The Economy, stupid

[Rex Kickass]

The dollar got crushed today, and oil rallied off of that to start. I don't know if that will start a new trend or if today was the one day adjustment to that news. That is where you can make your money if you are right

 

If I had money to risk, the Euro looks good about now.

[NorthSideSox72]

Part of the front month oil spike is influenced in part with the shortages, short term, from Ike etc. There is some increased demand reality in there, in addition to the dollar changes, and recovery from a low too low in the 90's.

 

 

[southsider2k5]

If I had money to risk, the Euro looks good about now.

 

Europe is going to get drilled by all of this as well.

[Rex Kickass]

Europe is going to get drilled by all of this as well.

 

However, I think the Euro is quickly becoming a bigger safe haven than the dollar.

[southsider2k5]

So I wonder if today we get the "RECORD DOWN DAYS FOR CRUDE OIL" headlines?

[Balta1701]

So I wonder if today we get the "RECORD DOWN DAYS FOR CRUDE OIL" headlines?

Down $2, so no.

[southsider2k5]

Down $2, so no.

 

Or down $15 from yesterday's close...

[Balta1701]

So, 2k5, you and I have sort of had this running debate about the GSE's and how much to blame they were for the debacle in the housing market and whether the bubble still would have exploded had they not existed as the implicit government backed entities.. I have an interesting bit of data I'd like to submit...during the real peak of the housing bubble, the share of the mortgages on the market going to the GSE's dropped significantly compared to other issuers.

The quarterly data are a little noisy, I realize (it's actually significantly more work to get the annual numbers, and I don't have time for that right now). That huge mirror movement--banks up, thrifts down--in the fourth quarter of 2006, for example, was the result of several thrifts becoming banks. (For example: Wachovia swallowed up Golden West that quarter and switched it to a bank charter.) But the basic picture is pretty clear: Fannie and Freddie have dominated U.S. mortgage lending since the early 1980s--except from 2004 through 2006, when the asset-backed securities issuers, a.k.a. Wall Street, took over. And that's when the craziest excesses of the mortgage boom happened.

 

The thing that's most amazing in retrospect is the fact that alarm bells didn't go off all over the place when private securitizers began muscling Fannie and Freddie (and the FHA) aside in 2004. Because of their formerly implicit government guarantee, the GSEs can usually easily outbid their private ABS competitors for mortgages. That's always been the complaint--that the guarantee makes it impossible for truly private companies to compete against them. So when a bunch of private companies were suddenly able to steal market share from the GSEs right and left, shouldn't everybody have been able to sense that something was terribly wrong in mortgageland?

[Balta1701]

Washington Mutual officially falls. Assets sold to JPMorgan after the FDIC stepped in and somehow enabled things...supposedly this will happen without having to deplete the FDIC's assets, which WaMu would have done had there not been a buyer.

[Rex Kickass]

Washington Mutual officially falls. Assets sold to JPMorgan after the FDIC stepped in and somehow enabled things...supposedly this will happen without having to deplete the FDIC's assets, which WaMu would have done had there not been a buyer.

The final CEO of WaMu, Alan Fishman was in charge all of three weeks.

 

What does he get for his troubles? He gets to keep his 7.5 million dollar signing bonus. Plus severance of 11.6 million in cash.

 

Now that is finding advantage in a troubled economy.

 

http://finance.yahoo.com/tech-ticker/artic...AC,C,XLF,WFC,WB

[StrangeSox]

The final CEO of WaMu, Alan Fishman was in charge all of three weeks.

 

What does he get for his troubles? He gets to keep his 7.5 million dollar signing bonus. Plus severance of 11.6 million in cash.

 

Now that is finding advantage in a troubled economy.

 

http://finance.yahoo.com/tech-ticker/artic...AC,C,XLF,WFC,WB

 

Let's assume that he worked 15 hour days, seven days a week trying to right that ship. That works out to about $60,000/ hr.

