Francis, it’s gotta suck, being you sometimes. You were calling the Fannie/Freddie disaster months ahead of time. And this, well…. bleh. It’s a rotten time to be ANYBODY, but I know it’s especially no fun having a front-row seat to this slow-motion train wreck.

So is this global economic disaster ultimately, truly all or mostly a spinoff of the subprime lending antics ? Was it really that avoidable, if the clock were wound back 36 months and real-live grownups left in charge?

A mentor of mine saw BHO’s( a radical socialist) possible election and decided to dump some assets a few weeks prior to the election based on the intention of our President Elect to jack the Cap Gains tax.
I presume that the bond market histrionics could be a reflection of the same fear on a greater scale now that we are 100% looking at an Obamunism attack on what is left of the “free market.”

for that summary. As a decades-long investor, I noticed some of that action in the bonds today, and my reaction was…well, fairly unprintable. Bravos for the clear reportage.

Derivatives, swaps, hedges, Spider’s, mortgage-backed assets and all the other “products” as they’re called.

“The Street” couldn’t leave well-enough alone with the stock market, mutual funds and bonds…………..Nooooooooooooooooo.

We had to get fancy, didn’t we.

“N’th Degree Micro-Minutia” investments for every aspect of money and when some bizarre investment realm was thought of, all of a sudden, there was an “expert” somewhere talking about it as if the bread slicer was just re-invented.

Guess what?

I’m not passing the popcorn, I’m passing the ammunition.

This isn’t a game anymore, it’s our country’s existence.

I read the original piece and this one, of course, and I’m getting a sinking feeling. Admittedly, economics is not my strongest suit, but I know enough to know that this could be bad.

Thank you for these economic updates. I get the basic premise of these, even though I don’t understand many of the technical terms. It seems like we’re screwed ’08-’11 at least.

Will you let us know when it is time to start burying our money in the backyard, please? (I’m only half-kidding on this request.)

Your analysis has been very helpful for us in understanding (at least some) of the financial collapse.

Analysis is necessary, but I think we’d also all be interested in prescription.

If you were in charge, what steps would you take to fix this mess and get our economy moving again?

Francis, I don’t think the bond market is indicating an expectation of no inflation. Normally yes, but right now no.

Here’s why: For many investors who are trying to get OUT of the stock market, there is no other choice but to put the money into bonds, particularly if one’s investment is a 401k. I moved my 401k investments to bonds back in the spring, but I would have withdrawn if I could have.

Think of it this way… when the Titanic was sinking, part of the ship had a brief period of elevation, just like the bond market now. But the vast amount of currency the Fed will be creating in order to bail out various sectors of this economy will cause the value of the dollar to sink beneath the waves, especially once it’s no longer accepted as the world reserve currency. More and more dollars chasing after fewer and fewer goods and services.

The only way this can be possible, that I can imagine anyway, is if large numbers of investors are being forced to liquidate positions, for some reason. It’s known that fixed-income professionals use all kinds of arcane mathematical strategies to trade the shape of the yield curve. Something must be happening to make a lot of those trades go bad all at once. And something must be forcing lots of people to get liquid at once, even if they have to take extraordinary mispricings to do it.

The S&P 500 dropped below 1997 levels and in the past two days the DJIA has dropped 10.6%, the largest drop since the 1987 crash.

It’s simple: the market is trying to find the next bottom after the now virtually guaranteed bankruptcy of one or more of the Big Three automakers.

Everyone is running for the exits and they aren’t stopping at the coat room to check if they’ve actually retrieved their wool/cashmere overcoat and the wife’s fur on the way out the door: they’re taking whatever the dude hands them as they run into the street, on their way to getting flattened by the cars that are zooming out of the parking lot driven by people who didn’t check to see if it was actually their car on their way out of Dodge.

If we didn’t want an automotive bailout, this is the market’s reaction. It’s as simple as that.

I’m betting the bottom is somewhere around 6,000-6,500. We’re going to be living back in 1997. Ten years of wealth wiped away like it never existed. Half a generation’s worth of work down the drain.

WE got nearly everything out back in August of 2007, in no small part thanks to you.
Now if I just had more of that kingdom….

treasuries that will hit the market thanks to the bail out?
My reading leads me to believe that the Treasury yields will rise due to lack of enough buyers of US treasury debt when the supply hits the markets.