January 30, 2008

Open thread to talk about Bernanke's move today

What does the Fed know and when did they know it?

Or... is the Fed simply trying to create a new (stock) bubble to replace the crashed housing bubble so that our fake economy can continue?

FLASH 2:15 EST: HELICOPTER BEN SWOOPS IN WITH ANOTHER 1/2 POINT CUT, DOLLARS FALLING FROM THE SKY. INVEST ACCORDINGLY.

83 comments:

Anonymous said...

He cuts 1/2 and I buy every stock I can even the banks

Anonymous said...

the PPT can make bubble whenever where ever.

Anonymous said...

PBW Alt Energy Fund

There's the next bubble

Bailout said...

They are doing this to minimize the impact of resetting ARMs?

tangelo mozilo said...

I agree with anonypuss 5:07. Alternative energy is tyhe next bubble. Perhaps it should me made a choice in the poll.

Anonymous said...

beanie babies

Paul E. Math said...

I'm sure Bernanke would love to have a bubble to make it look like there isn't a massive systemic problem. He knows that, in the court of public opinion, he will be exonerated if he can just get the short-term economic indicators to rise.

But it would take a massive bubble to bail us out of this credit and housing bubble. I just can't think of anything that will take the place of the last bubble. Yes, stocks could do it but given the restrictions on margin buying and declining corporate earnings, it just doesn't seem possible. Unless there really is a ppt that really can make stock prices whatever they want.

I would really like to know, once and for all, what exactly Paulsen's "Working Group on Financial Markets" (Plunge Protection Team) actually does. Because stock price manipulation would be highly illegal and backstopping the stock market just takes moral hazard to a whole new level.

If stock prices end 2008 higher than they were at the beginning then I will become a firm believer in the secretive power of the ppt.

Andrew Hac said...

Ah hah, the house of card is starting to sway, no center of gravity, no concrete foundation to base the structure on. The Americano's economy is tumbling, pushing, carousing itself into a fatal fall. Joe6Pack will not have a 6pack any more to booze on. JaneZinfandel will not have a bottle of wine to swill on. But of course, what can one expect from a nation of Snapper Turtle and Enron legacy ?

Sad day today and more sad days to come for the Americano.

Anonymous said...

Well, it won't be the stock market, that would be impossible. The fed cannot make the stock market go up, besides, it is near its historic highs. The economy will continue to deteriorate and all those companies in the Stock Exchange will report lower and lower earnings and their stock will go down. How can it be any other way? It is just a matter of time. The fed may delay this process, but what's done is done. We have to ride out this process until it is complete. Just prepare yourself individually. That is all that you can do.

gt said...

half point
i guess it was 'expected'
you know, someone mentioned half and suddenly everyone randomly 'expects' it

dcfred said...

just discovered something which does not augur well for the future.

The treasury used to allow individuals to buy up to $30,000, per calendar year, of I-bonds, which are tax-deferred for up to 30 years. I just found out that they have reduced the limit to $5000 per CY, per individual. The only reason to do this would be that the government expects high inflation and they want to limit their exposure. Aint looking good, Kido.

Anonymous said...

Invest in Tickle Me Elmo

Mark in San Diego said...

The Fed is just proping up the banks, but it won't really do much for the housing market. . .prices are still too high for the Average American. I mentioned before that we have been in a depresion for at least 20 years - 80% of people are essentially working-poor, and 20% are doing VERY well thanks to globalization. . .this will just prop the stock markets up for those of us who are the 20%, and screw the other 80%. . .so goes the world. . .

Gavin said...

kevin.. the problem is that non-borrowed reserves are below zero for the first time since the statistics began to be kept in the 30's. The TAF is the only reason the banking system is solvent.

FFT will follow private market debt origination down to zero.

Blowing a bubble requires the availability of credit, and right now there is none.

Anonymous said...

Nothing will minimize the impact of those resetting ARMs. People will get hammered regardless of that he does.

I still put my money on deflation. Still shorting the market.

