November 01, 2007

The Fed knows what's coming. And they're scared. REALLY FU*KING SCARED.

Bernanke has taken US rates down to an effective 0%, and we're going even lower. Japan has showed him the way. And yes, our currency will be destroyed along the way.

So why does he do it?

Because he's scared. The housing crash wave is about to come crashing down upon the shores of America, and he knows it. And he knows the only way out of the housing bubble mess is to create more bubbles, while destroying the purchasing power of the dollar.

From BusinessWeek:

Then why cut? In a word: housing.
The slump in the housing market is so severe that it still threatens to drag down the rest of the economy.

Housing's crash has multiple impacts: throwing homebuilders out of work; making homeowners feel poorer and less willing to spend; and threatening a generalized credit crunch by casting doubt on the value of subprime mortgage-backed securities.

What's more, the housing crash isn't over, judging from the mounting inventory of unsold homes. Global Insight, in a report issued before the Fed's announcement, wrote, "We expect the damage to come through soon, with gross domestic product growth slipping to just 1.5% in the fourth quarter, and doing no better than that in the first half of 2008."


Tilolite said...

Investors should set aside negative economic news and concerns about overvalued stocks and just concentrate on buying stocks and making money, Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

Anonymous said...

We were told that the subprime problem was contained? I went out and bought the whole clan new HumVees and 64" flatscreens on my Amex card. What will I do now?


panic in michigan said...

I just gave a 30-day move out notice to my landlord. He freaked!

But what can I do with no CC and no savings? My last 3 painting jobs canceled. I freaked! It always slows down in construction this time of year, but this entire summer and fall was the worst I've ever seen. 2006 was not much better either.

This winter is going to suck.

Did anybody give Bush an economic leadership medal yet? He at least deserves a cookie and a glass of milk. Nothing more! (Na, skip the cookie... just the milk. (sour if possible. :)


Anonymous said...

"just concentrate on buying stocks and making money"

Also, don't forget to sell before the peak

You read what they post said...

Keith and others,

Well they all said we were hysterical about the housing bubble. the marvel that is the Phoenix and Miami economies would insure that 1 million homes would be the rule not the exception and that real estate always goes up. We were crazy they said back in 2005. Now it turns out that devaluing the dollar is a good idea and that increases in the price of oil are not a big deal afterall. Besides we can still get electronics cheaper than 10 years ago. Once again fellow HPers we will be called tin foil fools and we shall be correct once again. Do those who mock us forget that we were right about the housing bubble--fundamentals do prevail. Sadly, housing was not a cause--just a symptom. So trolls if devaluing the dollar and raising the cost of oil are such good ideas why did we not do this years ago.....Ahhhhh, to be correct again. Trolls, post your name so we can give you the dopes" treatment......

Just Testing said...

The Fed's tried to convince markets that they are still being vigilant on inflation, but the market no longer believes them: said...

Well the one positive for me is that over 40% of my product sales are now outside the US. My international sales rise in inverse proportion to the value of the dollar, so this rate cut will mean another big kick upward in international sales.

Butch said...

One only has to look at these two Websites in order to share the Fed's panic. The first is the Markit site that tracks the ABX indices of CDOs:

Talk about falling off a cliff!!!

Click on any of the indices listed (for instance the "ABX-HE-AAA-07-2") and take a gander at how their price has fallen off the cliff. These indices are what Wall Street uses to judge the "value" of about $1.2 trillion in CDOs. (The very CDOs that are stuffed in every pension fund, mutual fund, and money market fund and foreign bank in the world).

Next, go to the Federal Reserve's Website, found here:

The Fed: The official destroyer of the currency

...and scroll down to the chart entitled "Outstandings". Look at the line marked "Asset Backed". Notice how it has dropped $300 billion dollars over the last two months or so. This is the money that WAS used to fund all the SIVs that hold all the CDOs, which are now going to zero, as reflected in the Markit indices.

So, despite the DJIA reaching for new highs (which keeps the masses placated) the REAL pros are watching the credit markets fall apart.

Little wonder that the Fed cut the Fed Funds Rate again, despite a 3.9% (annualized) GDP number, oil and gold at record (nominal) highs and the dollar at a record low.

Also, don't forget that the FHLB is now being cranked up to help bail out the housing bust, having loaned $165 billion in the last two months to the mortgage industry to help them keep pumping out loans.

What you will soon be witnessing is the greatest monetization in the history of mankind.

Anonymous said...

Is that a picture of the Toxic Loan Reset Monster?

Anonymous said...

