Friday, November 14, 2008

All Your TARPS Belong To Us!

Had a long day yesterday. Got into work around 6:45am, worked the day, then had to entertain visiting scientists from Germany over dinner until 8pm. Rushed home to watch the New England Patriots get blown away in the first half, come all the way back to force overtime, and lose on the first possession in OT. Went to bed around 1am and got up this morning at 5am. Rough stuff. But it is Friday!

Blatant Appeal for Page Views
As you know, I write this site for my own personal fulfillment and the hope that I can offer you, the readers, something of value and entertainment. I have NO ADS and no tip jar. I get "paid" by your comments and the fact that I appreciate your readership. I would like to ask you for one thing now.

There is an economic directory that is tracking blogs devoted to finance. The site can be seen here:
http://www.gongol.com/lists/bizeconsites/

Economic Disconnect resides currently at the 105th spot. I want to crack the top 100 so I can say "My blog is in the top 100 economic blogs". It is a point of pride. So what can YOU do?

Well, obviously visit my site! What would help is if you can recruit around 5 people to visit a couple times a week to push my numbers up. I can break the top 100! Woo Hoo! Thanks for any help.

Gold Getting Plenty of Buzz
Full disclosure: I am a fan of the yellow metal. That said, Gold has been getting quite a buzz as of late, and I am not sure if that is good or bad! The December COMEX delivery issue is even making the rounds in somewhat more mainstream news sources. I read a piece tonight that is very sensational in that the writer sees the G20 meeting this weekend as a plot to revalue the world currencies, get this, based on some kind of gold peg:
http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996

Now I think this is both nuts and out in left field, but it does make good reading! Gold to $5,000 an ounce? $10,000 an ounce? Wild stuff.

Stock Market So Fake It's A Waste of Time
The banana republic show that is the US stock market was on full display this week. Wild intraday swings, reversals, last hour sell offs, and ripper days to the upside all happened this week. So what is the story?

I have a simple explanation. Nobody has a clue about what to do so market participants have given themselves over to purely technical mumbo jumbo. Terms like "retest of lows", "head and shoulders", "oversold", and the like are all chart related with no fundamental grounding. When the markets hit a point X, they buy and at point Y they sell. Everyone is in the same trades, and thus the crazy moves up and down.

I also have ZERO doubt that the FED/Treasury (the Feasury) has been out this week buying stocks on the open market at key times. In the future we will see just how much they were buying. In the meantime, there is no reason to get into this market except for a trade. There is no value in stocks. The coming recession will kill estimates, and this has not been reflected at this time by prices. I may mention market action, but the markets moves themselves are no decoupled from anything that could shine a light on things, so it is kind of a waste of time. My 2 cents!

All Your TARPS Belong To Us!
I keep going back and forth in my head as to whether Hank Paulson knowingly prodded players in non banking companies to try and become some kind of bank, or if the companies themselves took the initiative to get in under the TARP. I am not sure as yet, but I think it would be a good question to ask the Treasury Chrome Dome (remember Destro from G.I. Joe anyone?)

A compilation of headlines from Yahoo Finance this evening:
Reuters
Hartford Financial soars on plan to join TARPFriday November 14, 5:18 pm ET
By Jonathan Stempel
Note: A stock rallies because it is in so much trouble it needs government financing and will jump through loops to get it! Sounds like a winner to me.

It is not just companies getting into the act, check this whopper out:

TARP CityPosted by David Gaffen
Meena Thiruvengadam reports:
Three of America’s largest cities have asked the U.S. Treasury for billions of dollars to shore up pension systems, cover short-term borrowing needs and boost infrastructure spending.
In a letter to Treasury Secretary Henry Paulson Friday, the mayors of Philadelphia, Phoenix and Atlanta asked for the creation of a $50 billion fund to spur infrastructure investments as well as for loans to cover unfunded pension liabilities and to address cash flow crunches amidst tight credit markets.
“Cities will disproportionately bear the brunt of the dislocations caused by the credit crisis and a contracting economy unless the federal government steps in to assist us,” the mayors wrote.


