Dow 7000?

Back on October 6, I predicted - well sort of predicted by writing a headline on some market news aggregation - Dow 8,000.  Based on the economic and financial industry news of that day just 2 1/2 months ago (seems longer) the Dow dropping to 8,000 and staying in that vicinity for some period of time seemed reasonable.

At the time we had been through Fannie and Freddie, Lehman was failing, more banks were failing and the federal government and media began explaining things like credit default swaps to America.  Things looked bad, but some were still touting the “fundamentals” of the U.S. economy and the publicly traded companies on our major stock exchanges shouldn’t pay too high a price (with dropping share values) for the excesses of the financial services industry.  Also at that time, I was reading Kevin Phillps’ book, Bad Money.  If you want a better understanding than the average bear - or bull - of the current U.S. financial system Bad Money is a must read.  At any rate, under the influence of that book, it was just obvious that as stocks dropped sharply that day there were probably many more shoes to drop, hence the market wasn’t at the bottom yet.

Now I’ll revise my estimate.  On top of the crisis in the financial system and all that it entails, from failing banks to a still too tight credit market there are many more economic indicators pointing to the final quarter of 2008 just being the beginning of a difficult economic downturn.  Here are a few things that immediately come to mind: Read more

Text: Ben Bernanke Testimony to House Financial Services Committee | November 18, 2008

Click this link for PDF of Chairman Bernanke’s testimony.

Big Three Automakers, UAW Go Begging on Capitol Hill

Other Than Lehman, Who’s Not Too Big to Fail?

• Automakers beg for aid as their bailout bill stalls - Associated Press
• Big Three try to jumpstart U.S. bailout - Agence France Presse
• GM’s Wagoner: Bailout needed to save U.S. economy from ‘catastrophic collapse’ - Reuters
• Support unravels for Detroit’s share of $700 BN - Detroit Free Press
• Mulally defends Ford’s decisions - Detroit Free Press
• Automakers ask for federal help - Washington Post
• Automakers make their case to Congress - New York Times

Treasury Bailing Out AIG Again

Will There Be Spa Trips and English Hunting Excursions This Time?

I sure hope the executive pigs at AIG get it this time.  After all, the last time our tax money was used to prop up their failing business, they spent hundreds of thousands on a West Coast spa and an English hunting trip.

This morning, the U.S. Dept. of Treasury announced the federal government was upping the AIG bailout ante by $40 billion — bringing the taxpayer funded tab to keep the company solvent to $150 billion.  Additionally, AIG is getting a better deal today on the interest it is paying the federal government for loans the public is backing.  As this once shining capitalist jewel becomes nationalized, that means the public accounts will reap less from the bad business decisions sown by AIG executives.

One must also remember that just weeks ago, New York Attorney General Andrew Cuomo told the insurance company that he was able and willing to ‘help’ them do away with golden parachutes, executive pleasure outings and huge bonuses.  Then, U.S. Rep. Henry Waxman found that former AIG exec Joseph Cassano, who ran the company’s financial products section into the ground and left AIG in February was being paid $1 million a month - for nothing - even as the company slurped up taxpayers’ money. Read more

Sunday Papers – November 9, 2008

New York Times Magazine

• After the Imperial Presidency– Jonathan Mahler
• Payday Lenders, Check Cashers – Redeemed?– Douglas McGray
• Deprogramming Jihadists– Katherine Zoepf

New York Times

• Obama team weighs what to take on first
• Harsh words about Obama? Never mind
• Citing workload public lawyers refuse new cases
• How Merrill fell
• Pelosi, Reid want aid for U.S. automakers
• Op-Ed, Frank Rich: It still felt good morning after
• Op-Ed, Al Gore: The climate for change
• Op-Ed, Thomas Friedman: Show me the money
• Op-Ed, Nicholas Kristof: Obama and the War on Brains
• Rice visits West Bank
• U.S. electricity project in Afghanistan
• Back home, Palin finds landscape changed
• After push for Obama, Unions seek new rules

