Credit Crisis and Recession Deepen

[FRED]

What started off as a "subprime lending crisis" has predictably spread to include other credit markets as Risk Pollution oozes out of the financial system globally. Dr. Peter Warburton, author of debtanddelusion, told us in an interview back in Oct. 2007 ($ubscription):

EJ: We've seen the breakdown in the market for lower rated asset-backed securities and now even the higher rated ASBs are falling in price. What's next? Are there securitized loan products are vulnerable to the next stage of correction?

PW: There are. These next thoughts are gleaned from conversations with people far more knowledgeable than I in specialist areas. I would highlight the credit insurers. Jim Grant has written a few pieces that focus on a few of these in particular. That's number one. The next most vulnerable are student loans. The third is problem in municipal finance.

Here we are, five months later. As the Risk Pollution crisis spreads, new credit markets crumble in line with Warburton's forecast.

Auction Debt Succumbs to Bid-Rig Taint as Citi Flees

Feb. 21 (Bloomberg) -- The collapse of the auction-rate bond market, where state and local governments go to raise cash, demonstrates that regulators are no match for Wall Street.

Hundreds of auctions have failed this month, sending borrowing costs as high as 20 percent because dealers from Goldman Sachs Group Inc. to Citigroup Inc., UBS AG and Merrill Lynch & Co. stopped using their own capital to support the sales. Regulators, who alowed the manipulation of bids and lack of information to persist even after two probes in the past 15 years, are now watching a $342 billion market evaporate at the expense of taxpayers.

From 1984 through 2006, only 13 auctions failed, typically because of changes in the credit of the borrower, according to Moody's Investors Service. There were 31 failures in the second half of 2007, and 32 during a two-week period beginning in January. That compares with more than 480 failures yesterday alone, according to figures compiled by Deutsche Bank AG, Wilmington Trust Corp. and Bank of New York Mellon Corp.

``It's ugly,'' said Luis I. Alfaro-Martinez, finance director for the Government Development Bank of Puerto Rico, which saw the rate it pays on $62 million of debt rise to the maximum of 12 percent set out in documents governing the bonds, from 4 percent at a Feb. 12 auction handled by Goldman. ``It's getting uglier.''

Will the crisis eventually spread to your local neighborhood bank and credit card company? If and when it does, a credit crisis which was abstract, impacting markets far from Main Street, will hit home. Interest rates will rise as investors demand higher yields to compensate for default risk. Then the recession, already accelerating, will enter a new more serious stage.

First the housing market, then the auto market are acknowledged to be in recession. One industry at a time, the U.S. recession deepens. Meanwhile, the Fed fiddles and Congress fumbles, not understanding that this is not a normal "business cycle" recession.

Ghosn Says US Auto Market in Recession

Nissan's Ghosn Says US Auto Market in Recession, Companies Face Higher Costs, Tough Times

Feb. 22, 2008 SEOUL, South Korea (AP) -- The head of Nissan Motor Co. said even if the United States is not in recession, its auto industry is.

"We are very lucid on the situation of the industry that there is a recession in the United States, at least in the car market," Chief Executive Carlos Ghosn told reporters, saying automakers face rising costs for iron ore, precious metals, aluminum and other materials.

The recession is also rolling across the nation one state at a time – California, Florida, and Illinois – and city after city. Acccording to the BLS, unemployment is 15% in Merced, CA and Yuma, AZ and in El Centro, CA is pushing 30%. The rate of unemployment growth is stunning, rising from 3.5% to 7% in Punta Gorda, Cape Coral and Fort Meyers, FL over the past year.

Batten down the hatches, folks. It's going to be a rough ride.

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[DemonD]

Re: Credit Crisis and Recession Deepen

I posted something similar to this in the News section. While a lot of people might be struggling financially, we're not at the point where we are shutting down schools and fire stations and whatnot. I'm wondering if this week is going to be a real hall mark of the current downturn.

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

I posted something similar to this in the News section. While a lot of people might be struggling financially, we're not at the point where we are shutting down schools and fire stations and whatnot. I'm wondering if this week is going to be a real hall mark of the current downturn.

What do you mean "real hall mark[sic] of the current downturn?

Are you saying this is the beginning of the end on the way further down, or the end of the way down and now things will turn up, or something else?

