August 20, 2008
Elaine Meinel Supkis
An epic series of bank stock charts clearly show the nearly universal bubble in banking and how it is, across the board, everywhere, going off the cliff. From $170 a share to penny stock in less than three months! The banking collapse, far from being done, is destroying everything in its path. It is getting worse, not better. The list of banks on the ropes or hanging by a thread is long, long and hideous. All our top banks are in deep, deep trouble. And we go to the Bank of Japan to look at yet more graphs and statistics. What a mess! And Germany decides to throw up barriers to being devoured by the Russian Bear. Yet, Germany wants to do the same to the US. We have to learn about tariffs and barriers before we are crushed underfoot.
CHUCK JAFFE
Crunch time
Commentary: Even the best borrowers will feel the brunt of the credit crisis
MarketWatch) -- Some bad news headlines hit home more than others.
Gas prices and inflation, for example, are tough to avoid. Falling real estate prices may not be an immediate concern -- assuming you are not trying to sell your property into a sinking market -- but they clearly have an impact on net worth.The credit crunch is the one area that many consumers think they can sidestep if their financial situation is not perilous. After all, the term "credit crunch" was just put into the Concise Oxford English Dictionary, defined as "a severe shortage of money or credit," so anyone with decent credit or stable cash flow is likely to believe that credit headlines represent someone else's problems.
Unfortunately, the same pervasive situation that made "credit crunch" a household term has also made it a household problem, in ways that many consumers don't immediately see.
Credit crunch? How about a full-blown banking collapse of epic proportions? The US can't hand out loans if our banks are kaput. We can't go to the bank if the bank is dead. We can't use the Home ATM machine or even the bank ATM machine if the banks are broke and bankrupt. Let's look at a series of stock charts today that clearly show just how bankrupt our banks are:
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Freddie Mac's stock history is a classic bubble/crash:
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Ditto, Fannie Mae:
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But wait! So is Lehman Brothers. I expect them to be bankrupt by the end of the year unless Bernake's helicopter has oodles of dollars:
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Citigroup is groping in the hot deserts of Araby for more money to save it from bankruptcy:
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The JP Morgan Pirates might end up in the same three-headed dog house Bears Stearns was in when they were finally shot dead by Bernake. Old Yeller, here we come!
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Bank of America becomes Banco de Mexico. Heh. Hoard them pesos!
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Washington Mutual is wishing it were DCing with the stars, not falling flat on the dance floor.
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Wells Fargo is as cold as Fargo, North Dakota, not exactly the world's hottest real estate market:
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Wachovia is waning fast, its moon is green cheese.
As we scan down all these top banking graphs and these are some of the biggest of the biggest banks, we see the same thing over and over and over again: they all started to suddenly climb in value. Their stocks began to soar, all at the same time. They all have the same rise. And the same crashes, the only difference is how far each is off the cliff this last quarter. Some are just about at rock bottom. Dropping from around $100 a share to less than $5 a share is a 95% drop. And these stocks are still dropping. At a 50% rate per week for the Fannies and Freddies, for example. But they are all in the same trouble. It is painfully obvious even to the people at the very top. we are off a cliff, Mr. Jones! We are OFF THAT CLIFF!!!! Like, flying down!
Just last month, the media breathlessly announced the banking crisis was over. This is a very common theme. They never tire of it. From the President to Bernanke on down, the same song is sung. 'The housing crisis is over! The banking collapse is over!'
Last summer, it was, 'There is no banking crisis, there is a liquidity shortage!' By now, that stupid story should be laid to rest. It is dead, Mr. Jones. Dead, I say! Give it up.
Today, all talk of the banking crisis being over is now over. No sane person looking at these graphs above can even slightly entertain the idea, all is well and look at all the BARGAINS one can buy! Wow! Our entire banking system is... PENNY STOCKS?????? HAHAHA!!! Lehman is definitely on death watch. Bears Stearns may have been pushed of the cliff by naked short trading gnomes and trolls. But Lehman has been protected by Goldman Sach's troops of Gollums who run the Treasury. Naked short selling which was supposed to be a myth, has now been verboten! No one may do it for the nex 60 days!
But will this trick save the dying banks?
NO!!! They MUST raise cash. This means, selling stocks. If I sold some pieces of paper for $100@, I could get a lot of loot if 10,000 give me this. Sounds cool! How about it? But if I were selling penny stocks at $1@ this would get me only $10,000. Hey, I'm not greedy! This is like the thing we kids used to talk about in grade school. 'If everyone on earth gave me a penny, I would be a billionaire!' The only trick was, tricking everyone on earth into giving a penny each! Difficult, to say the least.
The Great Consumer Crash of 2009
by James Quinn August 19, 2008
In conclusion, the gathering storm has arrived. It will be long, painful and destructive. Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed. Those who built their house on sand by leveraging up and living the “good” life, will see their house swept out to sea. The storm will pass and we will rebuild. Our country is resilient. The purging of this massive debt will result in the creative destruction that is the hallmark of American capitalism. New opportunities, new technologies and a new attitude will put us back on course.There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.