Washington Post

• Preparing for the Obama era
• Reid, Pelosi urge Treasury to extend aid to automakers
• Self-sufficiency evades Iraqi security forces
• Obama positioned to reverse Bush actions
• Medvedev calls Obama; Kremlin describes call
• Congressional Democrats say economy first priority
• Op-Ed, Rich Lowry: The right needs to get centered
• Op-Ed, Joseph Stiglitz: More pain to come even if he’s perfect
• Op-Ed, Ron Suskind: U.S. has power – it could use authority
• Op-Ed, David Broder: Governors know best
• Op-Ed, George Will: Democratic ironies and Republican Afflictions

Los Angeles Times

• Democrats set sights on Texas
• Public works on the table once again
• Obama relies on a close-knit inner circle
• Op-Ed, Norman Ornstein: The GOP’s deep hole
• Op-Ed, James Rainey: Right-wing media feeds its post-election anger
• Political blogger be nimble, be quick
• Election leaves gay couple feeling isolated

Text: Prof. Nouriel Roubini’s Congressional Testimony, October 30 | Dr. Doom Speaks

Prof. Nouriel Roubini testified today before the U.S. Congress Joint Economic Committee.

Click Here for Roubini’s Written Testimony (PDF)

A Commercial That Should Have Aired on the Real Tube - David Robinson for Congress

As you pop your corn and crack open your favorite cold beverage to sit back and watch Barack Obama tonight, don’t forget about the great Democratic candidates who are left behind this cycle.  Candidates like David Robinson running to unseat career politician Pat Tiberi from the seat which was handed down to him by John Kasich.

It’s astonishing really.  Barack Obama has so much money left in the tank six days out that he will be able to go out tonight and spend 30 unininterrupted minutes and several millions of dollars to seal his deal with America.  On the other hand, you have an accomplished businessman with ideas and an energy policy who can’t get the people who hold Democratic pursestrings to throw a little love his way. 

It’s true, Robinson is a neophyte in politics.  Rumor has it his campaign is a bit haphazard and he’s fairly set in his ways of wanting to do things differently.  Well friends, he won the fucking primary why hasn’t Labor or the DCCC ponied up.  Well, there’s also the argument that his district is solidly red.  The former Democratic candidate spent over a million dollars and lost against Tiberi who is really a backbenching, pathetic sack of internal organs.  They say, we have to marshall our resources — Ohio 12 isn’t on the list. 

Well, guess what.  Voter registration is up in OH-12.  Shamansky was past his prime.  Shamansky is no David Robinson.  A long time ago when I was peripherally involved with the DCCC, Robinson was a candidate party leaders would have died for … handsome, well-spoken, smart, full of ideas - and wait - the vice-president of a small manufacturing business?  Are you kidding?  Let’s put some money down on this guy.

Perhaps party leaders need to rethink how the wealth is spread in the Democratic Party.  Candidates should have to meet standards, but they should also be able to run the race they want to run.  We can fund the hell out of a cranky old candidate whose baggage has made her race more difficult than it should be, but we can’t help Robinson mount any sort of a media campaign?  If Tiberi weren’t so pathetic, I wouldn’t be so exercised.  All I’m saying is let’s expand the metrics we judge candidates on when we have a do-nothing, Bush clone incumbent and a dynamic Democrat to challenge. 

Well, when the earth moves next Tuesday and we pick up more seats in the U.S. House and hopefully get to 60 in the Senate, our party will have left David Robinson behind. 

If we’re on TV for 30 minutes tonight, it’s obvious the resources were there.

The U.S. Government Lie: $700 Billion Bailout

When the U.S. government begins renaming terrible things like killing civilians with misplaced bombs “collateral damage,” we should all know we’re in trouble. When the media doesn’t challenge this government gobbledy-gook but rather adopts it, we’re in bigger trouble. The de-sensitizing has begun. Read more

The $50 Trillion Swindle the Investment Class Doesn’t Have Us on the Hook For - Yet

Credit Default Swaps and the Potential Cost of a Las Vegas Financial System

If you’ve been paying any attention to my posts and choice of content over the last two weeks, you know I’m not for the current $700 billion federal bailout of Wall Street which is underway thanks to the jackasses in Washington – and I’m talking all of them regardless of party.