[sadsack]

Re: Credit Crisis and Recession Deepen

Come on JN, let us be forgiven our trespasses in English usage, as we forgive those who tresspass against us.

With ever so bubblicious CA facing a $14B state shortfall, which I am sure is to be repeated in many of the other states most affected by the housing bubble, a very likely consequence is the pinching of the proverbial municipal penny to the point of screaming by those dependent on municipal budgets.

We hear about malaria breeding grounds in the neglected pools of the McMansions, squatters and dealers setting up shop in the abandoned spec houses. How able will the municipal authorities be to combat the collateral damage from the foreclosure tidal wave when their own budgets for city services are soon set to be completely eviscerated?

[metalman]

Re: Credit Crisis and Recession Deepen

What do you mean "real hall mark[sic] of the current downturn?

Are you saying this is the beginning of the end on the way further down, or the end of the way down and now things will turn up, or something else?

jim, you get what's happening?

the credit and banking system are breaking down.

so far it all seems abstract... surreal. denial is the order of the day. even here.

what does it mean that towns can't refi debt or sell bonds? it means debt financed stuff will be reduced or shut down.

car loans are off and the auto industry is in recession. just like warburton said it's the muni funds now. next the credit card companies will tighten up as defaults mount. fred ran a chart that shows unemployment rising fast across the country but extra fast in housing bubble crash states.

by hallmark he means when does it stop being about some credit doo dah that stopped trading on wall street and starts being about someone breaking into my house looking for some money?

also, stop being so friggin dense... and a ball buster to boot.

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

Come on JN, let us be forgiven our trespasses in English usage, as we forgive those who tresspass against us.

With ever so bubblicious CA facing a $14B state shortfall, which I am sure is to be repeated in many of the other states most affected by the housing bubble, a very likely consequence is the pinching of the proverbial municipal penny to the point of screaming by those dependent on municipal budgets.

We hear about malaria breeding grounds in the neglected pools of the McMansions, squatters and dealers setting up shop in the abandoned spec houses. How able will the municipal authorities be to combat the collateral damage from the foreclosure tidal wave when their own budgets for city services are soon set to be completely eviscerated?

sadsack,

Are you sure you answered the question I asked DemonD? I aprreciate your answer, but I don't know that it is his answer.

Perhaps "hall mark" is graffiti on the wall in the hall.

[metalman]

Re: Credit Crisis and Recession Deepen

sadsack,

Are you sure you answered the question I asked DemonD? I aprreciate your answer, but I don't know that it is his answer.

Perhaps "hall mark" is graffiti on the wall in the hall.

another jn classic...

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

jim, you get what's happening?

the credit and banking system are breaking down.

so far it all seems abstract... surreal. denial is the order of the day. even here.

what does it mean that towns can't refi debt or sell bonds? it means debt financed stuff will be reduced or shut down.

car loans are off and the auto industry is in recession. just like warburton said it's the muni funds now. next the credit card companies will tighten up as defaults mount. fred ran a chart that shows unemployment rising fast across the country but extra fast in housing bubble crash states.

by hallmark he means when does it stop being about some credit doo dah that stopped trading on wall street and starts being about someone breaking into my house looking for some money?

Thanks, metalman, your answer is almost equisite English, now if you could just learn "CAPS."

Now when you wrote "here" were you referencing iTulip or where you live? I'm hard pressed to see much denial here on iTulip, except for perhaps my own disposition, so you must be writing about where you live, which is where?

I am significantly long, and man, I cannot even explain how it could possibly work out except that almost everyone, almost everywhere, almost all the time, is negative and there is nothing but bad news to boot. My answer is I hate crowds.

also, stop being so friggin dense... and a ball buster to boot.

metalman, do not admonish me for seeking clarity. You have no basis for doing that. Incidentally, what is an "asshat"? And what do you mean by "ball buster"?

[WDCRob]

Re: Credit Crisis and Recession Deepen

This was always my favorite. Years before he played the heavy in Lock, Stock and Two Smoking Barrels as well:

http://weirdpicturearchive.com/pics/vinniejones.php

Damn. Why can't I get images to work here?

[sadsack]

Re: Credit Crisis and Recession Deepen

sadsack,

Are you sure you answered the question I asked DemonD? I aprreciate your answer, but I don't know that it is his answer.

Perhaps "hall mark" is graffiti on the wall in the hall.

