Tag: congress

Oil? Economy? No, it’s Maxine Waters Watch! – 02/13/09 (UPDATED)

A new low amongst lows, but who gives a crap

Yesterday the March ’09 contract hit a new low of $33.55, besting the pre-Christmas low of $35.18 for February delivery.

March '09 Crude Oil

Few words from the media on this – they are too busy making hay of some easily misinterpreted somewhat odd batshit crazy questions fired at bank CEOs the other day.

While prices at the pump are a little slow to reflect the ever downward slide, it’s smart to keep in mind that this one component of cost of living touches virtually everything. And it’s my view that this ‘chapter 2’ of the summer rally is the sole reason why Americans don’t quite see the economy falling headfirst into the abyss (at least just yet). If the wholesale printing of monopoly money by ‘our saviors’ forces oil producing countries to turn off the pumps, it’s watch out below.

Editor’s note: As oil rallied over the summer, Congresswoman Maxine Waters was screaming for the nationalization of energy companies. No word from Ms. Waters on how that move is progressing, but Congress has crammed billions down the throats of more than a few banks that probably didn’t need it, and Ms. Waters is off her lithium once again.

Would someone please make a run on ‘meet your mate locally’ dating service lawn signs and ‘my kid is an honor roll student’ bumper stickers? Maxine Waters can hold a few quick hearings with those entrepreneurs, and subsequently nationalize those industries. Then, whomever is left in charge at Congressional Kiddie Club while Nancy Pelosi is sitting on the beach with the pope can maybe get a few issues addressed, and we can be on our way to recovery.

UPDATE: The media finally catches wind of the issue. The fact that gas isn’t plummeting too is pricing disparity between the quotes above and Brent Sea, combined with the fact that refineries have taken a break. But I wouldn’t hold my breath on gas hitting $2.50 – gasoline futures are catching on to the crude mentality.

The Age of Prosperity Is Over

From “The Curve” Dude:

These issues aren’t Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren’t.

By the way, Mr. Laffer also points out the hilarity of government bailouts, and makes quick work of how intervention flies in the face of demand/supply practice and how it’s going to push the economy further down the rabbit hole.

Tuesday Tidbits – October 7, 2008

The rally that wasn’t

  • Jim Cramer called the end of days. He’s widely considered such a dope that whenever he says something peoples’ first reaction is to fade his advice.
  • The Federal Reserve is now letting non-financial enterprises step up to the trough. I give credit where credit is due around here – Nouriel Roubini called this one last week on the RiskMetrics webcast.
  • More credit: Henry Blodget and Company have been saying web advertising would take a hit, and they’ve been saying it for a while. You can continue to question the thought, but while you’re pondering Facebook’s COO says the web needs a new business model (albeit late), and VCs are still trying to sell free. Results from the second half of this year will certainly shed some light on the subject, but I wouldn’t bet against the Alley Insider right now.
  • The rich are hurting too, and “the rich” includes institutional investors like pension funds. Take their actuarial perspective towards funding, throw in an alternative investments market including hedge funds and private equity (that have either gone neutron or can’t find an exit with flashing neon signs), and then lop on top an S&P 500 that has (as of today) been flat for a decade, and you’ve got a recipe for retirement ugly.
  • Bad credit: Mortgage equity withdrawals closed in on zero for the second quarter of this year. I’ve heard more than a few stories about equity lines of credit being shut down even when there has been no drawdown at all. The good part of this is people won’t be digging themselves deeper into debt at a time when they should be concentrating solely on getting out. The bad part of this is that the consumption-based economy will suffer. For the rest, there’s always eBay and Bill Me Later.
  • And last but not least…

  • Government gives handouts, but previously hat-passing Wall Street is now going to say no thanks? No wonder there was so much pork in the bailout bill. Congress can’t seem to get much right, and their timing is just as bad. Good thing they’ve got the blame game to fall back on.

Adieu.

How will the bailout bill failure play out?

In a poll from Glenn Reynolds almost half of respondents chose…

Can’t answer — too busy stockpiling shotgun shells and canned goods.

Based on panel estimates from Quantcast, Instapundit readers are solidly middle class, and over 80% are college or graduate school educated. In other words, I’m not sure they were just joking.

I’m not sure I blame them either.

