Oldtent Archives 2007 - 2008

Sad…but probably true…..We can always hope. The new administration can’t possibly do a worse job IMO. Maybe they’ll interview Ron Paul for the job……Yow right…now I’m really dreamin’!

All the best.—–aggie.

Don’t give up hope on the HUI…..Oh hell…..forgive me….I think that was FGC talkin’ instead of me! hahaha! Anyways…..us permabulls may be thickheaded….but always optimistic.

All the best.—–aggie.

How about……”Deflation illusion or Inflation reality.” I look forward to the new book…..and getting your others!

All the best.—–aggie.

In case no one has told ya……Good to see ya posting again!

All the best.—-aggie.

Interesting article…..Geo. Bush Sr.’s dream of a “New World Oder”…..I mean Order is about to be given legs.

All the best.—–aggie.

I hope ya keep postin’ the news….It is a great part of the tent…..and appreciated.

All the best.——aggie.

For the few Goldtenters who like to poke fun at Canada’s excess socialism, it might be illuminating to reflect upon  the Stratfor item that puptent posted.  I wonder which nation of the North American continent is going to be the most socialistic by the time the current financial uncertainty settles down?  Cheers.  Equiz.

http://tinyurl.com/4wglvt

It doesn’t seem much to matter because it’s changing so quickly and the recent developments are by the minute instead of day to day.  Totally depressing to boot.  By the time they figure this mess out it won’t matter as all markets will be a zero.

Top Stories

• U.S. considers insuring all deposits, guaranteeing bank debt
  Authorities in the U.S. are weighing drastic plans, including guaranteeing billions of dollars in bank debt and temporarily insuring all bank deposits, to shore up markets and return confidence to the system, according to the Wall Street Journal. Several government agencies would need to agree to a “systemic risk” to remove the cap on insured deposits. MarketWatch (10 Oct.)

• U.K. banks scrutinize £400 billion rescue plan
  Executives from Britain’s biggest banks met Thursday with officials, regulators and investors to review the fine print and implications of the £400 billion rescue package. Bankers tried to figure out how to meet requirements for fresh capital while limiting effects on shareholders, but confusion remains. Financial Times (09 Oct.)

• Brown urges other nations to follow Britain’s lead: U.K. Prime Minister Gordon Brown encouraged other governments to take steps similar to those happening in Britain, such as injecting capital into banks, to rescue the banking system. Brown wrote in The Times that nations need to forgo “outworn dogmas” and consider new, innovative, cross-border solutions to the problem. Brown’s suggestion received a tepid response from other EU governments that appear cautious about “a concerted approach” to the crisis. The Times (London) (10 Oct.) , Financial Times (09 Oct.)

• Iceland’s financial system crashes; official to meet with IMF
  Iceland seized the nation’s last major independent bank, shutting down currency trading and effectively rendering the krona worthless on world markets, as the collapse of Iceland’s financial system accelerated. Prime Minister Geir Haarde, who warned this week of “national bankruptcy,” said Iceland’s finance minister, Arni Mathiesen, will be in Washington this weekend for International Monetary Fund/World Bank meetings, but he would not say whether an IMF bailout is in the works. Iceland and Britain are at odds about the status of funds held in each other’s banks. International Herald Tribune (09 Oct.) , The Economist (09 Oct.) , Financial Times (09 Oct.)

• Wells Fargo gets green light to buy Wachovia
  Citigroup walked away from its fight to buy Wachovia, clearing the way for rival Wells Fargo to acquire the sixth-largest lender in the U.S., transforming Wells Fargo from a regional player focused on the West Coast to a national retail-banking powerhouse. Citi said it will no longer seek injunctive relief to block Wells Fargo but will pursue a $60 billion claim against Wells Fargo and Wachovia for breaching an agreement that gave it the exclusive right to negotiate with Wachovia. With Citi bowing out, Wells Fargo looks set to acquire Wachovia in a $11.7 billion all-share deal. Financial Times (10 Oct.)

• Nationalized banks may mark end of U.S.-style capitalism
  Governmental ownership of a huge portion of the U.S. financial system could be the beginning of the end for the American style of capitalism, not only at home but also in other nations that follow the lead of the U.S. The hands-off brand of capitalism is being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments. Heavy intervention by the government, critics said, is further robbing Washington of moral authority to spread the gospel of laissez-faire capitalism. The Washington Post (10 Oct.)

