Just a few stray thoughts this morning.
What did you think about the presidential debate? I watched so I wouldn't miss anything as opposed to expecting to hear something great.
I think I have been consistent in expecting that Obama is going to end up winning (not a preference just an expectation) but one thing I just don't get and am surprised that we don't hear more about, but why do so many people think that a senator in his mid 40s serving first term (of which he has spent a lot of the time campaigning) is the best choice for the job?
My dad made a comment about Palin lacking experience and having her only be one heart beat away makes him uncomfortable. Fair enough but Obama is only a couple of years older and he would be the heartbeat.
Is Fox all done with the Business Block on Saturday morning? For several weeks now the shows have been preempted (maybe they were shown later in the weekend?) for special crisis coverage. At some point the special coverage becomes the regular show, doesn't it?
As I write this there is no deal yet on the bailout. There is a consensus that says if they announce a deal that the market will then rally. It certainly could but if everyone thinks it will go up I'm not sure how it can go up.
One reader noted that muni money markets are yielding more than taxable money markets and wonders if that is where money should be placed. I tend to be very conservative with this sort of thing. In my opinion this is exactly the wrong time to reach for yield (return of versus retrurn on). Aside from just thinking this is a bad time to that, how do municipalities use the credit market to function? They have short term financing needs just like companies and the US government. What happens to your muni money fund if there is a problem there?
It would be reasonable to assume that at some number (yield) you are seeing some concern about being able to access capital? Other than Valejo, CA and Jefferson County, AL there have not been any other municipalities to have trouble (but maybe there have been and I missed them?). At this point with the way the dominos have fallen would it be shocking to to hear the the muni market ends up getting touched? I'd rather have an individual issue that will very likely pay me back par when it is supposed to than have a money market right now. And for short term money I'll take the crappy yield for now.
Update Update; Looks like a tentative bailout was agreed upon. Here is the WSJ version. I still am uncertain why so many people can be correct about the market going up so much come Monday but it'll very probably be me who is wrong about this.
We have a house guest for the next couple of weeks. That is him in the picture, his name is Ben and he is a golden retriever.
35 comments:
"Is Fox all done with the Business Block on Saturday morning?"
I was wondering the same thing.
Maybe it's a message to start
buying equities...or maybe the
regular guests have/are_____________.
Is Ben your houseguest until he
can refinance his subprime mortgage? Hope they didn't foreclose on his doghouse! :-)
thanks Roger
No, Ben's story is about a very positive post retirement career.
Ben himself however is a bad fit for our pack, as Cesar would say.
I watched most of the debate, thought it was mostly a draw, although I came away feeling McCain would be a better finger to have on the nuke button in a crisis. Regarding Palin, IMO the McCain campaign has really fumbled the ball as-far-as responding to international experience questions. There is not a governor out there who NEEDS in-depth foreign-policy experience to be a governor; the McCain campaign should have responded in this manner when asked instead of getting all defensive and letting her make statements like "Well, ya know you can see Russia from Alaska...so therefore I have foreign-policy experience.". Obama is intriguing but I'm leaning McCain, although I think it's Obama's race to lose.
As for the bailout, I keep hearing various folks (senators/congressman involved in the bailout discussions, economic talking-heads, etc.) say that even with the bailout, they're not 'sure' it will work, i.e. get the credit markets functioning again. Why would it not work, roger ? Would it mean they needed a bigger bailout, or that lending institutions refuse to lend, or something else ?
"but why do so many people think that a senator in his mid 40s serving first term (of which he has spent a lot of the time campaigning) is the best choice for the job?"
He may not be, but so far, 18 million people thought he was and he has lead all polls since. Whereas, Palin was selected (as a stunt) and has not received one vote. If one votes for McCain they get stuck with Palin.
look i don't know anything but ideology aside one thing a bailout does is push out a final conclusion.
if there were no bailout we would see more failures and more private solutions (JPM buying WaMu) faciliated by the government.
I also think no bailout would create a chance for more pain right here right now but that could be a faster path to a panic, bottom and then an aggressive path to a fix.
i don't think someone who a CEO for a few weeks should get millions but will that prevent some companies from participating? I don't know but that seems like jsut one of several dilemmas this raises.
Come to think of it, my first thought when Palin was selected was "I think McCain just had his dan quayle moment". But after hearing her, and a few taped interviews c-span rolled out when she became governor, i do believe she is more intelligent than quayle - although i know that's damning with faint praise. I assume you know palin wasn't running during the primaries and that's why she has not received 1 vote, not to mention, even democrats acknowledge that people vote for the top of the ticket. I thought the 18 million figure was what hillary received, btw.
