy cannot lift it, Levy said.

As we noted, the Fed got behind the 8 ball when subprime collapsed.

Levy said he expected Bernanke to say the Fed will do whatever it has to do to avoid recession.

Ultimately, the next step is likely to be take steps to alter the composition of the composition of the Fed’s balance sheet to keep bond yields low, he said.

“That is all the Fed can do,” Levy said.

“More QE would not help. Lower long-term yields on the margin would help,” he added.

Operation Twist 2. It won't help but hope springs eternal.

[Higgenbotham]

I'm a rare poster, but IMO, I believe Bernanke knows exactly what he is doing...for the rich banksters and the very wealthy 0.1%. He knows the global Ponzi is going to eventually implode, but first he needed to do QE1, QE2, QE? to steathily transfer the bad financial investments from the private sector to the public sector. He couldn't transfer all the bad investments at one time because it would have been too obvious. So that's why we have had multiple QE programs. In other words, the QE programs were never designed to trickle down to help the small businesses nor to help we the people. It was designed so that the rich get richer, and we get poorer.

A general way to restate all that's been said here recently: After 2007 or so, the center of the system was no longer self sustaining and began to operate at a loss. The choices were to shore it up or let it implode. The choice was made to shore it up. In order to do that, resources had to be sucked from the periphery to the center so that the system could operate at an apparent profit. Now the system is operating at an even greater true loss, there are not enough resources left to suck out of the periphery to cover it, and it will implode anyway. The only difference is the implosion will now be greater than it could have been 3 years ago because much of the productive part of the system has been sucked dry and destroyed.

[vincecate]

After 2007 or so, the center of the system was no longer self sustaining and began to operate at a loss. The choices were to shore it up or let it implode. The choice was made to shore it up. In order to do that, resources had to be sucked from the periphery to the center so that the system could operate at an apparent profit. Now the system is operating at an even greater true loss, there are not enough resources left to suck out of the periphery to cover it, and it will implode anyway. The only difference is the implosion will now be greater than it could have been 3 years ago because much of the productive part of the system has been sucked dry and destroyed.

When the US prints money it is stealing value from dollar holders all around the world, and then spending the new dollars inside the US. If half the dollars are outside the US and the US prints $1 trillion new dollars, they have stolen $500 billion from the rest of the world. At some point the rest of the world will not go along with this and stop holding dollars. After this ends the rest of the world is relieved of an "inflation tax" and better off, but the US will miss this trick badly. The transition will be painful for the whole world.