[Cknolls]

Has anyone heard about the possibility of a derivatives tax. Someone here on the CBOE said Pelosi is trying to pass a tax on every derivatives trade because Wall Street cuased this mess. One more reason she is clueless. The only part of the system that operated properly was the exchanges. Chicago did not cause the problem. Durbin and Obama should be all over this, and I do believe they would have our back on this one.

[southsider2k5]

Has anyone heard about the possibility of a derivatives tax. Someone here on the CBOE said Pelosi is trying to pass a tax on every derivatives trade because Wall Street cuased this mess. One more reason she is clueless. The only part of the system that operated properly was the exchanges. Chicago did not cause the problem. Durbin and Obama should be all over this, and I do believe they would have our back on this one.

 

Its true.

 

http://www.bloomberg.com/apps/news?pid=new...id=a5UhcbI4jecU

 

Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say

 

By Laura Litvan

 

Sept. 25 (Bloomberg) -- A group of House Democrats is proposing to make Wall Street companies and investors pay more of the cost of any financial rescue plan through a new tax.

 

In a letter sent late yesterday to House Speaker Nancy Pelosi, 16 Democrats asked her to ensure any rescue legislation include a ``transaction tax'' on all U.S. stock trades and on other types of trades, such as credit default swaps, options and futures. They are proposing the tax would be at a rate of one quarter of one percent on all trades.

 

``The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it, not U.S. taxpayers,'' according to the letter, which was signed by Representative Peter DeFazio, an Oregon Democrat, and Representative Pete Stark, a California Democrat.

 

In a news conference today, House Speaker Nancy Pelosi said she would support some mechanism that could return more funds to Treasury coffers if the $700 billion to be spent to acquire troubled investments isn't later recouped. She didn't endorse any specific proposal and suggested it is likely to be explored later.

 

``You might make a judgment down the road that there is a shortfall and it should be covered,'' Pelosi said.

 

President George W. Bush in a televised address last night urged swift action on the $700 billion rescue plan to help avert ``a long and painful'' recession.

 

The $700 billion proposal would allow the Treasury to buy troubled assets to restore financial stability, Fed Chairman Ben S. Bernanke said yesterday.

[kapkomet]

Its true.

 

http://www.bloomberg.com/apps/news?pid=new...id=a5UhcbI4jecU

Again, these people have no f'in clue.

 

[Chisoxfn]

That would be a f***ing disaster.

[Balta1701]

So, aside from just saying "This is a horrible idea", I'd love to hear a better explanation. That type of tax seems like it would provide a strong incentive towards long-term stock investing, while providing a huge disincentive to attempt things like day trading and all of these currency swaps that have gotten us in to this trillion dollar hole. Here's an argument as to why it would work, I'm actually interested in hearing the response as to why it's a particularly bad tax proposal and specifically why it would be worse than other methods of raising similar amounts of revenue.

But we should tax all transactions, based on the value of the asset being traded. Dean Baker, an economist for the left-leaning Center for Economic Policy Research, argues that a small tax (say 0.25 percent, though it would vary depending on the asset) be levied whenever a financial instrument—a share, mortgage securities, a credit derivative—passes from one owner to the next. Trades wouldn’t be legal unless the tax had been paid.

 

This isn’t so unthinkable. After all, we already pass judgment on whether we should encourage long-term holding through the tax structure. We have capital gains taxes that fall more heavily on short-term gains than long-term ones.

 

At the margin, such a tax would hinder short-term speculation. For long-term holders, the impact would be small, diminishing in significance over time. Those investing on fundamentals would be almost untouched. But the tax would slow down the two groups that are doing little to help the markets. The first is made up of traders who erroneously think they can beat the market but in fact are just responding to noise. They read charts and measure momentum; they don’t care about fundamentals. The second group is made up of those who gather the “little crumbs,” in the words of Sherman McCoy’s wife in The Bonfire of the Vanities. These are the brilliant quantitative hedge funds that have computer programs executing countless trades every second. The world would benefit from the shrinking of these two groups.