IMO, she came off pretty well in the c-span interviews because c-span interviews people for the purpose of obtaining useful information on important subjects. Much of the media (couric,etc.) Palin is dealing with since her selection has been of the 'gotcha' style of interviewing, i.e. what can we ask that will throw off the interviewee and may result in a soundbite which will help our ratings. BTW, if we're going to get double-team by the brothers nusbaum, maybe this site should be changed to "NusbaumsKnows", or something equally silly.
anon 731, ease up there fella, i didn't offer any opinion about Palin, i acknowledged a common sentiment about her.
my brother and i have different political views.
Roger,
Attached is a link to a new article just published by Roubini on this bailout package. If Roubini's assessment is accurate this does not bode well for our exonomy dduring the enxt 2 years or so...
http://www.rgemonitor.com/blog/roubini/253783/is_purchasing_700_billion_of_toxic_assets_the_best_way_to_recapitalize_the_financial_system_no_it_is_rather_a_disgrace_and_rip-off_benefitting_only_the_shareholders_and_unsecured_creditors_of_banks
roubini bearish? No, no that can't be right, lol.
Thank you fro the link, there is value in his commentary to be sure but i tihnk most folks could probably guess what he will say, right?
One thing that has almost always been true is that equities turn up before it is fundamentally justified. I will read the link but if he is targeting two years before things start to get better then maybe that means 18 months for equities (assuming the reader's comment abotu two years is correct)
FYI- Just to clarify for the other readers, Roubini has been saying in past blog comments that the equity markets will see another decline between 15-20% and that the recession is likely to last another 18-24 months...
20% from here would be SPX 970 which would be about 125 points worse than what I have been thinking and would be a total drop from the peak of 38% versus my guess of closer to 30%.
For all of his dire commentary a 38% decline, if he were to be right (I have no idea about his track record for equity market predictions), doesn't seem so horrible.
Anyone agree with my on that? Or disagree?
From what I read, Jeffrey Saut disagrees. He says the bottom is in here.
a milder than normal bear in the face of a "the worst financial crisis since..."
what do you think about that?
I hope Saut is right.
Me too. Current crisis aside, we've still got to get through October (maybe all the funds have sold already?) and the presidential election. That's tough enough in a normal economy.
Calendar years is a rather crude metric: There are old fools and wise youths out there too: If Obama is elected he will hardly be the youngest president in US history; e.g., JFK and Teddy Roosevelt were younger.
If McCain is elected he will be the oldest first-term president in US history but I'm not sure how significant that is; i.e. the actuarial odds of him dying or becoming disabled within 4 years are close to 30% but, as a senator and multi-millionaire, his medical care has been second to none and that will certainly continue so his actuarial curve is probably strongly skewed in his favor.
Far more significant are McCain's multiple bouts with an extremely malignant and recurrent form of cancer (melanoma); i.e., the actuarial odds of him dying or at least being disabled under therapy are in the neighborhood of 90% within 5 years but w/o knowing stage and some other factors that's something of a guess too.
Still, between the factors of age and cancer I'd guess the odds of a Palin presidency to be at least 50:50, basically a coin toss.
Personally I don't have a huge problem with Palin although I wouldn't want to be her neighbor given her history of feuding and the rate at which her enemies list seems to grow. She's pretty much seems to be a suburban redneck; use to know a few like her in Kentucky and they're mostly all right if you don't expect too much. To tell the truth I think the McCain campaign has treated her shamefully but also find the idea of her as president frankly grotesque, YMMD.
But all that said the reason I won't be voting Republican this cycle is actually more related to the reason(s) I disapprove of this bailout: Giving money to poorly run companies (directly or in the form of free 'insurance') or voting for poorly run governments creates moral hazard, it rewards bad behavior and encourages it to continue; many of these companies should simply go into receivership, let the FDIC deal with 'em.
But that doesn't mean I'll necessarily be voting Democrat in all cases, got a pretty good Libertarian and a promising Independent out my way, nor do I kid myself a difference may be noticeable if Obama wins: I do not think his victory is a lock although I do think it will make a difference, still, I have no particular interest in hypotheticals right now.
When I study an investment there are numerous hypotheticals but once my money is in the pot there are none: Either I have more money afterward, meaning the strategy mostly worked and I can replicate or build on it, or I don't have more money and it's back to the drawing board. I generally don't argue to myself, gee if I'd just executed that better, let me try it again: That's what losers do when they head back to the card table after getting cleaned out; execution is an integral part of strategy, what good is a game plan once you've proved in the clearest possible way that you don't play well? You need to figure out what went wrong and not kid yourself while your doing it; excuses suck.
