October 22, 2008

We have seen / are seeing panic, capitulation and despondency. How long will this period last, and when will hope begin again?


"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king"

-Manias, Panics and Crashes, the HousingPANIC bible



Depending on the situation, for most Americans with crashed home values, destroyed 401k's and the prospect or reality of job loss, panic is now here. As well as capitulation, despondency and depression.

Talk to someone who's lost their life's savings, who's been removed from their foreclosed home, and who has no job or prospect of getting a new one, it's bad.

And yes, it can still get worse.

But all in all, I think we saw true panic a couple of weeks ago when the market went into freefall and the governments bailed out the banks, and now we're in capitulation and despondency as people deal with the reality that they can't retire, that they've lost everything, and that they're on their own.

But that's unfortunately what has to happen if we are to finally start with the recovery.

So, how long will this period last, will it get worse before it gets better, when will the recovery start, and what will the world look like after we emerge?

And when will hope begin again?

87 comments:

Hate Phoenix said...

To all good fellow HP'ers

When the ALT A , or "liars loans " come due in 2011 and 2012 by the millions , that will be the NEXT Tsunami to hit us hard. I want to know if most of you agree that we will then have to bail out Bank of America since they are to big to fail since they now are in way to deep with an overpaid Merryl Lynch and that worthless Countrywide.

That is when we will have MAJOR PANIC , if not WORLD WAR.

We are so screwed.

Anonymous said...

So, how long will this period last?

My guess: the very worse of it will last three to four months.

Will it get worse before it gets better?

My guess: Yes. The Dow will scrap bottom at 6800 to 7100, and unemployment will surge to 11-12 %

When will the recovery start?

My guess: In three years. By then the Chinese will be fed up waiting for their money and they should have sufficient military power to come ashore from their gunboats to collect on their debts personally. Once the Chinese find that we’re out of money, our new Chinese overlords will decide to stay and make the population of USA! USA! USA! work off their debts. The country slowly recovers, but only to the benefit of our Chinese overlords.

What will the world look like after we emerge?

My guess: Like China, except all of the servants and low wage employees will be white, speak hip-hop English and spur education as being only for losers and the master races of India and China.

Anonymous said...

I read a book called “Mortgage Meltdown” and it really helped me understand that I’m not the only one going through this. I was also able to apply for a grant from a non-profit to help me with my mortgage. I think anyone who is trying to save his or her home, like me, should read this. Go to www.48grant.com

Anonymous said...

Hope begins at the ballot box in November.

Continued death spiral with McCain.

Renewal with Onama.

Arrest Bushco and Cheneyburton.

Bury the GOP, The Party and the People that Wrecked America.

DIE U PIGS

Anonymous said...

My question is why hasn't the big media invited on TV yet? Yeah I get it they are guilty too with all the housing porn - just how come the voice of this blog - now more than ever needs to be given credit - you saved my life man - really!

Anonymous said...

It depends on what market you're looking at and what people you're talking about.

Sure, anyone who's lost both a home and a job is probably in the panic or despondency phase. But that's still a minority of Americans.

The majority is anxious, but still has an (overpriced) house, still has a (crummy) job, and still has (too many) credit cards. They're scared about their 401Ks but they're not putting their houses on the market at fire sale prices. Not yet anyway. They're not (yet) panicking.

Wall Street seems to be in panic-swing mode, but not (yet) Main Street.

I *wish* Main Street were more panicked, because then maybe housing prices would fall to the point where it makes sense to buy again, but prices are still just moving down slowly and steadily in most places (California and Florida excepted). Eventually the prices will fall low enough, but it's still going to take a while. The sellers are afraid but they're not panicking today. We're just not there yet.

Fortunately I can wait until they do. :-)

Anonymous said...

Panic? What panic? You ain't seen nothing yet.

vanilla ice said...

It could get worse, much worse.

Keith, remember that Daily Show clip showing Congress people describing this debacle as a car wreck on the highway, creating hour long backups? According to Congress the bailout will move traffic out of the way and get traffic flowing again.

And by the way, there was nothing said in Congress about all the people hurt in the wreck or prosecuting the unhurt drunk driver who caused the whole mess. What Congress has done was try to clean up the mess, but the have been more concerned with giving the drunk driver another car and more beer to keep him going down the highway.

Instead of using the car wreck analogy for this disaster, I'll use another transportation analogy, a train wreck. The front locomotive (credit cards, home loans, government bonds) driving this train (the economy) has come off the track and is now sliding down the embankment. The rest of the economy will soon follow.

Dow could fall to 4000-5000. Millions lose their jobs in the greatest recession since the great depression.

Anonymous said...

best guess, 3-5 years. but not really sure on specific date.

double digit unemployment soon to be here, already in some places. will it be as bad as the carter years? near 20% unemployment? and will it really cause despondency? i always thought that unemployment was really a choice. lets say it gets depression bad, 30% unemployment. are you telling me you are in the bottom 30% of americans as far as capabilities? if you are, i feel sorry for you. and do something about it, go to school, LEARN HOW TO WORK HARD.

i always felt it came down to work ethic. most people you meet today are EXTREMELY lazy and i think this down time will flush those people down the drain unless they change thier behavior. and someone like myself who is not only not afraid of a 70 hour week but actually loves to work, will flourish.

goes back to alot of andrew hac's themes in his posts. one can only hope this downturn will force the lazy to develop a work ethic.

the quicker that happens the quicker we see hope.