Granted, I’m not a financial expert. But, I have tried to educate myself, and this bailout just seems to be rewarding bad behavior with worse public policy. One book I’m about done with is Kevin Phillips’ Bad Money. This book is currently ranked 63 on Amazon and I highly recommend it. At any rate, just when I was getting resigned to the fact the bailout is now a fact of life, and there’s nothing I can do about it, I got a little more education this weekend.

On Sunday morning, I heard the latest edition of This American Life. Part of the show dealt with the impending doom that is ‘credit default swaps.’ You should give this show a listen online. Ira Glass’s gang simply defines and exposes the scope of the risk out there with these ’swaps.’ Later in the day came this report by 60 Minutes. This is another great piece of journalism exposing the problem with these financial vehicles. So, what are they – and why should we care?

Let’s say I’m a hedge fund and I have $1 billion wrapped up in a collateralized debt obligation (CDO) – aka a bunch of mortgages bundled together, many of which are shit. Lehman Brothers or CitiGroup comes to me and says, “We will insure you against loss for 2% of what you paid for the CDO.” I’m a little worried about the underlying assets in the CDO, so I say, sure, and fork over $20 million. CitiGroup has now made $20 million for nothing. When banks, investment banks, and hedge funds were doing these deals, they were merely placing a bet that the CDOs they were “insuring” wouldn’t tank.

We know what’s been happening. There’s more junk in the CDOs than anyone realized or cared to admit. I believe part of the reason Lehman failed is that the folks they sold credit default swaps to began to come calling for their insurance payout. But wait, I’m talking about insurance, right? Why are they called ’swaps?’ Simply put, if they called it insurance, it would be regulated, ie. the Lehmans of the world would have to show capital, or a risk reserve fund, backing up their deals. That’s cash. They call them swaps so the whole transaction remains the unregulated, gambling pile of poo that it is.

So far, taxpayers, we’re on the hook for $700 billion. If you watch the 60 Minutes segment, you’ll find out that the estimated value of all the credit default swaps out there in the world’s markets is around $50 trillion. That’s a “T” and an “R” at the beginning of that “illion.” How many more of the “insured” are going to demand payment from the underwriters of these swaps? How many more banks, insurance companies, or investment houses are going under? Who is going to pay for that?

Bailout Bill’s Value to Economy in Long Term Worth the Expense?

Apparently, the first Wall Street Bailout wasn’t big enough for the House Republicans and Democrats who voted against it on Monday. Congressional leaders from both parties are now saying heading into Friday’s planned vote that they’ll have the support they need to saddle the federal government with $700 billion in junk investments and billions more in tax breaks. What doesn’t appear to be in the bill, as passed by the Senate, is even the beginning of rulemaking or regulation to see that the investment class in New York and Washington doesn’t do this to the rest of us ever again.

It still seems ironic that all of the “free market” politicians in Congress are lining up behind what appears to be a huge social program for yachtsmen and polo players. The question tonight is will the action in Congress do anything at all constructive for an American economy that seems to be leading the world only due to the sheer size of an inefficient health care system and more imagination than value in our investment markets.

What Crisis? Dow Posts Third Biggest Gain Ever - Most Americans Don’t See the Sky Falling

Look, I know the stock market isn’t “the economy.”  But days like this will make it all the more difficult for Washington’s politicians to convince voters that $700 billion should be staked to bailout Wall Street’s financiers.

I was in a meeting today previewing a presentation I developed to communicate with a group of people over a thorny issue.  At one point, a colleague said to me, “Pelikan, you’re gonna like this.”

“Are we trying to educate or notify? This first part is good - you’re educating, but then you move to notifying.”

My colleague knew I’d like that feedback because she said she heard a political pundit using the same language to describe how the Bush Administration failed to get public support for the bailout.

I don’t know where she heard that analysis, but it’s good.  I still have yet to discuss this whole “crisis” with more than a couple of people who are four-square behind it. 