The Republicans ruled all branches of government for 6 years and had preponderant influence on fiscal and monetary policy for more than twice that span and here we are: If you like the results then reward them; if you don't then send them back to the drawing boards. (shrug)
Roger,
I had a long conversation with a hedge fund manager who considers this credit crisis completely unprecedented and simply not contained in any "history is likely to repeat itself" analysis.
Effectively, he thinks a 2-3 year recession will be the "good" scenario, and anticipates a Japanese experience (lost decade) potentially more likely. He considers a bailout the only possible triage, but doesn't have any confidence that it is more than a band-aid on a hand grenade wound.
I suppose my question, if I have one, for you is - after the volatility drains out, and after the sober realization occurs that maybe there is nothing out there to sponsor a "V" shaped bottom, and there is more to suggest an "L" shaped bottom, how would you position your holdings? (Whether at 970, 870 or 1070...)
I'm not a big believer in the de-coupling theory: I think China is not going to lead (yet) and I think the BRICs are too dependent on the rest of the world's demand (which some are predicting to be 25% off next year), so (with these assumptions - possibly not your investment premise... - is there anything that still makes sense?
R in NY
RW, age may not be the best measure but it is reasonable to ask about a first term senator where a big chunk of the term has been spent doing other things (campaigning).
R in NY,
My thought has been the same all along. If the US is in fact dealing with something systemic or secular ok but there are plenty of other countries that are dealing with something more cyclical in nature as a result. This creates visibility for some countries to turn up faster in the face of a US L.
If things do go down an uglier road in the US then maybe inverse bond funds (which will pay out something BTW) and maybe s/t sovereign debt from other countries. And I do believe that equities from some countries will be a good hold.
That is my thought going in and if I need to change on the fly so be it.
The debate on Friday confirmed my opinion of both candidates. McCain is incapable of making a case for free market capitalism and Obama is a committed Socialist who believes government is too small, too hands-off. Given those ugly options, and the likelihood that the Dems will have solid voting blocks in Congress, I'll be holding my nose and voting for McCain.
IMO, there is nothing in being a Senator that qualifies you to be Pres regardless of your age. The Senate advises and consents, reviews and pontificates - it does not plan or execute. A successful governor would be far better. (Note: Successful governor does not mean getting elected once and serving 18 mos, it means at least a full term and getting re-elected - and a large state would be much better than a State smaller than some cities (i.e. Ak)). To me that makes the both candidates equally unqualified, so the issue is who will seek and take good advice best . IMO that’s Obama. McCain was intimately involved in the over-deregulation and showed poor judgement, attempting to bail out of the debate was poor judgement, and Palin as VP is poor judgment. As for McCain having his finger on the nuclear button - he’s got a documented temper issue w his colleages in the Senate, people think that’s macho but I don’t want macho near any nuclear button.
Obama WILL take advice. That is what is scary. He Will pull out his "Rules for Radical" book written by Saul Alinsky ( who dedicated the book to Lucifer, by the way); he will get advice from Bill Ayers, maybe about how to blow up some other government building; in essence, he will get, and quite possible take advice from the most left of the left. In four years we will be pretty much toast.
"...it is reasonable to ask about a first term senator where a big chunk of the term has been spent doing other things (campaigning)."
Reasonable to some I suppose. So basically you're saying that years as professor of constitutional law, seven (7) years as Illinois state senator, winning a US Senate seat and coauthoring two (2) US senate bills while collaborating on legislation relevant to lobbying and electoral fraud, climate change, nuclear terrorism and care for returned U.S. military personnel in his freshman year, building an organization that defeated one powerful national political machine and is now giving another one hell of a run, cuts no mustard with you? Interesting.
We'll see what tune you sing if Palin becomes president but, no matter, got some set-up for tomorrow; could be some serious gaps but, if the bond markets go for the buyout story, some spreads should narrow and opportunity may knock. The equity markets will go for anything with skirts so I'm just staying hedged there; bloody flighty bunch.
Anon 1:00PM: The alien lizard people are clearly obscuring your view of the central nervous system transplant they gave McCain during his second cancer surgery; you must be more vigilant, tin-foil is an inadequate defense; you can trust me on this.
RW all I'm doing is questioning his experience WRT decision making on a very big stage.
why do so many people think that a senator in his mid 40s serving first term (of which he has spent a lot of the time campaigning) is the best choice for the job?
Well, people don't necessarily think he is the best choice for this job. They think that of the remaining candidates, he is the best choice. That may be damning him with faint praise.
Campaigning is not an easy task. The Democratic primary field was quite large, and it took leadership skills, organizational skills, and technical skills to pull through a very competitive primary. The presidency seems to age people through stress and the fact that people are four to eight years older when they finish. It seems unusual that the candidacy has aged this candidate. Historically, this has been quite a long primary, and I think Obama looks older now.