Besides .50 was already baked in. If Bem didnt raise it, the markets would have been in trouble.

Danny

Anonymous said...

Pop the corks Ben strikes again.

Have fun trying to spend your Ameros.

Anonymous said...

He cuts 1/2 and I buy every stock I can even the banks

January 30, 2008 5:00 PM



you need to read this:

http://globaleconomicanalysis.
blogspot.com/2008/01/
bank-reserves-go-negative.html

Anonymous said...

That 60 minutes report about people walking away from their homes even though they can afford to pay - magnifico! That will teach the banks and foreign investors a thing or two about risk management. Why the hell did they think a 20% or more down payment was required for the past thousands of years?

Vectorz said...

so how do we get into the alt engergy bubble? i don't want to miss out again.

asillywabbit said...

Hmm, Bernanke only has 12 bullets left in his gun to shoot at the Recession Monster. He has fired five in the last couple weeks, and the monster's still walking.

Daphne64 said...

A 1/2 point drop! Bernanke is crazy. Remember just a few years ago when Greenspan was finishing up his 1/4 point increases and a lot of folk were sweating about whether he had gone too far, that he should have taken a breather, blah, blah, blah.

Bernanke drops the rate 1.25% in a little over a week??? Not that it will do the economy any good. It's just going to tank the dollar.

Anonymous said...

I guess you guys don't know the old adage..."Never fight the fed". You will lose if you try.

We have a lot of problems no question. But I think they are on the right track.

keith said...

Are you all long or short today?

I'm not short anything

1.25% in a few days - he told us he was going to do it (in his 2001 speech), he did it, and now the next bubble comes while the dollar tanks

Mammoth said...

The charts for both the Dow and the price of gold just went vertical.

Anonymous said...

I'm all in

Dont' fight the fed

michael said...

now...how much in march?

i want 75 bps in march.

Anonymous said...

Dollar is being sh*t on!

keith said...

it's dry, but it's important

everyone read this Bernanke speech tonight. And invest accordingly.

http://www.federalreserve.gov/BoardDocs/Speeches/2002/20021015/default.htm

Anonymous said...

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Anonymous said...

Is my money worth anything?

Anonymous said...

Besides .50 was already baked in. If Bem didnt raise it, the markets would have been in trouble.

Yup, baked in.... riiighht...

Funny how when these cuts are "already factored in" the market jumps. A bullied fed is just what our economy needs to become insolvent.

turducken said...

i just heard it is 'expected' the fed will drop 200 basis in march. 200! it's EXPECTED!

Anonymous said...

IT'S ALL ABOUT CREATING A NEW BUBBLE.

AND THE CROOKS ON WALL STREET WILL COME UP WITH ANOTHER ONE, PROBABLY AT EMERGING MARKETS.

Anonymous said...

OMG...STOP THE INSANITY!

blah213 said...

i'm going with the nintendo wii bubble

Anonymous said...

Attention Investors! The reason Helicopter is cutting rates is because we are in a recession that is getting worse!

Cash will be king! Especially, after the elections! Helicopter is coming up for revue in 2010 and his job will be in jeopardy. He is bringing the punch bowl out until the elections is over and then it will be a different story.

Bongers said...

It amazing how easily Ben is being bullied by Wall Street, surely the 0.75 cut last week was enough of a cut, and they can just hold off, and keep this 0.5 point in reserve, what are they going to do now? And it is not the Fed's responsibility to keep stock prices up. The US should adopt the European system and make low inflation the only goal of monetary policy.

Anonymous said...

The insurers are going to be downgraded soon. They'll pad the market first before it gets slammed.

Anonymous said...

I've been long on a couple of the financials that are not at much risk of bankruptcy. I closed out my short positions after taking a pounding, but made it back on my longs. My broker is the only one making money now.

Anonymous said...

How does a FBer or a real estate speculator take advantage of lower rates when they're underwater? And they don't have a dime in their checking account to bring to the table...

Anonymous said...