Lady Di said...

Per Roubini this morning on CNBC:
(a great piece to watch BTW - you can find it on his website)

Decrease of 20-30% more in the stock market. It bottoms in mid 09

Decrease of 20% more in commodities including gold and oil.

Systematic collapse not entirely out of the question but less likely now.

Cash continues to be King.

MrBill said...

I haven't seen capitulation in US stocks yet. Panic, yes. Still the market is seeing big up days like Monday. People are not yet totally disgusted with stock market investing, and that's what needs to happen for capitulation. Yes, people have lost lots of money, but everyone I know who stayed in the market during the crash is still hanging on waiting for the rebound. That is not capitulation.

I have been sitting on cash for a year now and I may just stay that way until next summer at least. Targetting Dow 7000 by then, maybe lower.

Peter T said...

I wrote it before, Keith, you are way ahead of the curve. Capitulation and Despondency haven't yet begun. All the Option mortgages will have to reset first and push down the credit markets even lower. 2009 will first have to crush the hopes to return to "normal times" as if the period 1987-2006 would have been normal.

Anonymous said...

Hmmm, let me guess, Keith, Obama will fix the US, right? So the recovery starts in Jan 09, right? And if he turns out to be another disgrace like Carter, the corrupt MSM, Olbermann and his angry lesbo, Matthews, the disgusting DNC, and you will be looking for excuses and blaming someone else, right?

Got it.

Anonymous said...

Fiscal Cat 5 Hurricane Warning

[By Karl Denninger]

You only think the Stock Market has been smashed.

Just wait until you see what will come next.

If you're playing "Buffett", following his claim (note: there is no penalty for lying on national television about what you're doing in your personal account) that he's buying here, there is a little ugly fact you need to be aware of.

That fact is treasury issuance.

(snip)

There is a very real risk that this Treasury Issue could force GDP return on new debt below zero. If that happens then the stability of the monetary system disappears immediately and you will see instantaneous and very large fails in the Treasury marketplace.

The consequence of this event would be catastrophic. Ben would have only two choices - print raw money, which would immediately collapse the Treasury marketplace, or get Treasury and Congress to immediately reduce issue and spending to sustainable levels.

What would "sustainable levels" be? Given that issue is running $3 trillion year-on-year, this could result in an immediate and forced cut in all federal spending by fifty percent or more as the TARP and other program money will have been spent and cannot be recalled.

Yes, you read that right. Now go look at the Federal Budget and you will find that you could eliminate all discretionary programs and all of the military and not get there. This means that in order to attain stability we would have to immediately gut Medicare and Social Security by about 50%, cut our military budget dramatically, perhaps by 25% or more, and eliminate essentially all discretionary spending - all farm subsidies, the Department of Education, Unemployment Assistance and more.

Oh, and having done that, the long end of the curve would probably still spike to 10%, which means 13-14% mortgage rates. Cut the value of every house in America in half - again - from here.

The equity markets sense this. Not one equity trader in 1,000 understands it, but they all intuitively get that something is very wrong with what has been done recently, and that what's coming is going to be very bad - perhaps ruinously bad, especially in the corporate sector where corporate debt issue is a necessity to fund operations, and not just in the short-term commercial paper markets.

Running on free cash flow alone, most corporations would make 20% of what they make today - if that much. This, of course, collapses the "E" side of the balance sheet, which means that the "P" in P/E has to come down.

Way down.

(snip)

We cannot prevent this second dislocation from occurring but it is absolutely essential that the government "ring fence" Treasury debt before it occurs.

Government debt must be protected at all costs or we will lose our ability to fund essential services including Social Security and Medicare.

If Congress fails to act (given that Treasury and The Fed have demonstrated they will tie our sovereign debt to the commercial credit markets to the greatest extent possible) and this second dislocation occurs the probability of an economic Depression rises to 80% or more and the odds of the 2003 market lows holding into 2009 and beyond are essentially zero.

As I see no evidence that Congress grasps the serious nature of this threat and has refused to listen to those of us that have gotten this right from the start, including Nouriel Roubini, myself, Anna Schwartz and hundreds of other commentators and economists, you must prepare for this outcome - and remember who's responsible if and when it occurs.

http://tinyurl.com/5d2a4b

born to lose said...

Keith as always you are way ahead of the curve on this.

We haven't even got to the massive unemployment around the world.

People are still confident that there is money out there for anyone willing to work for it. All they have to do is work hard and they will be rewarded for their efforts.

When jobs dry up, not just good jobs, any jobs, that's when we'll see despondency.

Joe12pk is somewhere between denial and fear. They are where they will always be. 2 to 3 years behind this blog.

Employment Panic is next.

nfn.nln said...

