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alstry (35.13)

What are Leaders trying to tell us?

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February 14, 2008 – Comments (6)

Greenspan warns U.S. economy near recession

By Chris OliverHONG KONG (MarketWatch) -- Former U.S. Federal Reserve Chairman Alan Greenspan said the U.S. economy was on the edge of recession and cautioned conditions would continue to erode until housing prices stabilized, according to wire reports. Greenspan, speaking before energy executives at a CERA conference in Houston Wednesday, also said the U.S. housing market was a long way from bottoming out.

Let's get this straight:  conditions would continue to erode until housing priced stabilized and the U.S. housing market was a long way from bottoming out.  What does that mean to you?

Is somone trying to warn us:

Monday President Bush says he is concerned about the economy

Tuesday Paulson says the worst is just beginning

Thursday Bernanke warns the economy is worsening

Paulson noted that it will take time and be painful

And tonight Greenspan's comments.  Who flipped the switched? 

 

6 Comments – Post Your Own

#1) On February 14, 2008 at 10:02 PM, floridabuilder2 (99.23) wrote:

SKF.........  it will be interesting to see what unfolds over the next 3 months

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#2) On February 14, 2008 at 10:37 PM, alstry (35.13) wrote:

3 months, how about three days.  I have been at this a long time and read a lot about history.  There has never been anything close to this ever.  It is truly the WMD of the capital markets as Buffett characterizes it.

 You should have heard Chuck Shummer questioning Paulson today, he said Wall Street CEO's were calling him in a panic about current conditions in the credit market.

 My guess is that at least 50% of the financial institutions in America will have to recapitalize.  How it will impact the general public is still uncetain.

You may find this interesting from Calculated Risk:

After sketching the grim state of affairs with references to the “liquidity crisis,” a “market panic” and a “widespread decline across all sectors,” Cerberus boss Steve Feinberg (pictured) and his co-founder William Richter addressed its highest-profile deals.

The bigger concern of the two: GMAC, the former lending arm of General Motors that finances billions of dollars worth of homes and cars. “We have significant concerns,” they write in this nine-page letter to their investors, which was first reported on by Bloomberg. “If the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.” Report this comment
#3) On February 14, 2008 at 11:10 PM, floridabuilder2 (99.23) wrote:

alstry........  the subprime bubble officially popped last Feb.... its been a year now and I am still waiting for the massive sell off with no big short covering rebound... 

if someone were to offer you a bet for a substantial amount amount of money whether you thought the markets would implode in 3 days would you take it?  or would you take the bet that the markets would implode in 3 months......

my point is that making predictions about the exact date (3 days) of when the financial markets implode isnt my cup of tea...  obviously on the spf board you stated for months and months of the impending doom that would occur on earnings date and now they have $5 in cash a share

look, i invest in stocks to make money... and I play the market on a day to day basis taking into account risk, technicals, fundamentals and the news of the day........ then i place my bets, let them ride and take them off and wait in cash....... i have no idea what is going to happen or when it is going to happen or how bad its going to get......... and I don't care to predict it because from a daily investment strategy it doesn't make me any money

so I am ok with just owning SKF and a couple of small long positions and waiting to see what happens over the next 3 months........  I think it will be interesting, but i'm not too worried and I already covered in my latest blog post comments about what life was like back in the day.......  as long as i know the russians aren't a threat of launching 1,000 nuclear missles at the US tomorrow, I'm pretty much ok with whatever mr market throws at us..........

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#4) On February 15, 2008 at 1:28 AM, DemonDoug (71.12) wrote:

I think alstry is long AK47, AMMO, MILK, and RICE.

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#5) On February 15, 2008 at 1:34 AM, floridabuilder2 (99.23) wrote:

demon......... dude sometimes you really make me roll

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#6) On February 15, 2008 at 5:29 AM, alstry (35.13) wrote:

FB,

I never intended to say one should take any action over the next three days, simply the impact could be felt immediately.

This credit cruch is something very very different than anything ever experienced before because of its size.  The value of credit is declining practically daily.  As it keeps declining the ability for banks to lend becomes impaired which in turn slows the economy.

It has reached the point now where a city had to pay 20% interest simply to get financing.  That is a city.  Imagine what a corporation might have to pay going forward.  Many can't even get financing right now such as Private Equity deals and Delphi.

The joke about characterizing the problem as "subprime" is that of course subprime was the first to go, always the weakest loans go first.  Now the real problems set it as it has migrated to municipal, corporate, and prime mortgage.

The accounting of the last 12 months has been nothing short of comedy, especially for financial companies marking assets to myth.  We will look back at these times and shake our heads.

Where is this going to go nobody knows.  I certainly don't.  However, if debt is not worth 100% of its face, any underlying equity is generally worthless.

Never have we faced a situation before where their was so much debt owed by so many starting to default.

Things have seemingly taken a turn over the past week.  Our officials seem to be a little more candid.  If a bank's assets are not worth its deposits, how do you expect them to lend or return depositors money?

 

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