MBIA and Ambac are not out of the woods yet. Which may explain why the financials didn't do well the last hour of the day.

Skaven said...

No more bubbles, Keith. Well, let me restate that - deflation is going to cream this economy and all assets will depreciate. However the dollar is dropping and that is inflationary, right? Kind of.

You could call the forthcoming surge in gold and EUR,CHF,RMB a bubble but it's really just a matter of perspective. They aren't the bubble, it's just the USD that is the sinkhole.

Andrew from Russia said...

It seems that the classic "fool in the shower" problem has got worse this time:

There's no water!

Anonymous said...

Nothing will minimize the impact of those resetting ARMs. People will get hammered regardless of that he does.

I still put my money on deflation. Still shorting the market.


I have to agree, although we will have a deflation/stagflation situation.

The problem with the Fed is they are using the 1970s scorecard as a frame of reference. Unfortunately, the era of globilization we are in does not reflect the 1970s timeframe. Back then, "made in America" was a standard phrase. The hot ticket items were GM and Ford cars, luxury cars were Cadillacs and electronic stores were packed with RCA, Zenith and Magnavox. And now? Toyota and Honda with luxury being Mercedes and BMW. And electronics? Sony, Toshiba and Hitachi.

We have no economic foundation to our empire anymore. Oh sure, software is still produced here, but that is the last gasp of our establishment.

That being said, without a solid industrial base, we will reach a precipace whereby we literally run out of money and have no way to replace it.

Once that point of critical mass is reached, the Fed will go into damage control mode to prop up the currency to ensure foreign purchase of our bonds. That means jacking up the interest rates to high levels. End result, ka-BOOM in housing and a credit crash.

And without the great consumer engine that is the United States, prices begin falling across the board.

The above scenario will likely take years to play out. But I don't see any way around that outcome.

Malcolm said...

I just got my bank statement. And, as expected, the interest rates I’m being paid went down.

So much for rewarding good behavior.

Does anyone have a suggestion for a bank that has FDIC insured foreign currency accounts?

Also: I’m open to suggestions as to which currency.

I want to park my money somewhere where I can open my monthly statement without feeling as though I’ve been mugged.

Anonymous said...

Wow, Bennie drops 1/2 pt and the DOW still closes DOWN for the day!

Suckers rally INDEED!

snicker

Max said...

So much for the "don't fight the Fed". Today it ended down.

Anonymous said...

Nice relief rally... More of these could really help my short positions.

VivaTacos said...

www.everbank.com

The best/easiest way to get your US dollars OUT OF the USA, while still being FDIC insured.

kronar
swiss franc
euro

hell, at this rate, you should invest in the peso!!!

Viva Tacos!

gadfly said...

I wonder what Bernanke will do when rates get down to zero. Perhaps dollar printing presses in every home would do the trick.

Anonymous said...

Malcolm said...

....Also: I’m open to suggestions as to which currency.

I want to park my money somewhere where I can open my monthly statement without feeling as though I’ve been mugged.

europac.net

Make money as the dollar falls. Peter Schiff will take care of you.

Anonymous said...

Take a look at foreign currency shares, which are ETF's that trade as stocks. Try tickers FXE, FXY, FXS, FXC, heck anything other than US dollars.

Anonymous said...


I wonder what Bernanke will do when rates get down to zero. Perhaps dollar printing presses in every home would do the trick.



It will be the politicians sending checks to everyone for the next 3-4 years. This will force the foreigners to buy American assets. They have no choice. If they dump the dollars, who will buy it? The only choice is to buy a piece of every American company.

Anonymous said...


Does anyone have a suggestion for a bank that has FDIC insured foreign currency accounts?


Everbank and ETrade will let you deal in foreign currencies.

Anonymous said...

Forget Everbank, they charge you 1% to deposit your money and another 1% to take it out. It's highway robbery.

Go to www.hsbc.com and click on any one of the foreign countries. You can open an HSBC account in any country and the bank is kept in that foreign currency. I have an HSBC bank in China and one in Europe. China's interest rate is 3%, it's nice to get 3% plus 10% on the depreciating dollar.