I pulled my money out in Jan. '08. So now I'm one of those jack-asses with money on the sidelines waiting to jump back in. The question is how long should I wait. My gut is telling me to dump 25% back into the market. I'm not saying it won't go down somewhat but I don't want to get left out either. What does everyone else think. Now that they're re-stabilized, people aren't really talking about stocks anymore.

It's funny because even people that have stocks that lost big-time say the same thing when I ask. "Are you going to double-down?" ... Nope. "Ok then, are you going to sell?" ... Nope.

Are we at a cross-roads? Is it a good time to buy?

Anonymous said...

No, While the VIX may have been high, we still have not seen the bottom of either the housing or stock market collapses.

We are nowhere near the bottom of either mania.

Anonymous said...

Obama's lead crumbling in NC and VA. McCain is up in Ohio and tired in Nevada. Obama up by only 1 in NC and only 2 in VA and FL. Add in the Bradley effect and McCain is winning all those states comfortably.

Sorry Keith, the country is waking up to your boy wonder's deceit.

Anonymous said...

Boy keith, I don't know. I'm must be sitting better then most. I have not seen much hardship with the people I hang out with. I think spending will keep heading south and this will last for years. BUT this is a good thing (one living within their means) What a concept!

Anonymous said...

Bumbling, stuttering (like his Boss, Bushco)Wall Street profiteer Henry Paulson interviewed by ill-researched dunce media-controlled puppet Charlie Rose right now. Charlie's face red as a beet like a seial juicer... Paulson, bullet-headed mean and ugly as usual.

Rose asks question, Paulson gives answer to topic he chooses, much like Sarah Wallace Palin.

Paulson smiling all the while...

You KNOW Bushco-Cheneyburton have Fucked the American Public to their knees again... Meanwhile Bernanke is out buying more printing presses on credit and fueling up the helicopter to distribue more cheese doodles to the Rat Americanos...

Too Bad, the market tanking again, but not to worry, 1 pm PST coming up and the PPT fix will Be In.

This time Bush and Cheney have negatively impacted Americas economic future for generations, not just killing a few (4,000+ and counting) innocent US soldiers in an illegal and immoral phony war.

Punish the Guilty. GOP is going to the gallows. Last Day for GOP: Nov. 4th, 2008.

DIE U PIGS

greyhound said...

With all that having been said, consider that house prices are still no where near normal valuations relative to income. It could be very very ugly.

Anonymous said...

Please, I BEG you, anyone considering supporting the senile, out-of-touch serial warmonger, John Herbert Hoover McCain, watch this video of Your Candidate.

Mixed up, lost and looking for the exits: http://www.youtube.com/watch?v=bwHBzqYXBqw

Oh My Fucking God. Are you shitting me, President Wallace-Palin?

Fuck You, Frank.

DIE U PIGS

Anonymous said...

I work with someone who just bought an apartment in Queens, NY. Are the prices in NY much more stable than anywhere else or has this guy just made a big financial mistake? He seems to be quite content and thinks he just got a great deal.
Sorry, do not know the price or exact location, didn't really want to ask.

Mark in Philly said...

And yes, it can still get worse.

Yep - the dem congress is talking about either eliminating 401ks or just plain confiscating them...

http://www.workforce.com/section/00/article/25/83/58.php

Doug said...

Are you sure we've seen panic and/or capitulation? Most people I talk to are saying it's a good time to buy into the stock market 'cause it can't get any lower. Maybe I hang out with smart people, or maybe this is another round of knife catching.

RobertM said...

So, how long will this period last, 8-10 years will it get worse before it gets better, much worse when will the recovery start, 2012 and what will the world look like after we emerge? very, very different.

Anonymous said...

Help me with some basics please, someone. Why is the dollar so strong lately? Are Europe and Asia in as bad or worse shape than the US? What is causing people to want the US dollar compared to the Euro or Yen?

brokersleaveyoubroke said...

I hear a lot of grumbling about 401K's but I don't see a lot of real pain yet. There are still a lot of credit cards around that have not been maxed out yet. I think we have a long ways to go yet.

soft landing said...

Hope in the housing market? 2012
Relief - 2014
Optimism - 2016

It took a decade to come back last time 1989-1999.
Before that 1979-1984.

This one is a biggy.

mr sanchez said...

Is casey doing porn now?

Anonymous said...

This time "capitulation and despondency" will transform into destitution and unemployment rate of 30%, which in plain English means we will all pay the price of " wealth distribution". Just keep on saving that used aluminum foil and food wrap...
p.s. to me a key is not world markets indices, or LIBOR or TED spread of some VIX...to me it is commodity futures that have been plummeting since mid september - very telling, indeed

vanilla ice said...

S&P off 6%. Whaaaa whaaaaaa

Anonymous said...

It may take up to a decade to recover from this mess especially since the government keeps making it worse. And we will lose our superpower status.

Anonymous said...

I think the people calling bottom seem to think this is going to be a "normal" recession. What was going to make it stop last week?

lee said...

SPX will take out 2002 lows then a counter trend rally thats gonna cross ur eyes.
I say 720-750 in SPX this month
get ready to BUY !!!

Anonymous said...

I was WRONG.

Market down over 500 pts...

