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: Henry Paulson Testimony before House Financial Services Committee | November 18, 2008

(Source: U.S. Treasury Department)

Click this link for PDF of Sec. Paulson’s Testimony

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

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

Transcript: President-Elect Barack Obama and Michelle Obama on ‘60 Minutes’ | November 16

(Source: CBS News)

(Narration) Steve Kroft:Since Barack Obama was elected the 44th president of the United States 12 days ago, he has largely remained out of sight, getting high-level government briefings and conferring with his transition team. But he surfaced on Friday afternoon in Chicago, alongside his wife Michelle to give 60 Minutes his first post-election interview.

It covers a wide range of subjects including the economy, the ailing automobile industry, the government’s $700 billion bailout program, their visit to the White House, the emotions of election night and the quest for a family dog. You’ll hear all of it. But we begin with the president-elect and his thoughts about the new job.

Steve Kroft: So here we are.

President-elect Barack Obama: Here we are.

Kroft: How’s your life changed in the last ten days?

Mr. Obama: Well, I tell you what, there seem to be more people hovering around me. That’s for sure. And, on the other hand, I’m sleeping in my own bed over the last ten days, which is quite a treat. Michelle always wakes up earlier than I do. So listen to her roaming around and having the girls come in and, you know, jump in your bed. It’s a great feeling. Yeah. Read more

Full Text: President George W. Bush, Speech on the Financial Markets and World Economy, Manhattan Institute, November 13

(Source: White House Press Office)

THE PRESIDENT: Thank you very much. Please be seated. Thank you. Larry, thank you for the introduction. Thank you for giving Laura and me a chance to come to this historic hall to talk about a big issue facing the world. And today I appreciate you giving me a chance to come and for me to outline the steps that America and our partners are taking and are going to take to overcome this financial crisis.

And I thank the Manhattan Institute for all you have done. I appreciate the fact that I am here in a fabulous city to give this speech. (Applause.) People say, are you confident about our future? And the answer is, absolutely. And it’s easy to be confident when you’re a city like New York City. After all, there’s an unbelievable spirit in this city. This is a city whose skyline has offered immigrants their first glimpse of freedom. This is a city where people rallied when that freedom came under attack. This is a city whose capital markets have attracted investments from around the world and financed the dreams of entrepreneurs all across America. This is a city that has been and will always be the financial capital of the world. (Applause.) Read more

Text: George Soros Testimony to U.S. House Committee on Oversight and Government Reform, November 13, 2008

(Source: U.S. Congress, House Committee on Oversight and Government Reform)

Click Here for PDF of Soros’ Prepared Testimony

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

Bank Failures Surging in 2008

The last couple of times I’ve noticed that banks are failing it’s always on Saturday, as the FDIC quietly swoops in and takes over on a Friday afternoon.  It seems like it’s happening more and more often so I took a look at the FDIC’s website.  There is a spike this year, we’ve had 19 FDIC insured banks fail this year.  The record I found only went back to 2000, there is a chart below.  41% of the bank failures in the last eight years have occurred this year.  33% of U.S. bank failures since 2000 have happened since July of this year. 

Security Pacific Bank of Los Angeles and Franklin Bank of Houston, Texas became casulties on Friday.  I’m looking at these numbers, the jobless rate, the housing bubble, Ford’s and GM’s woes - the list goes on - and I’m thinking that all Barney Frank, George Bush and Henry Paulson have done is throw $700 billion at Wall Street. 

Video: Paul Krugman on Economy and Obama’s Economic Plan | November 7

U.S. and World Markets Poised for Another Rocky Week

Hong Market Plunges Most Since 1989 Tiananmen Crackdown
– Bloomberg

Global markets continue slide, U.S. futures off 4%
- New York Times

‘Dr. Doom’ doesn’t see things getting better yet – Times of London

Grim GDP figures shows U.K. on verge of recession
– Times of London

Forecasters race to call the bottom
– New York Times

Last night, CBS News’ 60 Minutes ran another great, explanatory piece on how the investment class nearly ruined our economy. Check it out below:

Watch CBS Videos Online

For an explanation of credit default swaps go here.

Text: Alan Greenspan Testimony | Congress | October 23

The following link is Alan Greenspan’s testimony before the House of Representatives Committee on Oversight and Government Reform in Washington today.

Click Here for Greenspan Testimony

Cat bounces Monday – Dies again today – What’s in store for tomorrow?

DOWn over 700

• Dow loses 8% over recession fears – CNBC
• U.S. stocks plunge most since 1987 – Bloomberg
• Dow declines 733; S&P 9% - Wall Street Journal
• Plunge in stocks Highlights ailing economy – New York Times
• Most of Monday’s gain is erased – New York Times
• Wall Street plummets – Reuters

One Year DJIA Chart

Bernanke, Other News & Analysis

• Economic activity weak across U.S.: Beige Book – Reuters
• Bernanke says U.S. economy faces big threat – Reuters
• Fed considers more cuts – Wall Street Journal
• Bernanke says bailout will need time to work – New York Times
• Video Link: Bernanke’s Address Courtesy of CNBC

Full Text: Ben Bernanke Speech | Economic Club of New York, NY | October 15

(Source: U.S. Federal Reserve Board of Governors)

Stabilizing the Financial Markets and the Economy

Good afternoon. I am pleased once again to share a meal and some thoughts with the Economic Club of New York. I will focus today on the economic and financial challenges we face and why I believe we are well positioned to move forward. The problems now evident in the markets and in the economy are large and complex, but, in my judgment, our government now has the tools it needs to confront and solve them. Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks. But we will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity. Read more

World Leaders to Act in Concert to Stem Financial Crisis – News Coverage

G-7 Summit Held in Washington This a.m.

• World leaders pledge united response – Times of London
• G-7 pledges ‘All necessary steps’ – Bloomberg
• Bush pledges global response – Washington Post
• Rich nations pushing for joint response
  – New York Times
• Canada backs crisis plans
  – Toronto Star
• Bush: Global cooperation in response – Wall Street Journal

Text: President Bush Statement on G7 Meeting, Oct 11

(Source: White House Press Office)

7:54 A.M. EDT

THE PRESIDENT: Thank you all very much. Good morning. Secretary Paulson, Secretary Rice and I just had a productive discussion with finance ministers of America’s partners in the G7 — Canada, France, Germany, Great Britain, Italy, and Japan. I’m pleased to be with Prime Minister Junker of Luxembourg, who is the President of the Eurogroup of countries, Managing Director Strauss-Kahn of the International Monetary Fund, President Zoellick of the World Bank, Chairman Draghi of the Financial Stability Forum. Thank you all for coming. Read more

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