• Trade finance skyrockets during trying times
  Demand is soaring for trade finance, which industry experts said is the simplest, least expensive and most collateralized form of credit. The price of deals is up 300% or more compared with a year ago, possibly proposing challenges for developing countries. Brazil already tapped into its foreign reserves to increase credit lines for exporters. “In difficult times, trade finance shows itself to be a tried-and-tested method of financing,” said Kimberly Wiehl, secretary-general of the Berne Union. FinancialWeek/Reuters (09 Oct.)

• Survey: Canada has strongest banking system; U.S. ranked 40th
  A survey by the World Economic Forum ranks Canada as having the world’s strongest banking system. The U.S. comes in 40th, below many smaller states, including Estonia, Malta and Namibia. Britain, once ranked in the top five, slipped to 44th place, putting it below Peru and El Salvador. Following closely behind Canada are Sweden, Luxembourg, Australia and Denmark. The lowest scores went to Lesotho, Libya and Algeria. FinancialWeek/Reuters (09 Oct.)

Market Activity

• Panic-stricken investors dump shares across Asia, Europe
  Jittery investors in Asian markets dumped stocks, with regional indexes suffering significant losses Friday. Tokyo’s Nikkei 225 Average pared a 11.4% decline to 9.6%, while the broader Topix was down 7.1%. In Hong Kong, the Hang Seng Index dropped 9%, and the Hang Seng China Enterprises Index tumbled 10.5%. China’s Shanghai Composite slid 3.6%, the Straits Times Index in Singapore lost 7.8% and Mumbai’s Sensex was down 8.9% after paring earlier losses. Australia’s S&P/ASX 200 gave up 8.3%, New Zealand’s NZX 50 index dropped 4.7% and South Korea’s Kospi fell 4.1%. In early trading, most markets across Europe also were down. MarketWatch (10 Oct.) , Financial Times (10 Oct.)

• U.S. stock market drops most since crash of 1987
  Concerns about Morgan Stanley, General Motors and a number of large insurance companies contributed to a plunge on the U.S. stock market Thursday. Share prices opened up but then dropped in the final hour of a volatile session. The S&P 500 index lost 7.6%, while the Dow Jones Industrial Average fell 7.3%. The declines coincided with the lifting of a temporary ban on short selling. Financial Times (10 Oct.)

• Auto stocks plunge on investor fears about credit availability: Investors worried about whether car buyers will be able to get loans, set against a backdrop of a weakening global economy, sent U.S. auto stocks to historic lows. Ford Motor shares fell 8.9%, while General Motors dropped 8.6%. Share prices declined for several auto suppliers, including American Axle & Manufacturing, which saw its shares hit $3.91, the lowest in the company’s history. Several dealers said the fear of people not being able to get car loans is grossly exaggerated. Detroit Free Press (09 Oct.)

• Oil money not enough to save Gulf markets from downturn
  The Persian Gulf region’s seven stock markets lost more than $160 billion of market value by the close of business Thursday, pointing to a possibility that the oil states’ billions of dollars in oil surpluses may not be enough to protect them from global recession. Stocks in Dubai, United Arab Emirates, the area’s boomtown, dropped nearly a quarter of their value in four days of trading. Many sovereign-wealth funds, which Persian Gulf states use to invest much of their oil revenue, have not disclosed how much they lost in U.S. and European investments. The Washington Post (10 Oct.)

• Emerging-market shares suffer biggest one-day fall in decades
  Firms in developing countries are wondering why emerging-market shares, even for fundamentally strong “mega-cap” companies, are getting hammered more than those in rich countries. Data from credit-default swaps suggest that borrowing costs for big, well-managed firms in emerging markets spiked, despite the fact that emerging-market industrial companies, like their governments, carry less debt than their Western equivalents. But, as in earlier crises, investors are not discriminating much. The Economist (09 Oct.)

• End of short-selling ban blamed for share-price declines
  Analysts and industry insiders blamed the end of a temporary ban on short selling for contributing to steep declines in U.S. share prices Thursday. Shares in General Motors plunged 31.1%, while Morgan Stanley dropped 25.9%. Investors were barred from short selling both stocks for the past three weeks. Financial Times (09 Oct.)