A very good article with many graphs and charts. Here are two of them:
First, the Bears Stearn's graph. I found this article while searching for graphs of Bear Stearns. Since it has been delisted, it is hard to get.
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This is an excellent graph showing the fake GDP statistics. Like the stupid story of Mr. and Ms. Thrifty, they were really up to their pretty eyeballs in debts that were draining their bank accounts. So it is here: the US counts as GDP massive debt growth. One can't say an economy is growing when it has a huge hole in the bucket. Like I noted yesterday, you can't milk a cow with a hole in the bucket!
Here is another excellent analysis:
Charles Hugh Smith: Saved by U.S. Savings? Don't Count On It
The new happy talk goes like this: Americans are getting thrifty, paying down debt and saving money. Interest rates will drop because they're going to dump all their savings into safe U.S. Treasury bonds. Once they've lowered their non-mortgage debt payments to 10% of income from the current 14%, then this gloriously low-interest rate environment and these trillions in new savings will spark the next Bull Market cycle of growth--in, say, mid-2009.Nice story, and I love the Hollywood ending. But is there any shred of reality in the fairy tale? It turns out academics have been struggling for the past 15 years to explain the declining U.S. savings rate, which dropped into negative territory in 2006 and 2007. The number of causal agents in the U.S. economy is huge, so quite naturally there is no one academically vetted "answer." Nonetheless, there are a few theories which have gathered some constituencies.
A reader in the Philippines sent me this link:
Jim Rogers is often right but he doesn't understand history all that well, alas:
If you look back at previous countries that have declined, you almost always see exchange controls – all sorts of controls – before failure. America is already doing some of that. America, for example, wouldn’t let the Chinese buy the oil company, wouldn’t let the [Dubai firm] buy the ports, et cetera.But I’m really talking about full-fledged, all-out exchange controls. That would certainly be a sign, but usually exchange controls are not the end of the story. Historically, they’re somewhere during the decline. Then the politicians bring in exchange controls and then things get worse from there before they bottom.
Before World War II, Japan’s yen was two to the dollar. After they lost the war, the yen was 500 to the dollar. That’s a collapse. That was also a bottom.
These are not predictions for the U.S., but I’m just saying that things have to usually get pretty, pretty, pretty, pretty bad.
It was similar in the United Kingdom. In 1918, the U.K. was the richest, most powerful country in the world. It had just won the First World War, et cetera. By 1939, it had exchange controls and this is in just one generation. And strict exchange controls. They in fact made it an act of treason for people to use anything except the pound sterling in settling debts.
I really get annoyed at people who talk about history but know little real history. England was the world's most powerful creditor nation in 1900. It was a beggar at the gates of Washington, DC, a nation it thoroughly despised for 100 years! It had to beg on its knees for loans during WWI. At the end of that disastrous war, England was basically bankrupt. Germany was definitely bankrupt! Both applied for endless US loans. All the nations owing the US began, starting with Germany, to default in 1928 onwards. This caused the Great Depression.
The English empire, instead of retracting and concentrating on saving England, kept trying to expand their military empire. Both Germany and Japan swatted down the British empire nearly effortlessly from 1934 onwards. If neither Russia nor the US entered the war [classic European sneak attack on Russia insured this and the Japanese sneak attacked shoved the US into the war, too] then Russia and the US both crushed all the opposing empires in less than 5 years.
When talking history, one must keep in mind all sorts of information. Reading many books and memorizing tables helps tremendously. I highly, highly recommend Kennedy's famous work, one that the Chinese leaders have embraced, 'The Rise and Fall of Great Powers.' Memorize the charts!
Jim is totally correct about this historical tidbit:
Now the only thing that saved the U.K. was the North Sea oil fields, even though Prime Minister Margaret Thatcher likes to take credit, but Margaret Thatcher has good PR. Margaret Thatcher came into office in 1979 and North Sea oil started flowing. And the U.K. suddenly had a huge balance-of-payment surplus.
England was a defacto OPEC country. Protected militarily and economically by the US. By 1979, the US was fading as an oil supplier. Our consumption began to outstrip our production of oil. But England saw oil pour out and exported it. Manufacturing died in England but who cared? Oil paid the bills. Now, suddenly and far swifter than expected, the Hubbert Oil Peak effects have hammered English oil output. It is rapidly declining. This is why England has clung to the US in its many oil wars of the last 8 years.
Japan's Exports Rebound, China Becomes No. 1 Customer
(Bloomberg) -- Japan's exports rebounded in July as China replaced the U.S. as the nation's largest customer.Shipments overseas rose 8.1 percent from a year earlier, after declining for the first time since 2003 in June, the Finance Ministry said today in Tokyo. Shipments to China climbed 16.8 percent to a record, with the value surpassing those sent to the U.S. for the first time.
