I also want to respond to the previous points about the yield curve and measuring inflation. In markets like this, the yield curve isn’t going to accurately project short-term inflation trends. You’ll be better off following week-to-week CPI indicators. However, speaking of the yield curve, I conducted a study about three or four months ago wherein I used the yield curve (and the traditional probit model approach) to project recession. I projected a roughly 30% chance we’d be in a recession by Q209. Clearly, I wasn’t considering the impact of widescale systemic failure. The point here is that the timeline for the market decline has been moved up considerably. That’s not a big shocker after the past couple of weeks we’ve had, but the point is that we’re moving through it. The sooner we hit the bottom, the sooner we’ll start recovering. So, that lends to the point that there’s a good chance we’re nearing the bottom of this market. That doesn’t mean it’s time to buy (in a general sense; I’ve been buying all kinds of things, but you don’t want to hear about my butterfly spreads and covered calls), but it’s typically the case that the worst hits right near the bottom.

I dont understand what we are doing that is different from what Japan did. The 700 bill plus the Trillion in Fed added liquidity is essentially a money gift, no? For simple sake, lets say we are buying something that is worth 1 dollar and are paying 100 for it, knowing full well its worth a dollar. We are giving the financials free money. Isnt this what they did in Japan? The only difference I can see is that in America, we are doing it at an earler stage then when they did it in Japan.

Didnt this stategy create a liquidity trap in Japan? Why are we following it?

I sold off the last of my SKF, SDS, TWM today.
What a ride.

I’m guessing we haven’t seen the bottom yet…but I do think its much closer.

Even when the markets stabilize somewhat that doesn’t fix the credit markets. If that isn’t addressed in a meaningful way soon the unemployment could get real ugly real fast.

It’s going to be a somber holiday season.

ATK in the 75-76 range? A steal.

Guns and Whiskey do pay, sometimes.

I figure… hey. I’ll be covered either way.

…”shorting virtually everything”….

Whatever.

LOL

Only somebody severely misinformed would be selling during a panic!?!

My son, the MBA in FInance, says start buying next week! High tech stocks, basics like food, oil companies, etc.

I said, “shorting nearly everything”.

Cheers

I shorted this market long ago, but selective, sagacious buying is key to restoring your wealth and our markets.

GM at 4 and BAC at 19? I was in at those levels. Oh, I forgot your busy dodging.

Deflation.

I have been a believer that printing excess money will cause inflation, the opposite of deflation.

Immediate tax rate reductions, bringing about the need for more immediate deficit financing (borrowing), accompanied by more cash infusion into the economy, should counter deflation with inflation. And we know that inflation hurts lenders and helps borrowers; deflation, the reverse. Also, lower corporate rates and capital gains rates should stimulate the economy, which it needs.

I have heard that banks now have plenty of liquidity, but are still refusing to lend. Are they waiting for deflation to take hold to make their cash more valuable?

Yet the Treasury apparently is issuing debt at historic low rates. People are willing to loan to the government with little demand for a return, an obvious flight to safety. Seems like a fine opportunity for the Feds to both borrow and to print money as well. Maybe it’s time to re-issue long bonds and lock in these low rates.

I realize this is far too simplistic, but what is the flaw in the logic?

How much of this whole event is the result of big investors (individuals and non-public financial institutions), and how much due to small-investor individuals selling stocks and mutual funds within their IRA’s and 401k’s? If it’s primarily the latter, I’d guess the stock market recovery will be very, very slow.

He has pre-conditions for his bailout:

1. The beneficiary must those who continue to live in their homes. In contrast, the Paulsen/Dem Plan is guaranteeing the corporations and GSEs, which cannot distinguish those who have been already evicted from those who are still have their homes.

2. The family must still have their original contract, and not yet tainted by fraudulent acts of the realtors and mortgage companies. This ensures that the money of the government will only save the people and not the dishonest companies and realtors.

3. The family/person has already put forward some sort of initial payment and have some track record of diligently paying their mortgages until such time that financial problems (may be work related) have hingered to continue their payment. This separates good but unfortunate families from families who acquired their contract through “affirmative action” like the one being promoted by Obama during his ACORN days in Chicago.

