Thursday, October 23, 2008

Can One Day Go by Without Another Bailout Plan?

It was about 33 degrees this morning when I embarked on my trek to work at 6am. I know I live in New England and I should just shut my mouth, but that first cold snap really takes something out of me. My long lost ancestors had to be from a warmer climate, I am just not made out for the cold! A little short on time and way too long on material tonight, so I will have a bit of links with commentary. Should have a full post tomorrow night complete with all the entertainment, so leave suggestions in the comments.

World Getting Wise to the Crap we Sell Them?
The following article could just be an outlier, but if it is a sign of things to come, the US is in for a world of hurt.
from the AsianInvestor:
Taiwan insurers ordered out of US agency MBS
By Liz Mak | 23 October 2008
The FSC has not only limited insurance company exposure to Fannie, Freddie and Ginnie bonds and mortgage-backed securities, but has decided that existing credit ratings are meaningless.

Full article here:
http://www.asianinvestor.net/article.aspx?CIaNID=87297

It seems that the Taiwanese have come to the conclusion that the rating agencies here have no idea what they are doing. If they watched the testimony today of a bunch of industry insiders, they found no solace. The US main export is crafty debt packages and now those very instruments have been deemed "public enemy number one" by Taiwan. If others follow suit, things are going to get bad. Very bad. Without constant inflows of cash the US is a dead duck. See what happens when fools run wild?

Cheaper For Ships to Sit Than Deliver Cargo
The Baltic Dry Index is a item I have just recently been watching. The action has been, well lets just say, vicious to the down side. The Baltic Dry Index is known as a proxy for international shipping and international manufacturing, as it captures shipping lease rates for all kinds of goods worldwide. The excellent blog Naked Capitalism has some rough data tonight, full link here:
http://www.nakedcapitalism.com/2008/10/baltic-dry-index-continues-to-fall-now.html

What the article recounts is that the index is 90% below its peak in early May. Key excerpt:
"Dry bulk shippers are going the way of the global economy: under water. Among the shippers, DryShips and Excel Maritime Carriers have been hit particularly hard because of their large debtloads and significant spot market exposure. For the 13th straight day, the Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, tumbled Wednesday, falling 71 points to 1,221.
The BDI began its slide over the summer, and it has been taking shipping stocks down with it...
“Day rates have fallen below costs for some ship owners,” Landsberg said. “Rather than take inadequate fixtures, they are anchoring their vessels and letting them sit idle.”

No money to made by shipping goods, and letters of credit are not being honored by many shippers. Keep in mind that the US is always about 3 meals away from a crisis if shipping breaks down and we have yet another ominous blinking light.

Can One Day Go by Without Another Bailout Plan?
Today the FDIC chair Sheila Blair was blabbing about some stupid plan to get modifications on home loans so you the taxpayer can pay for the poor choices of others in the spirit of "it will hurt you worse if you do not." It seems every single day there is a TARP, TLSF, PCP, LSD, plan being rolled out to calm markets and promise salvation for debt. It put me in mind of the film "The Godfather: Part III"

In the film the Godfather Michael Corleone hatches a plan to take over Società Generale Immobiliare, the Vatican controlled mega conglomerate that holds various real estate and debt instruments. It is implied in the film that Immobiliare can forgive debt through Vatican influence, hence the interest by the Godfather.

My plan for the US financial system is to ask the Vatican to forgive all the debt of our homeowners, all the crap paper we sold all over the world. In addition I would implore the Vatican to guarantee all the money market funds, all the commercial paper, all overnight bank lending, all modified mortgages, all 401k's, and all stock market losses going back to last August. This plan is called "God Ordains No Eventual Responsibility" or G.O.N.E.R for short.

I am not poking fun at religion here, but I am trying to make a point. The lengthy laundry list of bailouts and wild guarantees above are in fact being attempted by our bankrupt government. Another day, another acronym. If total absolution seems silly to you, then why does false guarantees by a broken government make any more sense?

Couple this concept with the two prior items, and it is not a pretty picture. Let us all hope the game can go on, at least until it does not matter to me!

Have a good night.

9 comments:

watchtower said...

That is a pretty good post GYSC, makes me want to chime in with my usual nonsense.
As a matter of fact I believe I will:

1. I know you don't like the cold but at least you get all that "cool" snow.
My daughter lives for it to snow but we never seem to be in the right "zone" for it to happen on a regular basis.
You are so lucky, if I were you I would get me a snowmobile :)

2. Could this be one of the reasons why Tawain is pulling back from us?
An S&P guy said: ``It could be structured by cows and we would rate it.''

3. This morning while going to work I heard on NPR that the shippers were getting (if I remember right) something over $200,000.00 for a trip around the Cape, and now it's somewhere around $9,000.00 for the same trip. I don't know if I heard that correctly or not, maybe they said $90,000.00 instead of $9,000.00
If it's 90 G's then they got a pretty good haircut, if it's 9 G's then they got their heads cut off.

Plus GYSC said:

"Keep in mind that the US is always about 3 meals away from a crisis if shipping breaks down and we have yet another ominous blinking light."

Absolutely! This is why my family is threatening to disown me, I keep nagging them to get that pantry stocked up.

4. Bailing out this situation?
Only if it was Jesus walking the trading floor of the NYSE instead of Hank, come to think of it Jesus has had some experience with "money changers" in the past.

watchtower said...

Woke up this morning to see that the futures had hit "lock limit down"!

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