Economics

• Measures by central banks unlikely to avert recession
  The International Monetary Fund said the world economy is “entering a major downturn” in the face of “the most dangerous shock” to rich-country financial markets since the 1930s. Interventions by central banks, including this week’s coordinated interest-rate cut, may head off an all-out catastrophe, but there is not much of a chance that they will prevent a worldwide recession. The downturn hit the U.S. first, with 159,000 jobs lost in September, but the outlook is equally grim in Europe, especially in Britain, where the economy is unmistakably falling into recession. The Economist (09 Oct.)

• Japan suffers major hit, loses first company to crisis
  The financial crisis claimed its first casualty in Japan with the failure of Yamato Life Insurance, prompting the Japanese government to seek ways to help smaller lenders. Meanwhile, Tokyo’s Nikkei 225 Average plunged on fears of worldwide recession. “This is panic. New York, the currencies — there’s nothing left for us to trust,” said Takashi Ushio of Marusan Securities. “Investors are scurrying to convert to cash. A lack of confidence is coupling with panic.” Reuters (10 Oct.)

• Bankruptcies rise; corporate high-yield debt reaches $328B
  Even before Lehman Brothers shut its doors, bankruptcy filings in the U.S. were on the rise this year. The face value of distressed American corporate high-yield debt increased from $59 billion in January to $328 billion, with retailers being particularly vulnerable. The Economist (09 Oct.)

Geopolitical/Regulatory

• G-7 financial policymakers under pressure as markets plunge
  Asian markets suffered fearful selling Friday after drastic share-price declines in the U.S. on Thursday. Investor fears are growing despite cuts in interest rates, bank rescues and liquidity injections. Declining markets are putting additional pressure on the Group of Seven’s financial leaders, who are meeting in Washington on Friday. Reuters (09 Oct.)

• Governments increase action, but crisis resolution uncertain
  With the financial crisis worsening, central banks and governments around the world began this week to truly address the depth of issues. They slashed interest rates, injected capital into the banking system and made other bold moves to resolve the crisis. It is still unclear whether the moves, most made by individual nations with few coordinated efforts, will turn the global economy around. The Economist (09 Oct.)

toying with two titles:

1) Golden Era or Great Depression?

2) The Federal Reserve Owes You $20,000: How Can You Get It?

Comments, Preferences, Flames?

PM

mr goldbug

cheers

#

Thanks for the Adens..

Please send picture’s of Cash & Coin collection….LOL

Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com

Oct 10 2008

Financial History in the making

So much has happened this month, where to begin? It’s been a month to end all months with one monumental crisis following another. At times, events were moving so quickly it was hard to keep up. Many analysts we know stayed up all night, several times, as developments and markets spiraled out of control in what’s being called a financial tsunami.

What lies ahead is unknown because massive changes are still taking place as the worst financial crisis since the Great Depression unfolds. We do know that this is clearly the end of an era and the beginning of a new one, and we’ll all be affected in one way or another.

LENDER OF LAST RESORT

For now, opinions are running rampant and although we can make some valid assumptions, no one actually knows how this will all end up. Here’s why…

As you all know, the bailouts this month were massive and truly mind boggling, but the big spending actually started before. First, there was the $150 billion in stimulus checks, booming money supply, super low interest rates and the Bear Stearns bust.

Then came the takeover of Fannie Mae and Freddie Mac, which made the government responsible for about half of the mortgages in the U.S. , totaling about $5 trillion. This amounted to the biggest bailout ever, costing $200 billion. But if just 10% of those loans have to be covered, it would mean another $500 billion and this alone equals the size of the entire annual defense budget… Then things really intensified.

A HOUSE OF CARDS

Lehman Brothers went bankrupt, Merrill Lynch agreed to be bought and the foundation of the financial system took a serious blow. Wall Street started to panic and the Federal Reserve, along with the world’s largest central banks, poured unprecedented amounts of money into the banking system to provide ever more liquidity as stocks fell sharply and the banking situation grew more serious.

The government then took over AIG, to avoid the worst collapse in history of the U.S.’s largest insurer. Money market funds, which have always been considered safe, came under pressure. Worried investors started pulling out of these to preserve their savings, resulting in the Fed also having to lend banks about $400 billion in guarantees to meet these withdrawal demands. The bottom line was that in just one week, the Fed spent over $1 trillion to keep things going.