And now we arrive right where anyone with half a brain figured we would. The gloves are off. It's nasty time. If the Feasury is going to pump cash all out, there will be fistfights for the loot. Banks cry "systemic risk; give us cash!"; US automakers cry "systemic unemployment; give us cash!"; Sinking insurance companies cry "What does systemic mean?; give us cash!"; and now bankrupt cities all over the country cry "systemic risk to government employee cash cows; give us cash!". It is now a free for all with nobody wanting to be left out of the goodie bag.

Of course we are on the clock waiting for the great state of California to come out and basically take whatever is left of the TARP funds for itself. The day is fast approaching where California will play "Way to big to fail" card and secure a ton of cash. Mark my words.

So where does this leave us? TARP was a failure, and it is also too small to deal with all these requests. Early 2009 will see a plan drawn up that will simply be astonishing in its recklessness and size. Paul Krugman, the money crammer himself, is calling for a 600 Billion dollar stimulus plan. Why stop there Paul? I mean why not go to the mattresses to save the economy?

It is my thinking that a shiny new plan will be unveiled, and the range I am looking for will be at the 2-3 Trillion dollar mark. I did not type that wrong. 2-3 TRILLION dollars will be created to fund all the worlds needs by the US Feasury by March 2009 at the latest.

How can this be done? I have no idea, but then I thought you could not just give out 700 Billion though the TARP without serious repercussions. As there have been none, I think the bold factor just got amped up a few levels. A force will act until it is acted upon, so the physics lesson tells us, and thus I think the US will blow out as much cash as possible until they are stopped by an external event. Foreign debt holders saying "No More" or some other calamity is the only way to stop this runaway train named the city of bailouts. (reference song; "I'm the train they call the city of New Orleans. I'll be gone 500 miles before the day is done.")

Is this not wildly inflationary? Glad you asked! I must say that the whole deflation thing has a strong basis (see Mish Shedlock) for that call. I am gradually moving towards the hyperinflation/dollar mega devaluation thesis at this point. There is nothing else that can happen in my mind. For a great take on about where I stand, you have to read this iTulip piece by Eric Janszen:
http://www.itulip.com/forums/showthread.php?p=60311#post60311

Take home point:
"The deflationistas apparently think what comes after post-bubble deflation is more deflation, as occurred in the early 1930s in the US but nowhere else ever since. It has not occurred to the deflationists why no similar period of deflation has ever occurred since the 1930s, or when they do confront the question they explain that the debt is really, really, really big debt this time, bigger than the Fed. Or that differences between the kind of money that the Fed prints versus the kind of money that the endogenous credit markets create when money is loaned into being by businesses and consumers means the Fed cannot impact the latter.
As we explain that in The truth about deflation, the reason no deflation spiral has occurred in any nation since the one instance in the US in the 1930s is because since then no nation has chosen to remain on the gold standard through a debt deflation. Needless to say, the US is not on a gold standard today."


I am a huge Mish fan, but this piece is so well written and well thought out that i think it makes the best argument. Leave your comments about what you think.

Friday Night Entertainment
It is that time!

Comic Relief
When I saw his video, I could not stop laughing. This thing is a work of art that should be leading the nightly news across America, instant classic:


Book Passage
"They are mine," he said softly, "They belong to me. The Red Bull gathered them for me, one at a time, and I bade him drive each into the sea. What better place could there be to keep unicorns, and what other cage could hold them? For the Bull keeps guard over them, awake or asleep, and he daunted their hearts long ago. Now they live in the Sea, and every tide still carries them within an easy step of the land, but they dare not take that step, they dare not come out of the water. They are afraid of the Red Bull."
-From "The Last Unicorn" by Peter S. Beagle

Music For the Masses
An excellent film was "Quicksilver" starring Kevin Bacon. A great song from the soundtrack was "Quicksilver Lightning" sung by Roger Daltry (who was in several Highlander episodes so he rules!):


I have no idea in the universe why I have had this song stuck in my head all day, but take a listen to Culture Club and "Karma Chameleon":


Another song I had stuck in my head today was "Jet City Woman" by Queensryche. have at it:


Have a good night.

11 comments:

Anonymous said...

Getyourselfconnected,

Glad you are starting to see the situation from my eyes.

"Is this not wildly inflationary?"