Anonymous said...

Let her crash and burn, the sooner the revolution can start.

Anonymous said...

Bernanke rate drop gun almost out of bullets, in the end he will yell "Bang! Bang!" and throw the gun at it.

mhrist said...

The state of things tells us that it is wishful thinking that a new bubble will arise. Granted there will be bubbles in the future but not the "imediate everything today" future as defined in the states. Put in 5 years for decline and desperation until the people totaly max out and are hungry and the good times are forgotten. Then you will get the reformers... the lenins and the hitlers and the roosvelts and such... then if the world is not sorely disappointed with capitalism and free markets which they prolly will after starving for 5 years or using food stamps standing in soup lines. Fun, fun, fun. Anyway, so if people are disappointed by capitalism they might tilt to something less volatile and stable. But in any event there is no juice, faith, fresh air, whatever, left for a new bubble.

Marty

Anonymous said...

I am having visions of Helicopter standing on a street corner asking anyone to take a "dollar".

Sadly, the poor and destitute who used to own a mcmansion don't want the dollar! They look at Helicopter with a sad look and just keep on walking.

Poor Helicopter, noone wants his dollars!

God Bless America said...

" gadfly said...
I wonder what Bernanke will do when rates get down to zero. Perhaps dollar printing presses in every home would do the trick.

January 30, 2008 10:08 PM"

Maybe Bush can run the printing presses in reverse? That should solve everything except the hungry and sick children of FB living in the gutter once the H2 is gone...

God Bless America

Anonymous said...

We could be getting close to the desperation phase.

C'mon, Fed cutting 1.25% in weeks? Sounds like they are reacting to something.

Malcolm said...

I appreciate everyone's advice.

I think it would be unfair of me to monopolize the HP thread with all of my particular questions and concerns about this.

If foreign accounts are something you do yourself; and you have the time to dish out some free advice, please read and respond to an open thread I've set up on my blog.

http://malcolmrant.blogspot.com/2008/01/foreign-currency-banking-open-thread.html

Use the same thread to discuss any foreign stock ideas you may have.

As always, I'm looking for LEGAL ideas only :)

Anonymous said...

The Medicine's not working well enough anymore, and we only have a few doses left.

mayor mcmansion said...

Hell, if the Fed thinks the financial system and/or the economy are going into the crapper, I'm not going to argue. This time, "Don't fight the Fed" has a whole new meaning.

mayor mcmansion said...

There are several possible metaphors for the rationale behind the Fed's actions.
I think they're like the firefighters at the airport who've received notice of a plane in serious distress coming in for a crash landing. They're piling the foam on the runway hoping to mitigate the destruction and loss of life.
Meanwhile Joe and Betty Mainstreet are standing in the airport arrivals lounge waving their little paper American flags...completely oblivious to the emergency activity in the control tower and on the runway. Except that they've noticed a whole series of flight delays starting to appear on the arrivals board, and a few airport staff have been seen running through the corridors.

in a nutshell said...

"...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation...."

-- Ben S. Bernanke, November 21, 2002

So just HOW are we going to have DEFLATION?

Anonymous said...

more Subprime losses to more than $265 billion !!!

S&P Lowers or May Cut $534 Billion of Subprime Debt
By Jody Shen
http://www.bloomberg.com/apps/news?pid=20601103&sid=am2Nk1VM5YsA&refer=news

Jan. 30 (Bloomberg) -- Standard & Poor's said it cut or may reduce ratings on $534 billion of subprime-mortgage securities and collateralized debt obligations, the most sweeping action in response to rising since home-loan defaults.

The downgrades may extend bank losses to more than $265 billion and have a ``ripple impact'' on the broader financial markets, S&P said in a statement today. The securities represent $270.1 billion, or 47 percent, of subprime mortgage bonds rated between January 2006 and June 2007. The New York-based ratings company also said it may cut 572 CDOs valued at $263.9 billion.