I think that pundit was right.  Henry Paulson said just in the last couple of months that the issues in the credit and banking system were “manageable.”  Then all of a sudden there’s a plan to make him king of the financial mountain.

There’s another reason why regular folks are skeptical.  It’s the rush.  The Bush Administration has a very poor record when it comes to public policy decisions hastily rammed down their collective throat:

1. WMD & Al-Qaeda running rampant in Iraq - There were no WMD and Al-Qaeda didn’t exist in Iraq until we destabilized the country.
2. Patriot Act - Constitution shredded
3. U.S. Official Torture Policy - Thanks to Dick Cheney, David Addington and John Yoo, Constitution shredded, treaties pissed on, FBI and Dept of Defense ignored, innocent people tortured along with bad guys who were tortured and gave erroneous information, Amerian moral authority erroded.

Now, 30 days before a presidential election, with less than a week to consider the problem, the Bush Administration wants to fork over $700 billion to investment bankers?

This can’t be good.

John McCain and the Bailout

The truth is, neither Sen. John McCain nor Sen. Barack Obama had any natural affinity to add value to the work of fashioning the bill for the proposed $700 billion bailout of Wall Street. What each did have was the opportunity, as titular heads of their parties, to take the temperature down, reassure and convince holdouts, and stay out of the way.

What wasn’t needed at such a serious time in our nation’s financial history was for either one of them to turn Washington into one more campaign stop. That’s what McCain did.

Today, after the House defeated the bailout bill, McCain released a statement, which said, in part:

I returned to Washington last week to work on a bipartisan rescue plan. It was the only plan at that time on the table but lacked enough support to pass. It also lacked sufficient accountability and transparency to justify expenditure of the taxpayers’ money.

What a pompous ass. Guess what, John? Apparently the plan “lacked enough support to pass” after you left Washington as well. Since well over 100 Republicans voted against the bill, either McCain didn’t work hard enough or he still has a problem with conservatives. Read more

Bailout Downed: Monday Night – Tuesday A.M. Coverage

Will We Get a Better Bill?

• Bush & Party Leaders Defied – New York Times
• How voter fury stopped bailout – Wall Street Journal
• Bailout rejected, markets plunge, scramble for answers – Wall Street Journal
• Asian markets nosedive – Times of London
• House leaders vow compromise – Washington Post

• Analysis: House rejection of bailout wounds McCain – Associated Press
• Leaders’ cajoling couldn’t move bailout – Congressional Quarterly
• Selling takes heavy toll on Wall Street – Los Angeles Times
• Stephanopolous: What’s Next? Four Options – ABC News

Monday Morning Bailout Blues

World Markets

• World Markets fall as U.S. seen taking time – Associated Press
• Stocks in Europe, Asia slump – Bloomberg
• European central banks cut sales of gold – Financial Times
• Britain nationalizes Bradford & Bingley – Reuters

U.S. Bailout News

• Lawmakers face difficult vote on Bailout – Washington Post
• Bailout plan in hand, House braces for tough vote – New York Times
• Boehner’s standing with conservatives tested – Congressional Quarterly
• Obama, McCain express cautious support for plan – Washington Post
• On bailout, candidates were surely themselves – New York Times
• Bailout effects to be felt in weeks – Associated Press
• Op-Ed, Paul Krugman: The 3 a.m. call – New York Times
• Lots of money and uncertainty – Washington Post
• Op-Ed, Michael Barone: Do markets work or don’t they? – Washington Times
• Analysis: Dr. Paulson’s tough medicine – Washington Post
• Analysis: First step on a long road – New York Times
• Op-Ed, Lawrence Summers: A bailout is just a start – Washington Post
• Op-Ed, Robert Samuelson: Bankrupt economics – Washington Post
• Op, Ed, Joel Berg: No rescue for the hungry – Washington Post
• Treasury would emerge with vast new powers – New York Times
• Foreclosed properties a suburban headache – Chicago Tribune
• Op-Ed, Clarence Page: How to avoid next bailout – Chicago Tribune

Video: Henry Paulson on ‘60 Minutes’ September 28

Watch CBS Videos Online

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