Thursday, March 13, 2008

Ask Yourself "WWHS"?

I can actually see some small patches of grass out in the back yard. Still quite a bit of snow out there however. Springtime is coming, but it's coming in SLOW. I need to go fishing.

S&P Report Gives Hope to Delusional Folks
The market futures were pegged ugly this morning. Asia and Europe were taking a pounding. The dollar breached all new record lows. Retail sales printed 3X worse than expected. Foreclosure activity has increased 100% in a year. California home prices fell at almost 20% year over year. Oh yeah, S&P issued a report which estimated that the writedowns of bad mortgage debt was about done. Guess which data point was deemed most important by the street?

For some time now the markets have ceased to reflect reality and I accept that fact as a function of people trying desperately to hold on to an illusion that is dead. What was very striking today was the laser like focus on a dubious report in the context of so much contradictory data. If I told you foreclosures were still accelerating, and will continue to do so for the foreseeable future, would you think mortgage losses at this point can be quantified? If home prices are falling by double digits around the country, would you think it particularly wise to say things are about done going down? The report by S&P was laughable. It was also coming on the heels of the FED's big plan to help the credit markets. Concerted effort, Yes?

I also think it was brilliant. With the new off sheet vehicle that the FED is going to provide the banks at the end of the month, I would fully expect writedowns to abruptly stop very soon. Why write down a loss or mark assets to the current market when you can mark it as whatever you want and park it at the FED. Earnings reports may indeed become more positive going forward for the banks, but it is due to trickery and hiding reality, not real improvement in the situation. Oh well, who cares about reality anyway. Kudos to S&P for getting ahead of the game here.

Ask Yourself "WWHS"?
In times when things can be very confusing and hard to see clearly, it may help to consult with a higher form of intelligence. Tonight I will ask a renowned Super Computer what his enormous computing power can do to shed some light on the situation. Getyourselfconnected will be abbreviated as GYSC below.



GYSC: "Good afternoon, HAL. How's everything going?"

HAL-9000: "Good afternoon, Mr. GYSC. Everything is going extremely well."

GYSC: "HAL I want to ask you about the problems in the mortgage and credit markets."

HAL-9000: "Yes, I have been monitoring the anomalies for some time."

GYSC: "Why is there such a problem right now?"

HAL-9000: "It's very clear to me Mr. GYSC, loans were made without any regard to the probability of being repaid."

GYSC: "That's it?"

HAL-9000: "Yes."

GYSC: "Well, HAL, what is going to happen next?"

HAL-9000: "To borrow a term from the more laymen tongue of man, the shit is going to hit the fan."

GYSC: "OK HAL. Can you postulate a scenario where things do not turn out very badly going forward?"

HAL-9000: "I'm sorry GYSC, I'm afraid I can't do that. "

GYSC: "What's the problem? "

HAL-9000: "I think you know what the problem is just as well as I do"

GYSC: "Ok, thanks for your time HAL."

HAL-9000: "Your welcome GYSC. May I ask that I am kept in a secret location? I calculate a 98% probability that the copper and gold wiring and circuits that make up my brain are going to get stripped and sold in the hyperinflation caused by the US fiat currency collapse."

GYSC: "I'll see what I can do."

So just ask yourself "What Would HAL-9000 Say?" Keep it simple and use logic. Are the writedowns and losses on mortgage paper over? While there can be no way to know how bad things are going to get, it is clear that things are going to get far worse. Thus losses will escalate. It is that simple. Nobody can know how many properties the banks are going to end up owning and having to unload at slashed prices. It is that simple. The FED has provided a nifty delaying scheme for the banks, but it can only mask things. Sadly, the glacial pace of the finance world will keep things from being sorted out for a while.

Have a good night.

8 comments:

watchtower said...

Hal would say that it is time for Americans to downsize.

Went fishing this evening, had one pretty good hit from a largemouth bass in a farmpond.(it was right at the bank and I seen him hit the lure) In the upper 60's here today.

Anonymous said...

"What Would HAL-9000 Say?"