The reductions may increase losses at European, Asian and U.S. regional banks, credit unions and government-sponsored enterprises such as Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks, S&P said. Many of those institutions haven't written down their subprime holdings to reflect a drop in market values and these downgrades may force them to recognize losses, S&P said.

``It is difficult to predict the magnitude of any such effect, but we believe it will have implications for trading revenues, general business activity, and liquidity for the banks,'' S&P said. The ratings company will start reviewing its rankings for some banks, especially those that ``are thinly capitalized,'' it said.

S&P downgraded $50.1 billion of subprime-mortgage securities, none rated higher than A+. More than 69 percent of the AAA rated subprime securities from 2006 and 46 percent from the first half of 2007 were placed on review.

Didn't See It

``This one, I didn't see coming,'' said Mark Adelson a consultant at Adelson & Jacob Consulting LLC in New York, and a former asset-backed bond analyst at Nomura Securities.

Some of the largest global banks have already taken ``significant'' losses and they aren't likely to have more writedowns, S&P said. CDOs repackage assets into new securities with varying degrees of risk, from AAA grade to unrated classes. Subprime loans are made to people with poor credit.

Under accounting rules, many smaller banks haven't been required to write down their holdings until the credit ratings fell, enabling them to avoid the losses at bigger competitors including Citigroup Inc., Merrill Lynch & Co. and UBS AG. The world's largest banks have reported losses exceeding $133 billion related to mortgages, CDOs and high-yield, high-risk loans, according to data compiled by Bloomberg.

``If you're holding a AAA piece and it's now downgraded to AA, you might have to write it down, even if you're holding it for an investment,'' Gary Gordon, a bank stock analyst at Portales Partners LLC in New York, said. ``The longer it goes on and the higher the credit rating of the instrument downgraded, the wider the pain.''

Foreclosures

S&P's move comes a day after RealtyTrac Inc. said the number of U.S. homeowners entering foreclosure climbed 75 percent in 2007 from a year earlier as mortgages became more difficult to refinance and falling property values made it tougher to sell.

More than 1 percent of U.S. households were in some stage of foreclosure during the year, up from 0.58 percent in 2006, according to RealtyTrac, an Irvine, California-based seller of real estate data.

Home prices in 20 U.S. metropolitan areas fell 7.7 percent in November, the 11th consecutive month of declines, according to the S&P/Case-Shiller home-price index released this week.

Anonymous said...

no more bubbles out of this one baby! the only way out of this mess is lawsuits! plenty of them. credit is disappearning. so you have to go after cash. where do you get cash? not credit or an iou. but a way so you go and file a lawsuit or make a claim. future prediction: you're going to see plenty of claims against insurance companies, aka arson claims, robbery claims, etc, etc. Those who can get away with it will. Its already starting to happen. what about the catholic church? why not just sue them, liquidate all their holdings, property and financials, and bingo, you got a solution to a hundred billion dollars or so and the housing mess is solved!

Anonymous said...

Keith,

I told you it's deflation.

Walmart and TGT slashing prices. Matter of fact, I see sales everywhere right now. Even Abercrombie slashing stuff by more than 50%.

I guess that .50 point drop in the rates didnt do anything for the market when billions worth of garbage are being downgraded. Those bond insurers are the kiss of the deflation death. Once they get downgraded, this bubble will crash.

Danny

Anonymous said...

"Go to www.hsbc.com and click on any one of the foreign countries. You can open an HSBC account in any country and the bank is kept in that foreign currency."

I went to the site. They open RMB accounts only for domestic Chinese citizens.

http://www.hsbc.com.cn/1/2/misc/faqs#b1

borkafatty said...