PPT must be hitting the pipe again or taking extra long expense-account lunch. Maybe a few drinks with George...

America is Bankrupt.

DIE U PIGS

Anonymous said...

were do we think Europe is at?

stuck in permo denial?

Anonymous said...

Here is your October surprise, suckas:

http://tinyurl.com/5c5pge

me too said...

Capitulation and Despondency haven't yet begun. It will after the election, Police departments in cities across the country are beefing up their ranks for Election Day, preparing for possible civil unrest and riots after the historic presidential contest.

Buy FOOD and AMMO NOW!

Anonymous said...

The stock market is already discounting 2011 - 2012.

The economic real work impact with hit but the stock market will already have begun to recover in 2010.

keith said...

Well I'm back in the USA this week folks, first time in a year. And today I stopped by a shopping mall to get a pulse of things. One word:

Empty

Seriously, absolutely like I've never seen a mall before empty.

Anyone else feeling that?

There is no way we're in denial anymore.

Anonymous said...

Watch for the Republican crooks to go out swinging.

This week will be a last minute pre-election suprise, and it will be a huge shocker to get people to not vote.

1. US currency will default and world will move to a new currency standard.

2. A nuclear bomb will explode somewhere in the middle east.

3. Both of the above.

Peter T said...

This can't be a recession or depression, I think we had eliminated the business cycle. It's just a correction, albeit a Great Correction.

Anonymous said...

* Brazil hit the circuit breaker today for the 6th time in a month. Then the Brazilian government announced a new provision to have national banks buying stakes in many private ones (which must be insolvent).

* Argentina will default for the second time in less than seven years, and will nationalize all the private retirement funds in order to use the money from savers to pay the bills. They the circuit breaker also.

GET THE F-OUT OF THE EMERGING MARKETS NOW BECAUSE IT'S COLLAPSING!

Nevada is burning said...

Just heard on CNBC (paraphrased)
"If the consumer decides to do something radical, like saving, then the recession will be long and protracted" Paul McCully(sp?) from PIMCO 10-22-08

Radical saving will kill the economy? Well I guess its days are numbered.


We are still in denial I think. I talk to people everyday as they tell me the markets are at bottom, or buy gold and precious metals. Also, people think their houses are poised to rise above what they paid in 2005-06. I don't think anybody realizes just what is on the horizon.

It took 10-12 years to wind the economy up so tight that it was bound to snap. A week or two of steep declines then in one weekend a worldwide infusion of money and all is well? It is just retarded to think that this problem is now minimized. Houses are still way too expensive, oil is too high still(with OPEC trying to purposely reduce output to supprt prices should tell any rational individual that they have plenty of oil and that they really like high prices so they can swim in our dollars and laugh), and gold is nothing more than another equity product. As long as gold is tied to a fiat currency to dictate its worth it is nothing but another security to play.

The lies about emerging markets, commodity shortages and housing shortages are being exposed. Double digit economic growth can't hold if the population grows by 1-2% a year. All I see is confusion in the markets which means that all the old adadges and technical indicators are useless. They are usless because the world lived beyond its means with high leveraged investments, massive inflated borrowing against houses and whatever a financial wizard could think of and it has destroyed the economy.

The dollar is up simply because the rest of the world sucks more than America. This is a world wide problem and when people here on Main Street realize that a couple of weeks of bleeding followed by emergency triage from world governments only keeps the victim alive(the economy), and does not fix the internal damage. Without extensive surgery it will end in the death of the victim.

All the bubble tv out there(CNBC, FOX Business, Bloomberg) and housing "porn" still try to promote anything they can to stop this unwinding, but it has only just begun IMO. When I go to work and "Joe Sixpack" talks about how big their savings accounts are now, then I might buy into something in some market somewhere. That,I believe,won't be for a LONG time.

mphill said...

Keith, you sound like you think the crash is over. Oh, no no no. We have until at least 2011 until prices bottom out.

Paul E. Math said...

Isn't there a big hedge fund redemption deadline on Dec. 1st? Hedge funds only allow their investors to redeem at certain times of the year, right?

So there will be massive redemptions leading up to Dec. 1st and hedge funds are going to have to liquidate positions regardless of the price. This is not panic - this is just supply and demand. Panic has yet to come, in my opinion.

I just don't think we've hit bottom.

My question, right now, is 2 part:
1) how to identify the end of the deflation that we are experiencing;
2) as we approach the end of deflation, how to invest to capitalize on what Jim Rogers call the 'inflationary holocaust'.

I read a description of current monetary trends as being like a tsunami: 1st the water (money supply) retreats as deleveraging takes place. Then the massive liquidity that the fed and treasury have been creating overwhelms the clueless tourists wandering the beach, so to speak.

Ross said...

This blog is too bipolar for me sometimes. It seems to follow this pattern lately:

Market Up: Caution, but vigilance. The guilty must be punished so we can avoid this mess in the future, which is very uncertain.

Market Down: WWIII is just around the corner. Everyone better enjoy these last few days of freedom before the bombs drop and our new life of slavery begins.

Anonymous said...

Forever. We will become a third world country.

Nick said...