I'm loathe to put words in DemonD's mouth, but I gather that he feels we are on the "cusp", "point of inflection," etc., where we go from bad to "ball-bustingly" worse (a la Metalman's indelicate soccer pic above).

Since "Hallmark" is a registered trademark, I assume (in the paranoid sense) that DemonD is wary of infringing the trademark, and is in addition unable to incorporate the registered symbol (being an extended ASCII character) . . . ;)

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

This was always my favorite. Years before he played the heavy in Lock, Stock and Two Smoking Barrels as well:

http://weirdpicturearchive.com/pics/vinniejones.php

Damn. Why can't I get images to work here?

So what does this have to do with anything, WDC?

Edit:OIC (oh, I see), after catching up on the rapid gun-fire like posts, I get it with the ball-busting at least in the soccer-sense.

[metalman]

Re: Credit Crisis and Recession Deepen

Thanks, metalman, your answer is almost equisite English, now if you could just learn "CAPS."

Now when you wrote "here" were you referencing iTulip or where you live? I'm hard pressed to see much denial here on iTulip, except for perhaps my own disposition, so you must be writing about where you live, which is where?

I am significantly long, and man, I cannot even explain how it could possibly work out except that almost everyone, almost everywhere, almost all the time, is negative and there is nothing but bad news to boot. My answer is I hate crowds.

by "here" i mean you. you and tet, that is. whatever happened to old tet anyhow? looks like he was washed out in the bear market already. you will be but later, i suppose.

almost everyone, almost everywhere, almost all the time, is negative and there is nothing but bad news to boot.

you're kidding, right? only here and a few bear sites so far as i can tell. go to yahoo! or motley fool etc. 99% of the population does NOT read itulip or other sites like this. they watch the news and shrug because the news says, "boo! news at 11!" and then on comes some guy who says blah, blah, but don't worry and they don't because they have no idea what he's talking about and trust anyone in a suit on tv. as long as they have a place to eat doughnuts and drink beer and money to buy 'em no one gives a shit about cdos and all that crap. not until they go to the bank and the atm doesn't work because they bank shut down or they ran out of money.

metalman, do not admonish me for seeking clarity. You have no basis for doing that. Incidentally, what is an "asshat"? And what do you mean by "ball buster"?

i admonish you for admonishing people for spelling errors and other little mistakes. this ain't an essay writing contest... it's causal conversation. relax. what's a ball buster? you are kidding me again. asshat is like a jerkweed but with more pretense.

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

by "here" i mean you. you and tet, that is. whatever happened to old tet anyhow? looks like he was washed out in the bear market already. you will be but later, i suppose.
you're kidding, right? only here and a few bear sites so far as i can tell. go to yahoo! or motley fool etc. 99% of the population does NOT read itulip or other sites like this. they watch the news and shrug because the news says, "boo! news at 11!" and then on comes some guy who says blah, blah, but don't worry and they don't because they have no idea what he's talking about and trust anyone in a suit on tv. as long as they have a place to eat doughnuts and drink beer and money to buy 'em no one gives a shit about cdos and all that crap. not until they go to the bank and the atm doesn't work because they bank shut down or they ran out of money.

i admonish you for admonishing people for spelling errors and other little mistakes. this ain't an essay writing contest... it's causal conversation. relax. what's a ball buster? you are kidding me again. asshat is like a jerkweed but with more pretense.

Seriously, thanks for your answer. Posts are occurring so rapidly here on Itulip, I'm getting flummoxed.

Your explanation for "here" sucks, surely you can do better.

I am not kidding, all I read is rather much bearish and I don't read anything at Fool or on Yahoo finance. I'm not wedded to my long positions, so unless the market dropped a 1000$ in 30 minutes, I expect I could get out of them near my mental stop point.

I only admonished your writing because it was damned near unintelligble. I vacillate in my assessment of what you know. Sometimes I think you know a whole lot, you sure are great at recalling a lot of stuff, and other times I think you must be an idiot--which in all likelihood you are far from--but the way you choose or allow yourself to express thoughts sometimes is so poor that it seems to waste time to try to figure it out. I am attempting to be contructive in my criticism, certainly not destructive.

What is a "jerkweed'?

[metalman]

Re: Credit Crisis and Recession Deepen

Seriously, thanks for your answer. Posts are occurring so rapidly here on Itulip, I'm getting flummoxed.