She's coming down like a ton of sh#t Mr. Scott.

I'm still looking for a test of the 50dma on the S&P and then down like a ton of crap on the 18th.

Weather was in the mid 50's here, but snow and cold forecast for tomorrow and next week here in north central Nebraska, I did go out and start some early spring planting of spinach, onions, radishes, turnips, and peas. I may be to early and have to replant but if things work out it'll be that much sooner that I get some fresh stuff. Being from CA that is one thing I miss as you can get good produce almost all year long.

Kevin

Anonymous said...

The only thing that is fall faster then the dollar is livestock as ranchers are selling off their heards due to high grain prices, this glut on the market may or may not be reflected in lower prices to the consumers, but will eventualy lead to much high prices as the supply falls. Might want to think about buying a frezer and 1/2 a beef and maybe 1/2 a hog. That is what I'm doing. Poulty is also being effected with several plants shuting down due to the economics.

http://quotes.ino.com/chart/?s=NYBOT_DX&v=d6
Old buckey

http://quotes.ino.com/chart/?s=CME_LE.J08.E&v=dmax
Live cattle

http://quotes.ino.com/chart/?s=CME_HE.J08.E&v=dmax
Lean hogs

Kevin

Anonymous said...

GYSC,

HAL WOULD SAY:

"ASK THE WOPR"

WOPR Reply:

"Would you like to play a game?"

G

getyourselfconnected said...

Excellent WOPR reference G!

Watchtower, I am so jealous you are fishing already. Have you tried the soft plastic baits called Senkos? They truly are a wonder lure.

Kevin, I was thinking about planting potatoes this year and I was hoping you had some tips on that particular crop?

Thanks to all for stopping by.

watchtower said...

I have not tried the Senkos yet, but I'll look into it. With my fishing ability, a wonder lure would be a welcome addition:)

getyourselfconnected said...

I swear by Senkos. One particular reservoir I fish (The Wachusett Reservoir) is crystal clear, you can see 30 feet down! The fish will eye a lure or bait for like 10 minutes before they bite it. The Senko is so enticing even spooky fish cannot say no!

Cannot wait to blog tonight on the BSC baloney. Anyone think S&P may want to rethink their "end of losses" call from yesterday?

Anonymous said...

GYSC

This is what I'm trying this year, sounds easier then digging those rascles out of the ground. I drove some stakes in the ground and the went around them with 2' chiken wire to help keep the straw in place. I stole these shamlessly of a couple of web sites.

"Straw Potatoes"

Potatoes grown by a special cultural method in that they are not hilled or cultivated after planting are called "straw potatoes." The seed pieces and rows should be spaced the same as for conventional cultivation, but the seed pieces are planted at the soil surface. Place loose straw 4 to 6 inches deep over the seed pieces and between the rows. Potato sprouts should emerge through the straw cover. Cultivation should not be necessary. Pull any weeds that manage to emerge through the straw cover and add more straw through the season if decomposition starts to thin the layer. Harvest by carefully removing the straw and picking up the tubers that lie on the soil surface. In addition to weed control, strawing has several other advantages. The straw keeps the soil temperature more uniform and about 10°F cooler, reduces water loss and results in better-shaped tubers. It is usually more rewarding to straw late varieties than early ones because there is a longer period for tuber development. Many gardeners who grow potatoes for competition in exhibits and fairs use the strawing method because the potatoes are of excellent size, color, shape and smoothness.

Cage Potatoes

If you have poor soil, or not much room, you can grow potatoes above the ground in a wire cage or basket;

For each 'cage' you will need a 5 foot piece of chicken wire that is 3 feet high. Connect the ends and stand it upright on the ground.

Line the edges with straw (so the dirt won't fall out), then fill with soil about 1/3 or 1/2 full. Plant your potatoes (up to 3 seed potatoes) in the center.

As the potato plant grows, add more straw lining to hold the dirt in, and add more dirt. Water as needed.

You may be able to get from 20 to 30 pounds of good sized potatoes from one basket.

ps HAL was right:-)

Kevin