 

One category of passive, ignorant investors wouldn’t be harmed, and that’s okay. These are the index investors in 401(k)s and retirement accounts. Yes, they contribute to distortions. They ignore fundamentals and are price-agnostic. But they are long-term holders. It’s only the index speculators slinging around exchange-traded funds who would feel the weight.

 

Transaction taxes, which exist in many markets abroad, have attracted surprising fans. In the late 1980s, prominent young economists embraced the idea. It’s no coincidence that this occurred in the aftermath of the horrific stock market crash of 1987. Lawrence Summers, who would become Bill Clinton’s Treasury secretary, co-authored a sheepishly titled paper, “When Financial Markets Work Too Well: A Cautious Case for a Securities Transactions Tax.” These days, of course, our problem is not that capital markets work too well, making the case for a transaction tax even stronger.

 

Stiglitz championed the transaction-tax idea in 1989. He was only slightly less apologetic, lest the profession fear for his sanity. “As an economist, I begin with a general suspicion against narrowly based taxes,” he began. But he overcame that reservation, arguing that such a tax would make the stock market more efficient and reduce price volatility. It’s a tax that’s meant to correct behavior, as described by the English economist Arthur Pigou. Why should we tax casino gambling but not options trading?

 

Such a tax could make the markets better. Financial markets raise capital for new enterprises. They help people exchange assets and information. But just because there is higher volume doesn’t mean these trades are expressing more views. Instead, all that is happening is that the bandwagon is speeding up. The faster it goes, the more people want to get on. Noise traders drive out the fundamental investors. During the tech bubble, famous value investors like Julian Robertson were forced out of the market at the top. “If we think people in the market are looking at what other people are doing, it’s totally plausible that the more people there are, the further you are getting from the right prices,” says Baker.

[Reddy]

man... i am a democrat but i am NOT happy about what this congress is trying to do... ugh pleeease no bailout...

[southsider2k5]

So, aside from just saying "This is a horrible idea", I'd love to hear a better explanation. That type of tax seems like it would provide a strong incentive towards long-term stock investing, while providing a huge disincentive to attempt things like day trading and all of these currency swaps that have gotten us in to this trillion dollar hole. Here's an argument as to why it would work, I'm actually interested in hearing the response as to why it's a particularly bad tax proposal and specifically why it would be worse than other methods of raising similar amounts of revenue.

 

If you think day trading is the problem here, you have been listening to too much propaganda. At the end of the day a day trader is flat and has exactly zero effect on the commodity in which they are trading. For every buy they execute, they also sell. To blame them for trillion dollar hole just demonstrates a complete misunderstanding of how the markets actually work. It would be like instituting an email tax to stop internet porn.

[NorthSideSox72]

If you think day trading is the problem here, you have been listening to too much propaganda. At the end of the day a day trader is flat and has exactly zero effect on the commodity in which they are trading. For every buy they execute, they also sell. To blame them for trillion dollar hole just demonstrates a complete misunderstanding of how the markets actually work. It would be like instituting an email tax to stop internet porn.

^^^^

 

That.

 

[Rex Kickass]

Is the only reason Wachovia didn't fail because the FDIC said "Wachovia didn't fail?"

[Balta1701]

The national debt has reached $10 trillion dollars.

[mr_genius]

The national debt has reached $10 trillion dollars.

 

whats the problem? did we run out of green ink or something? if not lets just print up some more money. woot

 

i was thinking about the economy today, and i decided a good solution would be to have Greenspan fly across the country in a massive hot air balloon and drop a few trillion in cash to all the peoples. weeeeee it's raining money. we just need to make sure we have enough ink and paper at the printing press.

[mr_genius]

Is the only reason Wachovia didn't fail because the FDIC said "Wachovia didn't fail?"

 

they should have just gave Wachovia a few hundred billion. that would have fixed things. done and done.

[Cknolls]

For the past 9-12 months I have been harping on how bad the credit market is and I believe the elasticity of debt has finally snapped. The bailout proposition will not work. Next up, INSURANCE COs.

[Cknolls]

I think we are destined for SPX 1080ish.