Bailout Bill Fails in House (UPDATED)

Wall Street Journal:

The House of Representatives delivered a stunning defeat to legislation designed to rescue the nation’s troubled financial system, sweeping aside a call from President Bush to “send a strong signal” of confidence to markets at home and abroad.

The 228-205 vote Monday exposed deep unease among rank-and-file lawmakers in both parties with what would be an unprecedented intervention in the private sector.

The financial markets reacted with disaccord…

sp-500-september-29-2008

Tallies for the day: Dow -777.68 (-6.98%); Nasdaq -199.61 (-9.14%); S&P 500 (above) -106.59 (-8.79%).

Side note: Barron’s added that the Nasdaq was headed for one of it’s top ten worst days. Today’s result wound up ranking #3. Paul Kedrosky says watch out for rolling boulders.

UPDATE: Today’s market result was also the biggest one day point drop for the DJIA.

Midday Monday Bailout Negotiations Briefing

A chronology

  • Thursday, September 25th, 1:10PM – Chris Dodd and Company say an agreement has been reached. Must have been Dodd’s Plan.
  • Thursday, September 25th, 4:32PM – We’re now hearing about ‘wreckage’ and ‘climbing’. Those dramatic terms probably got a lot of web hits.
  • Thursday, September 25th, 6:17PM – Unraveling because John McCain wants private markets involved?
  • Thursday, September 25th, 11:37PM – Deal breaks down and Paulson goes home. Who’s plan was this again?
  • Friday, September 26th, 9:02AM – Republicans to blame. Yep, Dodd’s Plan.
  • Friday, September 26th, 11:54AM – Barack Obama sees progress. I’ll bet Dodd handed over his plan.
  • Friday, September 26th, 11:58AM – It’s all Newt Gingrich’s fault?
  • Friday, September 26th, 12:36PM – Must be Barack’s Plan now – he’s blaming John McCain too.
  • Friday, September 26th, 2:40PM – All sides negotiating.
  • Friday, September 26th, 7:54PM – Barney Franks says “we’ll have a deal by Sunday” (the same Barney Frank that said nothing was wrong with Fannie or Freddie – video 01:18).
  • Saturday, September 27th, 9:05AM – Everyone is hung over; good thing the markets don’t open tomorrow.
  • Saturday, September 27th, 2:31PM – No doubt a bailout is necessary. And no doubt ‘taxpayers will get hosed‘.
  • Sunday, September 28th, 10:15AM – A comparison of Paulson’s Plan to Chris Dodd’sBarack Obama’s … Barney Frank’s Plan.
  • Sunday, September 28th, 11:46AM – The financial system needs more than Botox.
  • Sunday, September 28th, sometime in the afternoon – Tentative deal reached, but will it hold? You’ll have to wait until next Wednesday to find out.
  • Sunday, September 28th, 12:15PM – A summary of the agreement. [Full text here]
  • Sunday, September 28th, 6:15PM – The private sector Barney Frank got us into this mess. His plan will get us out?
  • Monday, September 29th, 7:14AM – Quit targeting asset prices, Messrs. Treasury and Federal Reserve.
  • Monday, September 29th, 12:00PM – The plan is imminent, but markets are tumbling anyway. And that is despite the Fed pumping a third of a trillion dollars into the system.
  • I wonder who will take credit for the plan next.

    Another weekend, another bailout plan (UPDATED)

    As the press goes, last week Fed Chairman Ben Bernanke told ‘congressional leaders’ that the US faced an imminent meltdown. We heard from the horses’ mouths that this was scary. It couldn’t have been written any better for a movie. Surprise – now we have yet another bailout plan.

    You can find the full proposal (for now) at the end of this post. The first thing you’ll notice is that it is pretty short, and the second thing you’ll notice are some of the egregious terms. The press and the blogosphere were quick to point out the latter, and various conspiracy theories were quickly generated around Section 8, which deals with the Treasury’s unilateral and unobservable authority, included protection from litigation. Amateurs, each and every one of them.

    You don’t go to the negotiating table with a proposal, particular one that outlines to a country full of people how weak they’ve become without a game plan. And you especially don’t bring such a proposal to a band of lawmakers that you know have a penchant for changing things to directly benefit themselves, and who, while complicit in the problem to begin with, will do everything in their power to try and convince said country’s people that they are there to help them. The sticking points in the proposal are nothing more than “throwaways” – terms purposely put there only to create a little unrest and be caved on later – terms designed specifically to make those on the far side of the negotiating table think they won something.

