The real S & P
Posted on 10/07/2008 10:14:18 PM PDT by Arkinsaw
Down 722 - 7% and falling so far.
Asian stock markets plunged Wednesday as recent steps by the world's major economies to fortify credit markets failed to stem escalating fears that the spreading financial crisis could spawn a global recession.
(Excerpt) Read more at finance.yahoo.com ...
Shanghai Composite Index DOWN frm 6000 to 2000 in one year. 33%. Good F$kem. Commie scum.
NO FED HELP FOR FORIEGN BANKS.
My guess is for a long time, because we have an interventionist government that doesn’t have the foggiest idea what they’re doing, they’re protecting their criminal friends, and by throwing more money after bad they’ll take down the dollar by causing a default.
This is just really bad. I was anticipating something bad since early last year, but the reality of how bad it is just hasn’t begun to be felt yet IMO
I want to see perp walks on Wall Street and in DC.
This total value of derivatives in the world has mushroomed, by perhaps a factor of ten times in the last five years (estimating wildly.)
Just as the total wagering on the Kentucky Derby can exceed the total worth of the horses running by an order of magnitude or two, similarly the total value of these derivatives can exceed the total value of the underlying securities being wagered on by many times.
And also like wagering on a horse race, it is not logically possible for all bets to become winners (or all losers.) Some bets are the opposite of others.
Unlike bets with gambling casinos or bookies, these bets are not against the 'house' (someone with deep pockets motivated to keep the odds balanced, so they win a little either way.) Rather these bets are between private parties, hence the 'OTC', for Over The Counter, label. Thus there is no way to keep them balanced, nor even any way to know how many there are or between whom or under what conditions. Besides, they are complicated to the maximum extent that hot shot Ph.D. quants driven by ethically challenged and greedy bosses using world class computers can achieve.
Not so much a black hole, as carpet bombing from our entire fleet of B-52's with a mix of radioactive dirty bombs, and more ordinary fusion, fission and moab bombs.
It all makes the dot-com bust of the late 1990's look like the collapsed Beanie Baby craze.
For example, I could bet you $5 even money that the Gross National Product will go up this quarter, against your bet that it would go down. The notional amount of this bet is the American GNP ($14 Trillion or whatever), not our paltry $5 bet.
Is that more accurate, Warlord?
I think it is Obama causing this. They are afraid he will win!
Read later...
I remember reading about it in FT's "Alphaville The 6am Cut", early e-mail preview yesterday evening. The writer could hardly withhold her amazement.
yitbos
I’m predicting the Dow has another 800-1000 points to drop before it has bottomed out. Looks like you and I are seeing the same things.AWB
Obama is definitely killing our markets and markets worldwide. The awful irony is this economic chaos makes an Obama win more likely
It's hard for me to imagine this no good punk running America. He's never done anything in his life but talk. Oh, he ran the Annenberg Challenge which was just a giveaway to Bill Ayer's buddies in the educational business and a giveaway to connected black groups who helped Obama get elected and re-elected
DJ EURO STOXX 50 € Pr 2,748.04 -131.41 -4.56% 03:36
FTSE 100 INDEX 4,424.12 -181.10 -3.93% 03:36
CAC 40 INDEX 3,559.42 -172.80 -4.63% 03:37
DAX INDEX 5,085.93 -240.70 -4.52% 03:36
IBEX 35 INDEX 10,420.60 -441.40 -4.06% 03:36
S&P/MIB INDEX 22,600.00 -1,022.00 -4.33% 03:31
AEX-Index 291.20 -18.24 -5.89% 03:37
OMX STOCKHOLM 30 INDEX 659.06 -48.15 -6.81% 03:51
SWISS MARKET INDEX 6,188.94 -238.82 -3.72% 03:36
What you are witnessing s a deflationary spiral.......
Characterized by loaning billions to banks but the banks cannot and will not lend it out. They don’t like the parties that want to borrow. Don’t have enough confidence in them
Which is a 180° turn from the real estate mania where banks made mortgages to anyone with a pulse including illegal aliens
“But these hearings on capitol hill are not helping. Ben Bernanke opening his mouth does not help.”
Watching Bernanke and Paulson is a lot like watching Ren and Stimpy.