Keith and HP'ers, what planet are you living on? I am upside down on my townhouse, I don't have much in savings, and I have missed twelve full mortgage payments. Yet all of the people I know who are in the same boat are not scared, fearful, depressed, etc....

Do you really think the government will send millions of Americans out of their house? Of course not. It is against their interests. Thus the government will end up rewriting those loans. They have no other option.

who me, panic? said...

“There are a lot more people interested in being prepared, stocking up and being on their own for extended periods of time, as we’ve been advising,” he said. Among them are businesses, he said, including a major Northwest corporation that recently spent “tens of thousands of dollars” to stock up on shelf-stable foods for its executives. He would not identify the company, but he said he urged the officials to stock up for its other employees as well.

----------------------------------

hmmmm...a major NW Corp.?? Let the panic begin.

Anonymous said...

"...You ain't seen nothing yet."

soft landing said... It took a decade to come back last time 1989-1999.


The DOW lost 90% '29-'32. Didn't recover nominally for 20 years; adjusted for inflation it wasn't back to the '29 top until 1987.

We're one year and 40% in, with a Massive pool of collateral fraud-ridden mortgage paper that must be kept in pools at all costs.

Anonymous said...

Why do you want to know?

keith said...

But I do have this to say about the good ol' USA:

Damn fine buffalo wings, TV and hamburgers. Cheap too.

Why we can't get buffalo wings in Europe I'll never understand. Chips and salsa too.

Makes me almost want to stay.

Almost.

Meanwhile, the dollar and Euro will be at parity soon. Who woulda thunk? The US crashes the world economy, and the dollar rallies 50%.

Amazing.

keith said...

Oh, Americans are really, really, really fat too.

Sorry. But you know it's true.

yoski said...

"Help me with some basics please, someone. Why is the dollar so strong lately?"

Everybody needs dollars to settle trades and pay off debt (deleveraging). That's why commodities and stocks are down so much even for good companies. People sell all that can be turned into dollar.
At least that's my take on the situation.

Anonymous said...

....Yet all of the people I know who are in the same boat are not scared, fearful, depressed, etc....
_______
Wait till the range rovers start to disappear in the night. They will. The repo man cometh.

These are the same people that are only made of their stuff. Of course they are not going to tell you they are broke!

Just heard from from friend married to previous high rolling auto dealership manager. They hit the wall, $300K+ in non mortgage debt, and there is no more - tapped. They are hitting the jewelry box to try to feed the monster their lifestyle has become. Finally realize they have 1 year to live payment free to save up and get a grip on reality.
They are rightfully scared to death. I could offer little sympathy.

Take this 1 couple times millions $$ in credit spending of the past decade that is ending day by day, along with jobs, and one realizes that we are so screwed!

Yes Keith, a ton of fatsos in the good ole USA, especially kids and teens. Guess we have McD's, X-box's, Realtor Moms and Flipper Dads to thank for that.

Adam Smith said...

Yeah, you're WAAAYYY too optimistic here, Keith, which is surprising: you seem to think this is just another 'market correction' that will blow over in a few months. Every bone in my body says it's NOT.

No, the macro-changes will be almost glacial in their time-frame, very slow and resolute. I think you're denying what even YOU didn't TRULY believe: this is going to get worse, much worse, with ever-rising unemployment as there's less consumption (demand destruction), until eventually the spectre of hyper-inflation occurs.

THis effect will be felt world-wide, because even though the housing bubble passed over countries like Germany, they DO trade with countries with many consumers who pulled a HELOC to get some cash to buy that Mercedes, and won't be buying again. Them days are OVER, for quite some time.

If you stop to think about it, the good times of the last decade were ABNORMAL, representing a spreading of the wealth via Late-Night infomercials to the middle-class who've never been exposed to such wealth. Where did that extra money come from? Anyone who bought a home, and over-paid: you paid a HUGE premium for that house, AKA the Housing Bubble tax!

Of course, people are expected to PAY OFF their mortgages, and many will decide not to. What's the point, if they're not going to turn a tidy profit, they think. So they walk out. So who's next in line to pick up THEIR bill? We all know the answer: the Lender of Last Resort, the government.

It's only human nature to think of THIS period of slowing down as the oddity, when it's really the OTHER WAY AROUND. That guy living in the condo he can't pay for? He never belonged there, in the first place!

I read this today, suggesting we're still nowhere close to the end of the HOUSING decline, much less the other reactions that follow:

Wachovia expects nationwide home prices to fall by between 20.8% and 27.6%, peak to trough, by the middle of 2010. In California, where most of the option ARM portfolio is focused, such declines may reach 23.1% to 30.2%, the bank estimated in a presentation on Wednesday.

Anonymous said...

Hi, Keith ~

I've enjoyed your site immensely and was disappointed when you first said you wanted to wind things down by November 1st. I'm wondering if your desire to see this thing at an end before you terminate coverage is tainting your judgment a bit at this point. While anything is possible, I tend to agree with those who feel we ain't seen nothin' yet. I've seen FEAR and SOME PANIC. But as for CAPITULATION where people really throw in the towel? Are you kidding? When that happens they won't be turning around trying to pick it up 10 minutes later. That's not a Genuine Capitulation! Despondency and Depression are when people give up hope that things are EVER going to get better. As it is, though, people are still calling a bottom on TV every single day!!! When people think it ain't EVER coming back in their lifetimes - THAT'S TRUE DESPONDENCY AND WHEN WE'LL FINALLY BE AT A BOTTOM. You have a great site and I wish you'd stay. I, for one, will miss you when you're gone.

vanilla ice said...

