Thursday, November 13, 2008

This is no way to run a Market

Some might be thrilled with a stock market up nearly 7% in a day.  Not me.  This is no way to run a market.

Clearly, the lunatics are running the asylum.  

Perhaps this is part of the bottoming process.  I certainly hope so.  I spoke with a dozen traders all over the Street today.  We had all pretty much to come to the same conclusion: that the market had to to turn here or we would be in deep doodoo.  Markets, like the blood in your body, do not need to go to Zero to kill.  The credit market is broken, and the equity market nearly broke down, too.  Was today a one day reprieve or a successful retest?  We shall see.


Now comes today's 30 year Treasury auction.  It was not well received, to say the least.  And why would it be well received?  All of these bailout programs will need to be funded by the Treasury by issuing more and more debt.  Simple supply and demand, really.  Well, it is an ill wind that doesn't blow someone some good - Gold gained over $20 in the wake of the markets realization of the amount of debt coming down the pike.  The US$ and the Yen fell against the major currencies, whether because of the auction or the end of the unwind of the carry trade remains to be seen. 


"Anything that can't go on forever, won't."

Back soon.

Mentatt (at) yahoo (d0t) com


Abraham said...

Yesterday doesn't signal a bottom. As long as there volatility like that I don't think we've hit bottom. Maybe something good comes out this weekend, maybe it doesn't. Either way the market hasn't signaled capitulation.

And yeah I am angry. I am pissed.

After eight years of inept leadership we are all seeing our futures, IRAs and 401Ks, housing values, any hope of retirement ever and really the future of the US go kaput like the air from a balloon.

It's not just numbers on a screen. People are hungry. People are being kicked out of their homes. People are losing their jobs.

All we have to look forward to is a lower standard of living.

Why others aren't pissed is of more interest.

Greg T. Jeffers said...

It has been my position that the US standard of living must contract along with the Oil supply.

Americans want their great national grandfather (or father in the case of Obama) to soothe all of their hurts. I have no idea why we give credit to a president or blame a president for outcomes he/she does not control. Don't like the war effort? THAT is within the presidents powers. Don't like the market? Too bad. show me where exactly in the U.S. Constitution that the president has any power in this regard.

OK, he submits the budget... Who sets monetary policy? Not the president. Who sets fiscal policy? Not the president.

Housing values are not lower than they were 8 years ago. Why did Americans expect to be PAID to buy a home?

We can't solve any over our issues by calling people names.

You are responsible for your life. I am responsible for mine. Political promises will not help a wit.

But are more than welcome to vent your spleen here. I do.

Good Luck!

Anonymous said...

What's happening today is the grand finale to a process that has been ongoing since the 70's at least. This is the great flight of capital from the United States. I'm not talking about investment, stocks and bonds, etc. I mean real capital. The plant and equipment necessary to produce the things we need have been going obsolete and not replaced within our borders. Oil, automobiles, TVs, clothing, shoes, semiconductors, you name it.

This huge meltdown in the financial markets is a symptom, not the disease. This much smoke and mirrors finance exists because of the lack of REAL alternatives to invest in. Look at the listings on the NYSE. Where are the industrial giants? Smoke and mirrors have been holding things together for years. It's a surprise it's lasted this long.

The right is beholden to the smoke and mirrors status quo. The left assuages the pain of the masses with give away programs. Everybody suffers.
Everybody gets poorer. Blame Bush today. In four years it'll be Obama's fault.


Coal Guy

bureaucrat said...

Um, lets not forget, however, that for all the sins of Mr. Greenspan (and he will going to hell for his easy credit nonsense), we do have to praise the Chinese juggernaut for replacing all of our factories and giving us products built for 10 cents on the dollar, thereby keeping our product prices/inflation low. We imported deflation, essentially. Now, I am with the group in saying this weakened our country to the point we are now pointing fingers and waiting for Mr. ObamaMessiah to save us, but, bottom line, a lot of stuff we needed and bought was indeed cheaper because the Chinese gave us all that near-free labor. Always two sides to every story. The U.S. will pass from world domination because of it, but it is what it is.

Anonymous said...

Hi Bureaucrat!

Yes, and we supported and encouraged the Chinese juggernaut in an attempt to stabilize a very unstable and dangerous China. Did it work? No one knows. I'm fully in support of such endeavors. Beats the hell out of war!

But, we've thrown the baby out with the bathwater. I'm just a geeky electronics engineer. But, I've known this day was coming since the 80's. Just not when. We've been listening to the post-industrial economy and information economy crap for decades. Yep, those Harvard economists sure have it goin' on, don't they!


Coal Guy

Anonymous said...

Also, after the crash, who are the big losers? I mean when international trade and finance break down and the Dollar and Euro and Yen have achieved ultimate parity , exactly ZERO?

Well, China has a shiny new industrial base, lots of natural resources and a big internal market. They will also come out of this with a currency that is still worth something. They will be OK.

The US also has enormous natural resources, and an aged but still viable industrial base. Even if the US government defaults, there will be some internally valuable currency, and we will recover and be OK.

The EC has jack $%^T. The Russians will still be there, as always, to help them out. Russia will be OK

Not a clue about Japan.


Coal Guy

bureaucrat said...

China does NOW have an industrial base and 1.3 billion consumers, but as to their resource base, they are as bad off as we are. They are the same size -- land mass -- as the U.S. but their oil is peaking and they never had much nat gas. As the Coal Guy, you know they have lots of coal :) but as they burn it, bad things happen to the air. The U.S. has a rotting industrial base, oil that peaked a long time ago, and an aging population. The Chinese have every reason in the world to be messing around in Sudan/Darfur. That's where the energy is.

Anonymous said...

Sure, China is going where the energy is. And, they are going to have the hard currency to buy it. The US may not, if bailout fever persists, we may just be saving the banks while making US gov't debt worthless.

Yep, I'm coal guy, not because I think we ought to burn it all, just because it is necessary in the short to mid term until renewables become practical. Both political ends have it wrong. Drill, drill, drill is so short sighted it's funny. On the other hand the CAVE people (Citizens Against Virtually Everything) don't understand that the renewables require such a huge infrastructure rebuild that it is 25 to 50 years before they predominate. I don't want to freeze and starve waiting for it.

In the mean time, there is coal and gas and nuclear. All can be used with proven technologies that can be used in the right combination to get us off the foreign oil in 5 to 10 years. This requires only the political leadership to clear a path. The government is in the way.

For example, the nuclear industry has to beg Congress for loan guarantees, and won't be able to build a new power plant without them. Why, you might ask, do they need loan guarantees? Because the regulatory climate is so fickle that no one will invest without the guarantees. So, in order to build, the government has to protect the investors from the government.

If oil prices rise as expected it will be so F%^&*$$ing profitable there won't be trouble raising capital, given favorable regulation. Even if the $ is useless for foreign trade, there will still be some form of internal currency and capital formation. I don't see anybody standing up with a plan. Guess I'll have to do it myself.


Coal Guy