Baseball91's Weblog

November 20, 2008

When The Chips Are Down

The financial crisis reportedly has already wiped out $6.7 trillion of value from the S&P 500 since October 2007.  Government lost the chance to tax a lot of currency in the last 12 months.  Government is powerless in this downward spiral and does not really have the assets to be loaning money.  That is the truth. 


Before this financial crisis was over, the Total Fiat Money System might be put at risk all because government was not ready to let those investment banks go bankrupt, to let those derivatives default.    


Banking Committee Chairman Chris Dodd (D-Conn) said that it looks “remote” that there will be an auto industry bailout, when something like 10% of American jobs revolve  around the auto industry.  Meanwhile, the governors of Connecticut, New York and New Jersey asked the federal government for a $48 million emergency grant that would allow the states to give each of the estimated 82,000 laid-off financial services worker in the New York City metro area who are losing their jobs  by the end $12,500 to help them find jobs, relocate, and provide other services.  




LAS VEGAS…It is the ninth straight month that key metric of visitor spending has fallen and most indications are that it is only going to get worse. Arrivals are falling by double-digit percentages, and the corresponding drops in casino and ancillary revenue have operators tightening their belts. Layoffs are rampant, many ambitious development projects have been postponed indefinitely and room prices have fallen through the floor. Visitation was off 10% in September, according to the Las Vegas Convention and Visitors Authority whiled the number of conventions was down 18%. Hotel occupancy fell 7% while the average daily room rate dropped 21% to $112 and change.


By Todd Harrison


We’ve long offered that time and price were the only true medicine for the cumulative imbalances that steadily built through the years. Much like a forest fire, the painful process of price discovery is a necessary precursor for fertile rebirthing and greener pastures.  With a conscious nod that the ultimate market bottom is likely a few years away as debt is destroyed and social moods shift, we wanted to share five vibes that could manifest into the year’s end as conventional wisdom catches up with reality.


As the world worried about inflation entering 2008, deflation was a central theme in Minyanville. We were early as the dollar dripped lower and commodities drifted higher into the summer.


Since July, the greenback has appreciated 21% vs. a basket of foreign currencies, and commodities are down an eye-popping 48%. All roads lead to deflation, we know, but the path of maximum frustration is often paved with detours.  Keep close tabs on the dollar, which recently registered several technical exhaustion signals. If it reverses lower, it’ll pave the way for commodities to enjoy a spirited counter-trend sprint.


We suggested in August that retail therapy — or, the need for retailers to visit their therapists — would be necessary as we edged toward the holiday season. There’s no denying that the consumer is on the ropes and spending is on sabbatical. That’s front-page news, however, and the market rarely rewards the obvious, if only for a trade.


Equilibrium between asset classes is askew as evidenced by insane volatility in equities, credit, commodities and currencies.  Some analysts believe that given the current state of credit, fair value on the S&P 500 Index is close to 600. In a finance-based global economy, further dislocation could conceivably lead to social unrest and geopolitical conflict. Remember, world wars are historically bred from economic hardship.  We may witness a grand scale asset-class readjustment. Potential scenarios include wiping the speculative CDS slate clean (contracts not backed by underlying collateral), massive revaluation (yuan), the introduction of a “convertible currency” or crude being denominated in something other than dollars.


There is widespread acceptance that we’ll continue to see forced selling by the hedge-fund community as money migrates from that once-golden goose. That may prove true, but there’s another side to the trade. In the mutual-fund universe, the conditioned mind-set is that the only thing worse than losing money is underperforming the benchmark. Given the horrid performance in the mainstay averages, that currently isn’t competing for mind share. Should the tape catch a sustainable bid, the potential for a “long squeeze” will manifest in kind. If that happens, look for the “master beta” plays such as Research In Motion Ltd., ($47) Google ($300), Apple($90), and Baidu ($129) to spring back to life and lead the speed.


Entering September, we shared that one of two things would happen as corporate credit came due. Either the market would suffer from cancer that chewed through the system or we would see a car crash as the wheels fell off the wagon. We’ve since experienced both. The S&P 500 is down 35% in a matter of months, credit continues to clog our systemic arteries and lame-duck politicians have thrown in the towel and passed the buck to the new administration.  The biggest potential land mine in the marketplace is widespread speculation that General Motors Corp. will file for bankruptcy before year’s end.


That General Motors bankruptcy could set the stage for our final surprise of 2008 — for when the auto industry is finally fitted for a toe tag, it may finally be time to close your eyes and buy the market for a trade


In a speech at the Cato Institute, Kohn said that the threat posed by deflation is still small but that it has grown in recent weeks as the global economy has slowed. “   -Greg Robb of MarketWatch


“With stocks tied to bonds, bonds tied to housing, housing tied to the credit crisis, and everyone hitched to the government, this was all like the conga line to the poor house.”  -Craig Rappaport, wealth manager at Janney Montgomery Scott


 “Since 1971 Total Fiat Money has been here operating under a global currency as John Maynard Keynes, the father of our Fiat Monetary System, pressed for an international paper unit that would fluctuate through an independent fiat monetary system around the world.  In this way, the Central Banks of the world could inflate together, create a massive feudal system of peonage on a global scale and maintain both political and social controls over the various populations of the world without very much restrain or limitations. The problem, of course, is that they appear to actually believe in the system that they created for these purposes ….herding the population into neat, controllable groups for convenience, taxing and regulating to maintain their political controls.” –from a Ron Paul website, ,, posted by Republicae on November 5, 2008


1 Comment »

  1. Comment by baseball91 — February 6, 2018 @ 12:38 PM | Reply

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