Keith, can you give us a clue? Which mall did you go to?

keith said...

I think we're in "to be determined" folks when it comes to recession or depression.

If the government opens up both guns blazing and floods us with handouts and bailouts, then we bounce back quickly, and the hard times are again pushed back a bit when the dollar collapses and the US collapses under the weight of its debt.

That said, there's a chance that the hole may be so big, and the bombs so huge, that even a government dropping dollars from helicopters and lowering rates to 0% won't be able to stay ahead of the locomotive. It feels like that right now.

Hold this space, that's what I'd say. I'm keeping an open mind. I think the market is pricing in very deep recession right now, on the verge of depression. And we may end up going there, or worse.

Get popcorn. Prepare for great depression II. But don't be surprised if things don't go armageddon.

CrisisGuy said...

Company earnings for the non-financial bellweathers are just beginning to show the ill effects of what's going on, heck some of them are still beating estimates so I doubt we're anywhere near the bottom.

Come 4th quarter '08 and into most of '09 we'll see alot more non-financials falling apart. With no shelter in the market, most likely capitulation will take place at that time after 2-3 straight quarters of downward earnings.

Just because the majority of stocks in some of the sectors(financial,housing, etc.) have crashed doesn't mean everything else has gone down the drain yet. Lose that tunnel vision for financials and back up so you can see a clearer view of the whole market and the economy for that matter.

As far as hope, cash is king and as most of you have stated you're all just sitting with your cash hoards waiting to rejoin the party when the time is right.

We have the coal to send the train back up the mountain, it's just a matter of waiting for the tracks to clear.

Anonymous said...

Panic won't happen until mid Feb. Obama win = DJIA -500 pts; Hedge Fund redemptions -1200 pts; Year end statements and real 2009 projections -2000 pts (not like the BS that AAPL has put forth) About Feb 15

Keith, you will be missing the tragedy unfurling if you stop the HP blog.

Anonymous said...

10/22/08

The Stark Choice Now Facing America

by Karl Denninger

America, and Americans face a stark decision - and a choice that must be made now.

Not next month at the polls, not next week.

Today.

I have been writing on this subject, petitioning Congress, and both calling and faxing Congress - and you - for the last year and a half.

We now sit literally days away, with a high probability, of a credit market "dislocation" that will change American finance and decimate the stock market.

That is, worse - far worse - than what has happened thus far.

Try on for size 2-3,000 points down on the Dow from here. 25% more than has been lost thus far, more-or-less "all at once." The probability of this event is now in excess of 70% - within the next few days to two weeks.

The Politicians know this.

They were promised that the market would not blow up if they passed Paulson's and Bernanke's bill.

They were lied to, and the first "blowup" happened.

You, the people, were promised that passing this "stabilization" bill was the right thing to do too.

You were lied to.

Now we are sitting on the edge of the second blowup - "The Big One."

Among other things, today we learned that The Fed has lost control of the Effective Fed Funds Rate - their own overnight lending rate. They were forced to change their interest rate on reserves in order to try to get it back under control - and there is no reason to believe their efforts will be effective.

(snip)

Treasury will have to issue three trillion dollars of new debt over the next 12 months in an attempt to make this work. But Treasury has been using very short-term debt - mostly four week and 13 week "bills", to fund the existing debt, because they are cheaper. As such the total amount of these auctions could easily reach five trillion dollars over the next 12 months.

Already, Treasury is issuing more than $100 billion dollars in this debt a week, on average, including new issues and rollovers. This is about double the total amount of debt that foreigners (or US interests) hold in total, and we have barely begun to actually issue the debt necessary to make the "TARP" operate.

We are, in effect, borrowing to pay interest. If you have ever tried to do this personally, you know that doing so almost always leads to bankruptcy.

It will for us as a nation if we don't stop it now.

(snip)

We are on the cusp of this dislocation - and this realization - being forced upon us.

I believe Treasury has been attempting to "kick the can down the road" as is the usual pattern in Washington DC.

Unfortunately the can has filled up with cement and there is now a very high probability that instead of the can being able to be kicked down the road until next year after the elections the second-level dislocation - the "big one" - is going to happen within days.

It is my opinion that we must, at all costs, protect the borrowing ability of our government - the Treasury of The United States.

(snip)

We must choose America.

You have seen, today, another five percent decline in the stock market, despite the claims that "credit is improving."

That claim is a lie.

Credit is not improving - it is being replaced by The Fed being the only issuer and guarantor of credit - an impossible situation that is ruinous to our nation and its prospects.

We face an imminent collapse of both stock and credit markets if we do not act, and act today.

To Congress: Is there not one statesman or woman who will stand for America and her people, not for the bankers and fraudsters on Wall Street who have given you millions in campaign contributions?