    Will it work?

    I’m going out on a limb here…no. First and foremost, we are talking about the purchase of fairly complex mortgage instruments, including but not limited to the over-the-counter insurance which backs them in case of default. It’s that insurance that is causing most of the problems – a market of many 100’s of trillions of dollars – and if it collapses at one point it sets off a ripple of defaults elsewhere in the transaction chain. So while this move is probably quite necessary, the problem has been known for years. The Treasury really doesn’t have a clear idea of how much these assets are worth because the bankers that presently own them don’t – the market for these assets has become extremely inefficient, with few buyers asking very low prices, and the bankers demanding higher because they paid much more just a few years back. Sound familiar?

    Now a new buyer steps into the fray – this buyer has well-publicized, deep pockets, and has publicly stated it is willing to pay more. How do you expect these sales are going to go? The Treasury is going to wind up paying entirely too much for these assets, and when the obligations finally sell taxpayers are going to be looking at a loss. The cap on purchases has been initially set at $700 billion, but I say that’s a drop in the bucket – the Fed injected roughly $150 billion into the system just last week to prevent a money market meltdown. As a result of this cap, the Treasury will be forced to liquidate positions prematurely in order to buy additional product. The result – more losses. They’ll be back at the national debt trough in no time, which brings up the second problem, borrowing capacity.

    It isn’t just the US markets that are roiling – this is a worldwide financial crisis. Even China, who until now has had an unquenchable thirst for US Treasury securities, is getting tired. And with the US economy slowing, even they are going to see their need for dollar-denominated government securities wane. Either they (and every other foreign creditor still standing) starts getting bonds at deeper discounts, or interest rates have to rise – either way yield is headed up. If the former happens, Congress is going to be mighty busy raising that debt ceiling. If the latter, nobody is going to be able to afford domestic credit.

    This is all a temporary fix just like the last three (or is that four) bailout proposals presented over the last year, including the one which laughably sought to have Fannie Mae and Freddie Mac doing the bailing (those GSEs are now being bailed out themselves, in case you’re just joining). It’s just that this one is bigger.

    Regardless of its merits (or lack thereof), I suspect this proposal will pass. There will be oversight, and there will be further help for struggling homeowners.

    And there will be more proposals.

    UPDATE: It looks like the proposal may now include auto loans, student loans, revolving credit lines, and other ‘troubled assets’. The price tag is getting bigger already.

    UPDATE 2: Congress seems to be biting on the wrong stuff.

    (more…)

    Monday Morning’s Weekend in Review

    Linkfest Link Barrage Tidbits on real estate and oil, since this last weekend was about sun and fun (at least around here).

    Adieu.

    Sleazy Friday Links

    Getting ready for the weekend

      Topping the sleaze charts:

    • Government officials got big loan discounts from Countrywide. “Friends of Angelo” included, who else, but the heads of congressional banking and finance committees. Note – these folks voted for a government mortgage bailout plan, and no wonder – they’re getting foreclosed on.
    • Voted “Best Value From Your Stimulus Check”:

    • To hell with retail purchases – get “more bang” for your stimulus check dollar. A new “core inflation” measure is just around the corner…ex food and energy and sexual favors.
    • And last and least:

    • A judge recuses himself from obscenity case over a purportedly obscene website, but it seems what was truly obscene was the media’s lack of fact finding standards. The media will continue to cry about the internet killing them, never understanding the simple truth – their product is for shit.

    Today’s crude oil craziness

    Just a summary of nuttiness

    • Congress is nearing a quest to sue oil producing countries over prices. Even if they won such a lawsuit, who would determine the damages, and who would enforce the judgement? Is the Justice Department going to say “pay up, or you can’t export your oil to us anymore”?
    • It’s time to lay down further regulation of the commodities markets. Despite skyrocketing global demand (and blatant stockpiling on China’s part in advance of the Olympics), the government still wants to blame everything on speculators. Forget never ending trade deficits, soaring national debt, and a plummeting dollar…it’s time to further regulate the exchange of futures contracts by Joe Trader In The Bathrobe.

    What is going to happen when and if this bubble bursts?

    UPDATE: Revisting peak oil (seen the chart before, and I’d recommend downloading and looking at it on a big screen).

    UPDATE 2: More blaming the traders.

    UPDATE 3: Hoarding may be reality.