We have seen the last American Century. (1900-2000) This next century will belong to others, while America slips into second- and maybe even third-class nation status. The money people who destroyed America won't care. Like soon-to-be-ex-Prez , they will be living on their stolen dollars in Paraguay, or some similar backwater, which is certainly welcome to them...... The corporations and manufacturing jobs need to come home. ....However, that isn't going to happen.
Nor are Americans going to stand up and demand a decent living wage. The unions have been smashed,
with the full approval of American wage earners.
Sure, they we are working longer and harder than ever before. our children will work even harder and longer again for less wages.
America is morphing into a Third World Country with super rich overlords at the top and the peasantry underneath.

Anonymous said...

Cramer just called the bottom tonight. He's buying banks, homebuilders, and he insists he's gonna buy a house now.

No kidding.

Buy a house. I know shorting is crazy right now. And you cant find the fed. But he believes the market will be WAY up in 9 months or so.

He's going by history of rate cuts over the last 30 years. Will history repeat? Or are things different this time.


DOES ANYONE OUT THERE AGREE WITH CRAMER????

socalchris said...

This last week has looked like a fool's rally to me. Remember the dot.com bust. Fed started cutting in Jan 2001 and the stock market finally bottomed in March 2003.

As for foreign currency, I would recommend the Yen or the Swiss Franc. The Euro in my mind is almost as flawed as the dollar. The ECB is all to willing to devalue the Euro by cutting interest rates and injecting liquidity.

-Chris

Anonymous said...

Notes on Cramer's Mad Money show calling it a screaming bull market BUY!

http://tinyurl.com/3642sx

last gasp said...

If you want to get really angry, watch Mike Mandel's video on Businesweek today:
With a straight face:
"The subprime crisis started when the Fed raised interest rates".
http://preview.tinyurl.com/yuf24n
Hellooo???
Another sad day for the fiscally responsible. A dying breed.

E34 in Nova said...

I am by no means an expert in economics, but from all what I have been reading regarding the tanking dollar on this blog, I agree with Cramer. If the value of the dollar sinks, then more $$$ are needed to buy everyday things which means inflation. If I buy a house now that is in foreclosure at 50% of top value and inflation hits, then that 50% price I paid is even smaller.

I am just trying to learn to know what's the best thing I can do for my future. I don't understand the stock market enough to short or not short stocks and hoping in the long run that real estate will be my savings in 20-30 years.

E34 in Nova

mhrist said...

Danny, all retailers slash prices after the holidays. They have a lot of unsold inventory that has to go, so they can get the spring stuff in. Idiot.

Marty

mhrist said...

Dudes, did you see this new chick with Jim Cramer. I couldn't hear anything he was saying :)

I'm Rick James, beyatch! said...

To e34 - Rick James says, 'Hell yeah!'

That's why my Momma's house in 1959 cost $10,000. Too bad I slapped the sheriff and they repo'd that beyatch!

LauraVella said...

Ben can try to create a new bubble in the stock market, but its not going to work. Has anyone noticed the market is reacting less and less to his rate cuts?

The market is over valued and rate cuts will do nothing to get the dow back to 12,000. I see the dow floating down to 8,000 in less than 2 years.

In the meantime, beware - dont listen to these 'economists' who say the only way to grow your retirement fund is through the stock market!

Go safe with your money, or else you'll be sorry...

LauraVella said...

DCFred said:"just discovered something which does not augur well for the future.

The treasury used to allow individuals to buy up to $30,000, per calendar year, of I-bonds, which are tax-deferred for up to 30 years. I just found out that they have reduced the limit to $5000 per CY, per individual. The only reason to do this would be that the government expects high inflation and they want to limit their exposure. Aint looking good, Kido."


I heard this news last week also. 5,000 per bond catagory is nothing!

When the feds resort to this we are in REALLY bad trouble!

LauraVella said...

"DOES ANYONE OUT THERE AGREE WITH CRAMER????"


Hell No! cramer is the biggest shill there is.

If you want to get burned bad, and dont mind losing all your money, then by no means do what cramer says to do.

LauraVella said...

Gavin said: "Blowing a bubble requires the availability of credit, and right now there is none."



Agree. Anyone who thinks otherwise is in for a lot of pain.