YES. Don't argue it anymore. It's exactly what you say it will be:

"hyperinflation/dollar mega devaluation"

So glad your also watching the COMEX deliveries as well. Your looking at the big lie straight in the face buddy.

Think of it this way:

The game of musical chairs is long past due to stop and there are no chairs left. You have only one option left as does everyone else that reads this blog. GET OUT OF THE GAME AND WATCH FROM THE OTHER ROOM. YOU KNOW THE ROOM THAT IS BEHIND THE ONE WAY MIRROR! PROTECT YOURSELVES FROM THE COMING CRASH.... eh I mean...."CHANGE"

Because, yes we can.

G

PS: I will continue to read your blog as long as you speak the truth ! Your loyal visitor!

donald said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Betty

http://www.my-foreclosures.info

getyourselfconnected said...

Loyal reader G,
You have been here since the start and have shared so much. I thank you. I do strive to "speak the truth" as long as THEY let me. I am "all in" on the hyperinflation idea, I mean, what else could happen?
Donald,
Thanks for stopping by! If Watchtower and Kevin were here, we could have a party!

Anonymous said...

GYSC

There is another way to get some type of hyperinflation at the end of this deflation. Right now the transmission to get credit into the market is broken. Benny has the gas pedal to the floor, Hanky is riding shot gun pouring gas in the carburetor, going up a hill and the car is rolling back wards. Global trade goods are sitting in ports as there is no way to pay for them at the end destination so they sit. Banks won't issue a line of credit to ship the goods secured by the cargo because they are hording the money or they don't trust the other bank who issued the credit line. This in turn will start to hit supply train distribution and companies will start shutting down production and laying off employees as there is no way to get their product to the next step down the line this cascades all the way from the mine to the store shelf.

The hyperinflation we get may come because there is simply nothing in the stores to buy. If there is nothing to buy does paper money have any real value?

Kevin

watchtower said...

@ GYSC
Another great post but if I can't get that Culture Club song out of my head your in trouble :)

@ G
I really appreciated your input on your local shopping conditions where you live, I would really like to know how the Christmas season turns out down there if you don't mind.
I'm just curious.

@ Kevin

That is an excellent point to think about Kevin.

As for myself I am really starting to worry, I just don't see the government letting us off the hook with the lifeboat known as "gold".
I think KD may be right on that, "they" will take away the advantages of gold ownwership so I will try to diversify into a new rototiller and the likes instead of more PM purchases.

GawainsGhost said...

I too am a huge fan of Mish. And I think his deflation argument makes a lot of sense. But he's a strict Austrian school kind of guy and defines inflation and deflation specifically as an expansion of the money supply and credit vs. a contraction of the money supply and credit.

Take the failed TARP plan. Billions of dollars infused into banks, but they're still not lending. So there has been no expansion of credit, as evidenced by the lines of credit denied to shipping companies. Thus, by Mish's terms this is clearly a deflationary environment, with or without the gold standard.

Same with the consumer-led recession. Printing money is not inflation if banks won't lend it and people don't spend it.

Incidentally, the other day I saw a fascinating interview with Taleb, author of The Black Swan, and Mandelbrot, father of fractal geometry. As I have studied chaos theory extensively, I found their comments on the economy extremely interesting and profoundly disturbing.

In chaos, there is a saying. "On the West Coast of Africa, a butterfly flaps its wings and thunder clouds clap in L.A." It refers to how a tiny perturbation in wind currents can cascade into powerful storms elsewhere.

So a hedge fund fails. People think, so what? Then a grocery store cannot meet its payroll, and people can't eat. This is the kind of thing that concerns me most.

As the global economy becomes more and more interconnected and increasingly complex, it renders itself vulnerable to wild fluctuations brought about by small, seemingly irrelevant events.

I think the entire system could collapse at a moment's notice. And there's nothing the Fed or the G-20 can do about it. Now that's a scary thought.

Anonymous said...

Here is another local economy notice.

All Bennigans have closed.
This happened about 2 months ago.

PEARLS art supplies has closed it's doors.

G

watchtower said...

Thanks for the info G

Being that you are in FL (and in the "midst" of the collapsing housing bubble) I am always interested in how it's going down there.

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