Bernanke is a liar

In an address to a Federal Reserve conference in Jackson Hole, Wyo., the central bank chief made no promises and gave no clue as to his next step but he provided a sober analysis of how financing problems in the "subprime" mortgage markets had spread throughout the financial system.

"It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions," he said. But he added that the Fed would have to consider taking action if turmoil in financial markets threatened the economy.

FlyingMonkeyWarrior said...

@ Butch,
Thank you for the post, Butch. I was looking for your thoughts recently and I for one am glad you are still hangin around HP.

Anonymous said...

Unfortunately helicopter Ben is in a situation that has nothing to do with his policies. Given the pending crash, a soft landing is decidedly better looking, then a train wreck (which by all accounts should happen no matter what). I have been watching the sales patterns of companies like Home Depot and Lowes, as well as furniture and appliance outlets. The devistation being caused by the slow down in housing is having a MAJOR impact, I mean sales of 50%off of major appliances, furniture discounted and then sold with no payments until 2010. This is a reality that, quite frankly, should scare the hell out of all of us. So what to do, create a condition that the landing has some cushion, or exacerbate the outcome and do nothing. I agree that the destruction of this countries monetary is dispicable and borderline traitorous. That said, there is a line of thinking that may be getting overlooked. With cheaper money, it might bring back out once might industrial sector for goods that CAN be manufactured here (Semiconductors, Electronics assembly, I am not dillusional so the Auto is lost to the Asians (they make bullet proof cars CHEAP)). I don't want to discount this sights ability to spread the word, I think this is the best thing that could have happened to America and Americans, let the Town Crier' prevail. Just a different perspective on what might be happening. Also think about who is being destroyed by the tanking of the dollar (think China).

borkafatty said...

Yes butch it is good to see you still lurking in the shadows

Anonymous said...

And what were the big stories on the morning news shows today? Paul McCartney's ex-wife and Brittany Spears. There is a financial fire storm coming while the media fiddles.

Anonymous said...

the goobermint says that another 60 million uneducated illiterate illegal immigrants will save the housing market and social security. the more poor illiterate peons a country has, the better off it is economically. just look at mexico, haiti and zimbabwe

Anonymous said...

I believe housing is the not the
larger dilemma. It was the equity
(false, but what the heck) extraction
fueling spending for the individual,
and the bundles of larger financial
papers allowing the large scale players to extract from the global
financial structure. In fact,those rising houseprices (equivalent to wagering larger bets at the table) served the big game...I don't think the global financial system can be saved, when all is said and done.The bluffing will go on a bit longer, but some event will call
everybody's hand at once.. The small players (house buyers) are already bowing out.

The market is down right now, one
cause is Citigroups losses. Do you
know they are trying to get to
right to manage pensions. WHY AREN'T YOU SCREAMING NOOOOOOOOO!!!
FOLKS...Why should FU's like that
be given more of 'our' money to
play with? Unless we have a sub-
conscious desire to find out who
we are as a species without the
veneer of money.

The big boys aren't going to stop
until they have NO MORE MONEY....
Of course the average person will
long since be sucking air for dinner.


Anonymous said...

ben said subprime is contained

hank said housing bottomed last fall

george said the economy is strong

why the rate cuts?

Rhea said...

Oh, the housing crash is just in its infancy! There will be so much more to come throughout the country.

Princess Mononoke said...

Yes they know... They've always known!!! The problem for them is they can only keep lying for oh so long. Numbers don't lie!!!

They've (Bush, Paulson, Ben, etc.) kept up this fantastic charade. Their spell will soon wear off and The Public will not be able to avoid REALITY!

Princess Mononoke said...

Woweee!!! The DOW has just closed down 366................

What a ride it was today! Stay tuned.

Dave's Dead said...

Strange stuff going on in RE these days. Our paper publishes transactions from the previous week and since September sales of houses over $417K, the jumbo loans, have been nil. Plenty of transactions in the $200K-$400K range, but above $400K it's like a brick wall.

One RE agent has signs all over town bragging about his ability to get deals done, Dave will do this, and Dave will do that, etc., blah blah. A neighborhood near me has about 10 spec homes listed with "Dave"", and they're all $600-$800K. The houses have been finished and sitting empty since last Spring. I drove past some of them this afternoon and all of the houses facing the main road had a "Dave Sold Me!" plaquard on top of the main board. So why don't these houses show up in the RE transactions? Is this some weird attempt at reverse psychology?

Maybe the Fed isn't te only one playing games as this RE bust unfolds.