Your explanation for "here" sucks, surely you can do better.

I am not kidding, all I read is rather much bearish and I don't read anything at Fool or on Yahoo finance. I'm not wedded to my long positions, so unless the market dropped a 1000$ in 30 minutes, I expect I could get out of them near my mental stop point.

well at least you have a stop point. by going contrary to the 1% thatt's bearish 'cause they read this and other bear sites all you're doing is taking the side of the 99% clueless. now that may be the money for all i know but i seem to recall another post of yours where you say that most of the people are wrong. so i'm totally missing your logic.

I only admonished your writing because it was damned near unintelligble. I vacillate in my assessment of what you know. Sometimes I think you know a whole lot, you sure are great at recalling a lot of stuff, and other times I think you must be an idiot--which in all likelihood you are far from--but the way you choose or allow yourself to express thoughts sometimes is so poor that it seems to waste time to try to figure it out. I am attempting to be contructive in my criticism, certainly not destructive.

well no one else seems to mind or at least they don't compain. shit, they may even like it.... matter of fact someone here sent me a nice msg to that effect recently. so there.

What is a "jerkweed'?

oh c'mon. do a google search fer chrissakes. here's asshat and jerkweed used in the same article... http://cakeeaterchronicles.mu.nu/archives/252175.php

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

well at least you have a stop point. by going contrary to the 1% that's bearish because they read this and other bear sites all you're doing is taking the side of the 99% clueless.

metalman, I am long in some equity index positions because the indicators at which I look have been at points that typically, though not infallibly, have marked some sort of bottoms. That would be put/call ratios, investor sentiment polls: AAII, II, and Consensus Bulls, and also the degree of various oversold/overbought indicators--recently the focus has been in the oversold direction. No decisions I make are focused on the bullishness or bearishness of articles in the MSM or on the few websites I peruse. However, it is difficult in looking at what I am accustomed to perusing to find anything but all out gloom and doom, and I choose to use that as confirmation to the at least slightly more objective measures of investor sentiment in polls and using put/call data.

now that may be the money for all i know but i seem to recall another post of yours where you say that most of the people are wrong. so i'm totally missing your logic.

I think I said someone else said most people are wrong in their sentiment when it comes to turning points in markets. That is the basis for contrarian analysis and action if one tries to trade on a contrarian basis, but I do subscribe to the observation by whoever it was that first made the observation. The data at which I look and have looked for over twenty years suggest that recently there has been extreme negativity to the degree that it has previously noted bottoms. I've put up this article now in several posts, which I don't put forth as some sort of holy grail http://www.safehaven.com/article-9508.htm Actually I crossed that article after I had entered my current long positions (you can check
Top Investors to see the positions and when I bought them). The article is a nice article in looking at the confluence of such indicators as I mentioned above and their relative success in picking bottoms. It notes and I emphasize also the notable failure of such a confluence in October 2002, and I do not discount that we could be in another period now that is very similar to then.

well no one else seems to mind or at least they don't complain. shit, they may even like it.... matter of fact someone here sent me a nice msg to that effect recently. so there.

I think we have a lot of wimps, panty-waist types here who would never criticize anything--you know guys not like you seem to be and I am. I don't think you should get too ebullient on anyone complimenting the use of shitty English. My point is serious and simple, shit, if anyone has something worthwhile to put up here and the majority of people do, then it is worthwhile for them to do their best to make their posts comprehensible. It might take a bit more of their time, but it saves time for all who read it, and there is nothing wrong with going to the trouble necessary to attempt to explain what one wishes to express. So perhaps the score is 1:1, you decide.

oh c'mon. do a google search fer chrissakes. here's asshat and jerkweed used in the same article... http://cakeeaterchronicles.mu.nu/archives/252175.php

I seldom google anything because it seems the whole world lives by google. Thanks for the link, I'll check it out and am sure I will be edified.

Edit: That really doesn't explain "asshat." Because you used the word, I would think you should be responsible for telling me exactly what it means, same for jerkweed. It strikes me that "asshat" is some attempt at a new word for an old condition: asshole. Just like over the recent years everybody has got "attitude", fuck! even trucks and cars in adverts have "attitude". All people have an attitude, it is either good, bad, or passive, but in the modern day vernacular "attitude" means just one thing, I guess, "bad" and "bad" means "good." What shit this is!!