Excellent post which summarizes why investing is such a problem right now: analyzing the fundamentals is useless. What you need to know is who is on the “Friends of Hank and Ben” list.
Yes, it became illegal to own gold, but not gold jewelry. The government would never be stupid enough to come become between a woman and her earrings or charm bracelet.
There would be a really nasty revolution over that!
The real S & P
those graphs should be logarithmic but otherwise you are right...
The 1929 Crash went on for years.
Look at the dates on the X-axis.
We are in for the same thing.
However, that's just a quibble compared to my main point, which is that a 14,000 Dow and a 1600 S&P were both about 1/3 comprised of Monopoly money.
The Real DJIA (logarithmic)
The Real SP 500 (logarithmic)
Yes, a lot of dollars and a lot of euros are being turned into yen. It's at 98 right now, and everyone has to be wondering what the BOJ is thinking about this rapid strengthening.
We won't have the stats for a few days, but I have to wonder with so much liquidation going on around the globe that maybe some of the Japanese firms have decided to park cash back in Japan, even if they are buying a very expensive yen.
If the BOJ doesn't intervene, I have long thought that we see the yen go below 80, which I think is a much natural range.
se_ohio_young_conservative wrote:
How can panic last this long ?
Why are people freaking out when there is no reason to freak out ?
^^^^^^^^^^^^^^
Fractional Reserve banking is a pyramid scheme. Legally, the Federal Reserve can loan out $50 in paper currency on one $20 gold piece. The Fed has (had before the bailout) a 40% reserve requirement.
The bank that borrows that $50 can loan out $450, since banks have a 10% reserve requirement.
If the Fed loans the $50 to a Foreign Central Bank (foreign Federal Reserve), that Foreign Central bank can loan out $125 under their 40% reserve requirement. The foreign banks that borrow that $125, under 10% reserve requirements, can loan out $1125, all backed on one $20 gold piece.
Because of this pyramid scheme, if a single bank fails and defaults on $100, the downstream effect as the dominoes tumble is much greater than $100.
Mortgages from the housing bubble were bundled into packages, called “tranches”, by Freddie and Fannie, high risk of default, medium risk and low risk.
The banks that bought those packages also bought “insurance policies” in case they should fail. The “insurance packages” were in essence derivative investments, a piece of paper that went up in value if mortgages failed.
The company that sold the derivatives for $100 could turn around and loan out X times $100 under yet another pyramid scheme.
There are estimates out there that the derivative market pyramid scheme represents a total exposure of $500 trillion dollars. Some discount this figure since the entire world’s annual production is around $50 trillion.
Some say the derivative exposure is much greater than $500 trillion.
Nobody really knows.
In any event, nobody knows who’s holding all these shaky derivatives, so nobody wants to loan money to anybody else. Mainstream companies like Ford or Exxon or your local grain and feed company, used to being able to borrow tens of thousands up through hundreds of millions overnight, or for a week (commercial paper), now cannot.
They aren’t necessarily able to alter their normal practice fast enough to function properly while the short term credit market is frozen. They may not be able to pay back yesterday’s short term loans because they can’t borrow enough today. They may not be able to borrow enough tonight to buy enough steel to run the assembly line tomorrow. They may not be able to make payroll next payday. Regular companies, not banks.
Effect?
The entire global pyramid scheme, piled atop the Fractional reserve pyramid scheme, is tottering, wobbling, and nobody klnows when a key domino will fall, taking out many, many other dominoes with it.
Everybody wants out. Everybody is selling as fast as they can.
Two different brokers, one at Merril Lynch and one at Chase, both respected firms backed by arguably two of the strongest banks on earth, have predicted to me that the bottom of this stock sell-off lives around 8500 in the Dow Jones.
Keep in mind though, that these are bankers talking. Bankers usually won’t admit that Fractional Reserve banking is a pyramid scheme just like Amway or a chain letter, and they’re even uncomfortable describing derivatives as a pyramid scheme, even though derivatives make most bankers nervous.
Normally bankers don’t believe/won’t admit that a total meltdown is possible.
The markets will find bottom when people stop being afraid of losing loaned money, globally, whether that bottom is at 8500 or 0.
There’s plenty of reason to freak out.
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