Jim Cramer has called for a half-point rate cut approximately 439 times per day for the last 2 years. Cramer probably hates the current Fed more than Rick Reuben hates the mere existence of the Fed.

There probably will be another half-point rate cut at the next regular Fed meeting later this month. Pretty soon, Cramer will be calling on banks to pay borrowers to take money.

The business news media shills are more shockingly pathetic in the execution of their trade than their comrades in the general news media, which is a pretty amazing achievement.

Rick Reuben wrote:

eephour wrote:so whats going to be the end result of all this? breadlines?

Impossible to tell. That's what makes it so exciting.....[etc].

That's right....we don't know, as I told y'all awhile back....so shut the frick up already with your armchair economics. All yous.

I'm worried about America's financial future. Very worried.

We don't have a manufacturing base any longer. 40% of the new jobs that were ushered in by the Bush administration were centered around the rapidly growing housing industry, but now this trend is inevitably sliding back down due to the sup-prime meltdown. Where will these people find jobs? America's workforce is quickly becoming limited to the service industries, communications, construction and management. Why will foreign nations continue to loan us money when we have less and less to give them in return?

Once the dollar drops too far and foreign nations jump from dollars to euros, how are we going to maintain our way of life, one which is addicted to cheap consumerism and foreign debt? What are we going to do when we no longer control the global energy market? To what extent was the Iraq war an attempt to deal with that particular question?

What about Peak Oil? What about the inevitable global environmental collapse? What about terrorism and its effect on the global economy (9/11 shell-shocked stock markets around the world)?

These are very scary times we live in.

Rick Reuben wrote:Jim Cramer with Chris Matthews talking about the imploding bond insurers:

There is something I would urge all the candidates to think about and our Treasury Secretary, which is that there are a group of insurance companies which insure all these bad mortgages and, Chris, I think they are all about to go belly-up, and that will cause the Dow Jones to decline 2,000 points. They've got to be shut down and the insurance given to a New Resolution Trust. This is going to happen in maybe two or three weeks, Chris, it's going to be on the front of every newspaper and no one in Washington is even willing to admit it...I am telling you that these companies do not have the capital to "make good". And when they do fall, and I believe it is when---if the government does not have a plan in action; you will not be able to open the stock market when they collapse.

Help me out here, posters....is Rick Reuben aka clocker_bob?

matthew wrote:Help me out here, posters....is Rick Reuben aka clocker_bob?

yup.

emmanuelle cunt wrote:I have a gut feeling Matthew will come back in 2008.

freakish.

Rick Reuben wrote:Jim Cramer with Chris Matthews talking about the imploding bond insurers:

There is something I would urge all the candidates to think about and our Treasury Secretary, which is that there are a group of insurance companies which insure all these bad mortgages and, Chris, I think they are all about to go belly-up, and that will cause the Dow Jones to decline 2,000 points. They've got to be shut down and the insurance given to a New Resolution Trust. This is going to happen in maybe two or three weeks, Chris, it's going to be on the front of every newspaper and no one in Washington is even willing to admit it...I am telling you that these companies do not have the capital to "make good". And when they do fall, and I believe it is when---if the government does not have a plan in action; you will not be able to open the stock market when they collapse.

I broke this news already.

C'mon, Reuben -- it's in this thread.

The negitive growth of jobs in Dec by 17K smells like rescession.

I'm taking a financial markets class at a top MBA school. Our professor has dropped the standard syllabus, replacing it with nothing but current events. Some incredible things I've heard in the past 2 weeks:

- globalism, i.e. cheap labor, leads to a ton of American capital getting invested in countries with rather shaky political structures. These people immediately put this money in American banks, where they believe it is safe. American banks now have a glut of cash, so they loan it out to everyone who wants a house. A lot of those people were terrible, terrible investments.

- an investment banker realizes that if you packaged up all these mortgages into derivatives, you could sell them at a profit to institutional investors (endowments, insurance companies, pension funds...). These institutions are only allowed to buy AAA quality debt, though. About 80-90% of these mortgage derivatives are AAA, but the sub-prime stuff is BB/B. Because the institutional investors are forbidden from buying it and no one with a brain is stupid enough to buy it, the investment banks get stuck with the BB/B grade junk.

- after the investment banks had sold off their highly in-demand AAA derivatives to institutional investors, they were left with the lower rated BB and B grade junk. Knowing it's garbage, they get rid of it by re-packaging it into CDO's. These CDO's, despite being made up entirely of junk grade mortgages, then get magically turned into AAA grade debt by either yield spreads (which were based negligently selected statistics) or by taking out insurance - that's right folks, in the free market, you can take a piece of shit, get it insured as though it were a bar of gold, then openly market and sell it as a bona fide bar of gold. A lot of this is bought up by foreign investors who didn't know any better (hence the global implications of all this), or by institutional investors and banks who didn't know any better (but should have).

- re: yield spreads, a large amount of responsibility for this rests on the credit rating agencies, who assessed the investment quality of derivatives based on historical data that did not include the great depression. Instead, they started with post-WWII America, a country that had never seen a decline in the housing market. As you can imagine, a lot of folks thought this 'AAA' rated junk could only go up - indeed, that's what the statistics showed.

- commercial banks now held CDO's rated at AAA that were in fact junk. They don't want it either, so they start affiliate companies (legally separate entities for balance sheet purposes), dump the junk in their accounts, then have the affilliates issue asset backed commercial paper backed by the junk. The kicker - ABCP is short term, unsecured, high-quality debt. The primary buyer of these are money market funds. The primary funder of these, in turn, are your local banks, who dump your cash deposits into them as a way to get a little bit of interest off your money.

- now that people are wising up, the ABCP market is dead. Commercial banks were left holding a lot of this, and per new accounting rules, these are 'risky' assets which can only be listed at a fraction of what they are worth on paper (that is, law makers finally caught on). This means a bank that has say $500 million in ABCP's has to list them as, say, $250 million. They then have to write off a corresponding amount on the capital side, which is where banks all across the country are having problems.

- this is why the fed recently auctioned off $40 billion. The banks need it to stay solvent. As people start defaulting, banks will have to write off their mortgages on the assets side, which means they have to write off capital. Capital is largely our deposited money. "But my deposits are insured by FDIC!" you say. The FDIC currently has around $50 billion in cash to protect your money. Citigroup, the nations largest bank, could wipe that out all by itself even if only a third of their junk assets fall through. My prof says that as of January 1st, Citigroup was not in compliance with the law as to their asset-to-capital ratio and has 40 days from that point to do so or be shut down by the government.

- the really ugly part: the real defaulting hasn't happened yet. Most of the sub-prime mortgages were made with some deal wherein there were no principal payments for a couple years, then low interest rates for a while, then rising rates for the life of the mortgage. Thie over-lending started around 2001, and these mortgages are just now starting to become unmanageable for the people they were given to. Expect the real shit-storm to begin in August, when the default rate is out of control and the banks start writing off our cash.

Bonham lives! wrote:I'm taking a financial markets class at a top MBA school. Our professor has dropped the standard syllabus, replacing it with nothing but current events. Some incredible things I've heard in the past 2 weeks:

Bonham--very interesting post. Where are you studying? I just started at the U of Chicago GSB recently but haven't taken any finance classes yet.