Next, Washington Mutual failed, which was the biggest bank failure in U.S. history. While all this was happening, the bailout package was a top priority. Bernanke and Paulson were desperate to get it passed, and fast. The President pushed for it too as they all warned that the alternative would be far worse.

PANIC SET IN

But the House rejected it and this shocked the markets. The Dow plunged in its biggest one day loss ever, dropping $1.3 trillion, which was way more than the $700 billion requested in the bailout.

Seeing the market’s reaction, the package then passed quickly but stocks continued falling sharply anyway. The general feeling was that the $700 billion won’t be enough and the plan is insufficient. Some feel this could be like the initial low estimates for the Iraq war and the final bailout tally could be $2 to $5 trillion, or more.

REALITY HITS MAIN STREET

Meanwhile, folks on Main Street were generally against the package. They simply didn’t trust it or the politicians. Once they saw the stock market’s reaction to the no vote, however, many people changed their minds as it became more obvious hat this wasn’t simply a plan to bailout the mistakes made by greedy Wall Street big shots. People saw the writing on the wall and realized that this would affect everyone, resulting in a worsening economy, more job losses and no credit.  And since U.S. retirement assets are already down $2 trillion in the past 15 months, dropping 401 and real estate values, bank failures and insecurity are also taking their toll.

The economy is the number one concern for most people and they’re irritated at the mud slinging direction the election has taken while the priority issues take a back seat. So it’ll be interesting to see how the election unfolds too.

DELICATE GLOBAL FINANCIAL SYSTEM

There’s no question these are dangerous times and the financial world is in uncharted waters. The global financial system is on very thin ice, teetering on collapse.   Yesterday’s coordinated interest rate drop by seven central banks clearly illustrates this because it was the first time ever that so many central banks lowered rates together and by half a percent.  They’re literally pulling out all the stops to revive lending and the world economy.

Will these efforts work? Will they be enough? Those are the most important unanswered questions of the day and only time will tell, but we should know much more in the critical month or so ahead. Why?

HYPER-INFLATION OR DEFLATION?

The Fed is spending money at an astronomical rate. It’s creating this money out of thin air by monetizing bad debts and whatever else it has to. Remember, this is on top of all the other ongoing government expenses and it’s extremely inflationary.

Normally, there is a lag of about a year or so between money creation and inflation but eventually, what’s recently happened will result in massive inflation, a much lower U.S. dollar and a soaring gold price. This is inevitable but as our dear friend Chris Weber points out… not necessarily.

The bottom line is this, if the banks start to lend again, then the economy will be on the road to recovery and inflation. But we know the banks are scared and they’re being extremely cautious, for good reason. So if the banks decide not to lend and instead just sit on their cash, then the inflation process will freeze.

In other words, the risk of deflation has greatly increased. Inflation is not a given and much will depend on what the banks do, or don’t do in the period just ahead. The Fed is providing the ammunition but the banks have to use it. If they don’t, the outcome could be much different than what most analysts feel is a done deal.

WHAT TO DO

At this point, it’s best to be prepared for either outcome. That means gold for inflation and cash for deflation, at least until we see how things unfold.

For now, important changes are taking place but that also means challenges and opportunities. This may all end up differently than what we initially thought, but we’ll adapt and keep an open mind. Whatever lies ahead, the current challenge is getting safely from here to there relatively unscathed and we’ll do our best.

That should have been on the list too. I guess when it comes to the wild and stock market ignorance is bliss doesn’t apply. Probably why they have to make signs like that of below.I ran in the mountains all the time, till I moved away. Always liked it better than city. Climbed some water falls straight up once without cams(things you stick in rocks) was a camless climber, got stuck a couple of times. One time I had to make a rope out of tree branches to get back down. My friend also stuck said you don’t think Im gonna use that thing do you! Well I found I didn’t need it but my friend used it. I said , hey it worked! I got the dirtiest look.

An interesting post…those comments were a combination of funny but pitiful…reminded me of when I worked with the Forest Service and an Atlanta woman called one summer day, interested in camping in one of our campgrounds but before making the trip wanted to know when we last sprayed for mosquitoes.

I see that you mentioned the Appalachian Trail…the mileage totals 2,175 miles from Maine to Georgia.  I hiked a portion of it a year and a half ago in one of the roughest areas of NE Georgia - Blood Mtn…to celebrate my birthday…the last mile was shear rock, almost straight up…but what a view!

Moggy