Of five children presently serving as active duty military officers ( three and two by marriage), with two in Space Weapons intelligence, and one chasing down drugs and Cubans Castro doesn't want with his USAG boat, all are voting for McCain.
I'd like to vote for McCain, but I will make one hell of a lot more money with government housing giveaway programs and urban grants with Obama...so I have a moral issue to resolve.
Any advice?
you're serving our country in the military and you are worried about being selfish? no one will begrudge you voting your wallet.
I'm not enamored of either candidate and try to avoid being a single-issue voter, but McCain's judgment in selecting Sarah Palin goes beyond cynical. We're talking about the office of President of the United States. I don't want an "average" person representing me--I want someone in the 99.9% category, smart, intellectually curious and with the ability to lead. We've had Presidents in the past who were larger than life, students of history, inspirational--seems like modern politics have made that a thing of the past. Our precarious economy and complex political realities demand someone up to the task. McCain--maybe. Obama--I don't like his wishy-washy positions but he seems like he'd actually think, a refreshing change. But Palin?
Roger--re: market rally if bailout passes. If everyone is on the sidelines (flat) waiting for news, then couldn't everyone buy the news when the bailout passes & drive the market up? The question is if the market has priced in the bailout being passed, I'm guessing the theory is that it hasn't?
"If there is news of a bailout I'm gonna buy the hell out of this market" just doesn't make any rational sense to me. Can't really defend beyond that.
The proble is growing with leaps and bounds....
Fortis was thrown an €11.2bn (£8.8bn) lifeline on Sunday night as the Belgian, Dutch and Luxembourg governments combined to inject capital into the embattled banking and insurance group in a last-ditch effort to shore up confidence among savers.
The partial nationalisation was announced in Brussels by Yves Leterme, Belgium’s prime minister, after a frantic weekend of talks involving ministers, central bankers and financiers.
Over at calculated risk...
Mac
So Europe is going bailout gonzo too ...sigh. I really hate this trend, and believe it will probably prolong what is clearly a recessionary climate, but Bill Cara might have a point: When central banks decide en masse to pump money into the market then, the economy be damned, it's time to become a buyer of what the market sells. Damn!
Anon 4:05 PM - Might as well vote with the kids; a McCain victory should be fantastic for defense, oil, weapons and gambling stocks and the increase in unemployment and/or income stagnation among the 'bottom' 90% of the population, which naturally includes the military, could really boost subsistence welfare programs; sounds like a win-win for you no matter which way it goes.
Greetings from Palin Country. It seems as if the media wants to protray us Alaskans as if we are from central casting for the movie Deliverance. I took a beautiful fall drive to Wasilla but missed Burt Reynolds.
We and Palin by critized by the New
York and California media. Take a look at how messed up California with their budget situation. How about New York with Elliot Spitzer and their upcoming layoffs and budget disaster.
This year Alaska has a large budget surplus, 34 billion dollar savings account, strong economy, well run government and highly educated workforce. By the way, we are of workers.
Palin has done a good job and should not be underestimated.
MitchelG
Anchorage, Alaska
12.46a NY time.
Dow Futures off 78 points.
uh oh....
R in NY
Hard to believe any Alaskan would bend over far enough to refer to the state as "Palin Country" as if it were just another rube county fiefdom -- know for a fact my Alaskan in-laws wouldn't fall that low -- but do agree that with 80% of all state revenues coming from oil companies and with oil prices at the highest levels in history it should surprise no one there is a budget surplus: Makes it a bit easier to apply the petroleum jelly while the Bush-McCain-Palin Republicans slip the state the shaft I guess.
4.38a NYT, Dow futures off 218.
Posting the bailout may have backfired; commentary is running towards "largely cosmetic" changes from the Thursday plan.
Doubts are re-emerging as to its passage. The "fact" of Fortis and B&B is overwhelming the "hope" of a panacea from the revised plan.
Roubini has sniffed and doesn't like it.
Suggests hard times 'acomin.
(In seriousness: the interconnections between (A) the credit default swap market and the potential payouts due to credit events there, (B) the deterioration in the counterparties to these credit default swaps (which means even if you are in the money on your position, you may be holding paper that is worthless, and (C) the knock-on effects of Counterparty X defaulting and Ref.Entity Y defaulting pretty much make this bailout effort too little too late. But something is better than nothing... at least for now. The hard line may be, we're in the middle of an information cascade: the (this?) bailout plan is (in the dark view) the equivalent of putting up a stop sign on the hillside below the avalanche.
Rog, I hope you're right about this being just another 'normal' bear market. I"m just having trouble seeing the sector I need to rotate towards... maybe s/t foreign cb paper...
R in NY
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