What I have not heard in the discussion of sub-prime market is this:

Abadonment and eviction of the distressed families were the real reasons why the values of the properties were lowered. Besides psychological impacts to potential buyers, the USUAL STRATEGIES OF GSES/corporate entities IS TO IMMEDIATELY LOWER THE VALUE OF THE PROPERTY for “Re-sale”, triggering the undue lowering the value of sub-prime stock prices in the last couple of years. Housing market is unique and cannot be directly compared to other financial/commodity markets.

For me, McCain’s strategy is more appealing and more responsible… a balance of populism and fiscal conservatism.

Basically, the treasury yield curve should be the lowest interest rate obtainable for each maturity. Your saying that there are now instruments trading at rates LOWER than treasuries indicates to me a loss of confidence in the US as a borrower.

You might check to see either which country or countries are connected to the swaps you describe. Doing so will give a clue as to the new center of “riskless” finance.

Bailing out the people must be temporary. And people must learn to pay the Government. That’s how Reagan solved the financial crisis during his terms as President and it really did work effectively.

Jobs, small business, investment promotions, tax cuts, and educational trainings, and in some way, “wise and responsible spending both by the people and the government ” should be promoted and included in a very holistic manner. In fact, these are “real physical assets/outputs” that actually support and strengthen the financial market…bailout plan of the Dems are superficial.

It may also be necessary to reduce the daily family expenditure in electricity/heating and car/auto fuels. These items are also eating up the budget of the people and weaken their capacity to pay for mortgages and loans. And only Sarah Palin has a good track record of implementing a “physical/real” program towards a more energy independence. Domestic oil and gas development, even at its conceptual stage, has been effective to bring down the oil prices. Funny, but no one is reporting the positive impacts of Drill Baby Drill battle of the conservatives, now being pushed primarily by Newt. Palin’s natgas project will make heating fuels and bring down gas prices to the people in 2-5 years. ANWR (a small slivery land area) is our best chance to produce domestic oil at shortest time possible…say 3-6 years from now.

McCain and Sarah have started to emphasize on these things, which have been partly discussed in the recent rallies of John and Sarah.

I have opposed the bailout plan by the Bush/Dem Congress tandem. And I was first to get mad of McCain upon hearing his ADDITIONAL BAILOUT PLAN. Then I have studied the details (it’s in his website), I found it to be very populist and relatively close in addressing the problem of the people about mortgages…not just a solution for the institutions and corporate entities in the mortgage and credit business.

First, I’ve read that prices, including prices on oil and food have begun to nudge downward. The decline in the price of crude oil has been particularly noticeable, and I’m beginning to see that at the pump (I’m paying under $3.40 per gallon for the first time in a long time). Could all this be a sign of the deflation of which you speak? If so, couldn’t that be at least a mixed blessing for the low-income people, and people with fixed incomes?

Second, how are you doing? I know you’re one of those financial types who’ve been taking it on the chin recently, and I just wondered how you personally were holding up. Ordinarily I don’t care much about the Wall Street / big business crowd, especially during times like these, but I’d be very disappointed if you ended up flying off the top of a building somewhere. Those “postcards from the ledge” blogs you wrote a couple weeks ago kind of had me worried.

Hey, if you ever need to get away from it all, come down to Louisiana. Some crawfish, po boys, some hot boudin balls, and some LSU football might be just what you need. Take care man.

So what we are down to is faith: faith in the free market economy, faith in our fellow Americans to hold up their end of the bargain and work to support their families, faith in Congress, faith in our financial leaders, faith in the President and his advisors, faith that God will see us safely through to the other side. Of course, most of these have been under constant attack for the last 30-50 years and aren’t doing particularly well at the moment for the population at large. Right now I’m down to faith in just three on that list, one of which is wavering, and the other of which the ones I’ve lost faith in seem to be intent on killing. This is the sort of crisis we need a Ronald Reagan for. Not because he was smart enough to solve it; he’d be the first to tell you he wasn’t. But because he’d still give the same answer he did after the “great” crash of 87: “the markets go up, the markets go down,” and then he’d shrug his shoulders and smile. And as he did that, our faith in all of the above would return, and we’d get through it, just like we did in 1987.