To The People: You were promised a solution, and you didn't get it. Are you going to sit on your hands while our nation's economy implodes?

Those are your choices, and you must make them today.

Choose wisely.

(I hope I'm wrong, but fear I'm not.....)

http://tinyurl.com/5ty2cs

Anonymous said...

i think the stock markets could fall another 20%, i'm not sure it will happen. if it does it will be due to the forced selling that is happening. that is why the fed is backing money markets and buying their paper, to stop the forced selling of equities. if i buy stocks i will only be cash rich companies that will survive a deep recession. sounds like the world bought alot of our debt and have massive losses. so, the dollar being strong is because they have to settle those losses. our fed is also loaning dollars to the ecb as in europe there is a dollar shortage. that keeps the dollar from getting even stonger. emerging marketsare toast so they flee to dollars too! european banks are even more leveraged so who wants them and their euro balance sheet. then the euro has not been tested under these conditions, so i think that is another reason for euro selling. europe will cuts rates soon too, they have no choice. i'll buy some euros when it hits parity again! All this spending should reflate the whole bubble system as long as foreigners buy our treasuries. there is alot of cash out there so in the short term it will not be a problem. another bubble even bigger is sure to form out of all this spending!

fischer smith said...

Obama, according to Stirling Newberry at agonist.org, wrote that Obama wants to let people cash out parts of their 401k to pay off their debt w/o incurring a tax penalty. So Obama wants to let Americans put their retirements at risk just so they can prop up the American economy until their 401k cash runs out.... Of course Norm Coleman, here in Minnesota, has been pushing the same nonsense.... ouch! for the middle class...

soft landing said...

Its looking like the Fight Club scenario is going to play out. The debt record will be erased by the gubmint. I wonder if they will erase the savings record too. National socialist workers' party. Has a nice ring to it.

i've had it said...

Market still has more to go down. Housing still going down too. The govt. may re-write mortgages down the road if the Dems win the White House. May even do so if the Repubs win it since McCain floated this idea recently.

Double-digit unemployment for sure: we are almost there already since it's around 6% officially now but if you count the "discouraged workers" it's more like 8% to 9% (remember, during the depression there was no such thing as a discourage worker).

Short-term will see some deflation of certain commodities but I think in the long term we'll see inflation because of the trillions being printed.

I think the market has done some panicking but it could get worse if it starts to head into the 6,000 or 5,000 territory. At that point people will sell, sell, sell because even long term investors (like retirement accounts) can't afford to lose so much. This massive selling, of course, will send the market even lower.

We'll have U-shaped recovery starting sometime in 2010 and will take two+ years to really take hold.

Housing will continue to decline through 2009/2010. If the govt. re-writes the loans then the declines will stop, or at least not be so steep.

i've had it said...

NOTE TO KEITH - NOT FOR PUBLICATION

Keith, i applaud attempts to refresh websites but i feel the blue background in the comments section makes it a bit difficult to read the comments; have to strain to much. I think the white background is best for readability.

Also, I liked the way the "preview" text was rendered on the screen previously with the yellow background and looking like a real comment. i was able to pick up errors more easily than with the new preview screen which is still essentially a text box.

also, for the profile drop down, you may want to have the first one be "name" and the second one "anonymous" and put the others below those two.

My 2 cents....

p.s. if you're ever in the Boston area you should try the buffalo wings at Buff's Pub in Newton...just incredible.

Anonymous said...

Get ready for the IRS deduction of max. $3000 dollars a year write off Capital gains loss for the REST OF YOUR LIFE. What an ass backwards ripoff this is. this law needs to be changed NOW.

Anonymous said...

I pulled my money out in Jan. '08. So now I'm one of those jack-asses with money on the sidelines waiting to jump back in. The question is how long should I wait. My gut is telling me to dump 25% back into the market.
--------------------------------------

dude, check out DXD. buy some.

Anonymous said...

Oh, Americans are really, really, really fat too.

Sorry. But you know it's true.

---------------------------------------

yea but I keep reading how the Europeans are copying us on that one too.

Anonymous said...

Why we can't get buffalo wings in Europe I'll never understand. Chips and salsa too.


-------------------------------

not many buffalo in europe. duh.

Anonymous said...

Help me with some basics please, someone. Why is the dollar so strong lately? Are Europe and Asia in as bad or worse shape than the US? What is causing people to want the US dollar compared to the Euro or Yen?
-------------------------------

where are you getting your quotes? the yen is decreasing relative to the dollar??? news to me (it's not, it's rising).

the euro is dropping because europe is not any better off than the US. it isn't that the dollar is really increasing in value, the euro is coming down to where the dollar is at.

i have been short the euro since 1.48 (DRR, double short euro). I will sell around 1.10, i think. I don't want to be a hog.....

Tyrone said...

Housing Bubble and Lobster? ...

Lobster prices tank
Lobster's price collapse boils down to supply glut, as Maine catches tail end of credit crisis

PORTLAND, Maine (AP) -- The price of Maine lobster, which accounts for 80 percent of the U.S. catch, is tanking.
The primary factor, a drop-off in demand by penny-pinching diners, has been in place since summer. But a secondary problem recently surfaced: the global banking crisis left Canadian processors short on credit, trapping Maine lobstermen and dealers with too much supply.