Today's number may not be enough to alleviate concern that waning global demand will tip the world's second-largest economy into a recession. The Bank of Japan this week described growth as ``sluggish'' for the first time in a decade, citing weakening exports as well as higher commodity costs.
Asia is trading with Asia. Although all of Asia still desires to flood the US with exports, their mutual economies are still growing, albeit, a tad slower right now. Time to visit the latest Bank of Japan economic statistics report!
Bank of Japan
Monthly Report of Recent Economic and Financial Developments
July 2008
Japan's economic growth is slowing further, mainly due to the effects of high energy and materials prices.
Exports have continued to be on an increasing trend, although the pace of increase has slowed lately. Corporate profits have been decreasing mainly due to the deterioration in the terms of trade, and business sentiment has become more cautious. In this situation, the pace of increase in business fixed investment has become slower. Household income has continued rising moderately, but growth in private consumption has recently been somewhat sluggish against the background of the continued increase in prices mainly of petroleum products and food. The recovery in housing investment has come to a halt. Public investment, meanwhile, has been sluggish. With these developments in demand both at home and abroad, production has recently been somewhat weak.
Japan's economy is expected to grow at a slower pace for the time being and gradually return onto a moderate growth path thereafter.
Just as maliciously clueless as the US reports! The Japanese apparatchiks are every bit as dim as the communist Soviet apparatchiks in the fading days of that empire.
Central banks implement a low interest rate where the scope for cutting the policy rate is very limited. For example, the Japanese economy has faced a defationary environment for a prolonged period. The Bank of Japan (BOJ) set their operational short-term interest rate -the uncollateralized overnight call rate- virtually equal to zero for almost seven years from
February 1999 to June 2006. Moreover, a low interest rate environment, where the policy interest rate equals 0.5 percent, has continued up to now (July 2008), as shown in Figure 1. In the United States, the Federal Reserve Board (FRB) temporarily set the federal funds rate as low as one percent in 2003 and 2004, which was a historical low. In Switzerland, the Swiss National Bank reduced its policy rate to almost zero percent from 2003 to 2005.1 Central banks can no longer ignore the possibility of hitting the zero (percent) lower bound on nominal interest rates.
Here is the Japanese graph:
Up until 1994, the US and Japanese rates were relatively in harmony. Then the Japanese rates fell like a rock and then laid there, utterly inert. Inflation might rage in Japan! So what. Rates are near zero and staying there. For good, I suspect. Or until someone drops nuclear bombs on Japan again. Note how, when Greenspan dropped US rates to 1%, Japan squashed theirs down to 0%. And outlasted us.
Rob G. gave me this link today:
Germany acts to halt the 'giant locusts'
Germany's cabinet is expected to approve a far-reaching new law this week to stop "giant locust funds" from Russia, China and the Middle East from launching takeover raids on the country's prized industries.The controversial measure will enable Germany to stop foreign investors from outside the European Union buying more than 25pc of any company when "public order and security" are at stake. The wording creates an elastic definition that goes far beyond the current law, which is restricted to the defence industry.
The proposals have set off a storm of controversy and raised fears that the country is drifting towards protectionism. The German Chamber of Trade and Industry (DIHK) has been highly critical of the draft law, warning that it risks provoking retaliation and is starkly at odds with the country's interests as the world's top exporting nation.
HINT TO ALL INTERNATIONAL LEADERS: WHEN YOUR NATION IS UNDER ATTACK, YOU HAVE TO DEFEND IT! Ask Putin about this dynamic. The US threw up protective barriers in the Great Depression and when WWII rolled around, had an intact industrial base capable of expanding and feeding the war we had to fight!
When England's currency died, they protected it by passing laws forcing people to use pounds, not dollars. Japan is throwing its own currency aside and making it useless for Japanese to bank with yen. This is stupid in the long run! Killing the currency for trade advantage can lead to losing important sovereignty!
Germany has some dim memories of WWII and being split in two. They are very worried about losing sovereignty. They better understand that Russia is even more annoyed about sovereignty. And China is a growing patriotic power, the 'pro-China' attitude is reflected in the Olympics. The US has more silver and bronze medals but the Chinese have left the US in the dust when it comes to gold medals! This is feeding the feeling of nationalist pride there.
I find it rather amusing that Putin is buying up Airbus and Deutsche Telekom. The Germans won't allow this. But then, they are doing THE EXACT SAME THING TO THE US. When will we wake up?
Well, falling off the banking cliff should wake even the deepest dreamers! Except the campaign rhetoric this year is yet more tax cutting and jokes about 'who is rich?'
I'll tell everyone the answer: Hu is rich. He has sovereign wealth. And Putin in his back pocket.
You have the wrong graph for Citigroup.
The ticker is "C", not "CIT"
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