The recent crisis in the global financial system resulted in lines of credit being cut off to several lobster processors, including some in Canada who have relied on Icelandic banks that have failed, according to John Norton, president and chief executive of Cozy Harbor Seafood Inc., a seafood processor in Portland.

More than half of Maine's lobster harvest is typically shipped to Canadian processors. But this year is hardly typical.

Jim Wilson, a professor of marine science and economics at the University of Maine, is astounded how the Maine lobster industry is being slammed indirectly by the mortgage crisis, Wall Street derivatives and bank failures in Iceland.

"It's rather amazing the interconnectedness that has built up in the economy," Wilson said.

Anonymous said...

Cash will not be king if it is not going to be put at higher return than its cost.

les said...

What currency does Iceland use?
Hungary?
Argentina?

I don't know either but everyone knows about the US dollar. It is the reserve currency of the world and most often used in international trade. People know that they can buy stuff in dollars anywhere in the world.

But, it's only a matter of time before people realize that the US has created too many dollars and is worthless. The US govt has made the m1 supply secret. Plus, what the hell does America make that foreigners need during a global recession besides food?

Anonymous said...

We're so far away from hope right now, probably will be in depression for at least 10 years.

Anonymous said...

Plus, what the hell does America make that foreigners need during a global recession besides food?

hey brainsurgeon, food and shelter are truly the ONLY things people actually NEED. when push comes to shove, people will feed themselves before they buy anything else.

and that brings up a good point, America can feed and sutain itself if it wants to. we could completely shut down the borders, quit driving cars and feed and shelter ourselves with our own resources. if we chose to do so.

Anonymous said...

And we will lose our superpower status.

And what has this "Superpower" status done for us? Make us target of ass backward Muslim extremists?? Gave us easy credit, so we could dig a hole so deep we may never escape?? I'll pass on that honor, thank you.

gutless and lazy said...

My intuitive guess is at least 4 quarters. Early 2010. Connventional thinking (which is 90% of the time too optimistic) is saying 2nd half 2009. Perhaps the best talent on CNBC is Rick Santelli. He's leaning more towards 2010.

I'll give you more rigorous analysis later.

Anonymous said...

I laugh at Wachovia's 20-30% peak to trough loss, they are still in the denial stage. No credit, no jobs, no money, shrinking opportunities, companies selling stock on hand so slowly it doesn't pay to start up operations again. Home prices won't stop plummeting for a decade and then stagnate for another, minimum. I am not a negativist, just a realist. This is a whole new global paradigm, the party is over for some time. All those arrogant and obnoxious fat friends will be moving soon to 'spend more time with their families.' In what reality do these people live in where the see a foundation for recovery, let alone a floor.

gutless and lazy said...

Oh, Americans are really, really, really fat too.
But I do have this to say about the good ol' USA:
Damn fine buffalo wings, TV and hamburgers. Cheap too.


LOL!! It's so funny because it's true! Don't keep doing the buffalo wings, TV and hamburgers. Or you'll look American too!!!

Forget the "VAT" tax. Obama should create a "FAT" tax!! I'm tire of subsidizing other people's medical insurance claims because they can't keep crap out of their mouths. Heart attack bills. Diabetic bills. Etc.

If we tax booze and cigs, we should tax people with huge fat guts too!!! They cause higher medical insurance bills, they should pay for it!!!

The xtra fat RED states will go BK!! LOL!!!

America loves declaring War. War on poverty. War on drugs. War on whatever. They just love wars.

Why not a war on FAT?

Anonymous said...

``We've reached...sheer *pAnIc*,''..."

Noriel Roubini

Anonymous said...

Get ready for the IRS deduction of max. $3000 dollars a year write off Capital gains loss for the REST OF YOUR LIFE. What an ass backwards ripoff this is. this law needs to be changed NOW.

So much for the January Effect on small cap

Ola Dunk said...

This is the worst set of comments I think I've read in this blog. I mean, we're not supposed to panic!

It will be bad, but living standards are far higher than in the late 20s and previous crises have passed.

Anonymous said...

I am sorry, but I don't think we are going to see hope for a long time: false hope, yes. What we are going to see is a very serious reality..this is just beginning..

Many companies are going to go out of business, deserving and undeserving alike. Unemployment is going to be high, just as in the GDepression, and families will gather in groups, liking it or not.

Companies that are involved in non-necessities will pare down unbelievably if they survive at all.There are going to be great shortages since we import much of what we use and wear, and the credit crunch prevents paying for things ordered overseas. We're talking clothes, shoes, appliances,
dishes, steel, tools, everything.
Even the dollar stores will fold.
We have exported almost all businesses...and almost everything sold has at least a 30-90 day invoice lag, handled by credit.
My dad had a small business and he couldn't expand until he'd saved enough to go 90 days without payment...who does that anymore?

We've screwed ourselves with our excalating demands. Now we are going through the descalating phase.

Grandma pkk