The Dow was up almost a 1,000 points today. Governments around the world have guaranteed with their lives that there will be no more problems. And I mean that in the most literal way possible. The sums that European Governments have thrown at the problem are out of this world. From Brad Setser….
The US and Click Here to continue reading.
The Ape Man actually wrote this rant a while ago when he was getting fed up with Tanta’s screeds against Puritans. But it still works today.
California is going to Washington, D.C., to ask for $7 billion to cover its budget shortfall. Otherwise it won’t be able to pay for its teachers, cops, firemen, and other essential services. Unfortunately, California won’t be alone. A number of other states are experiencing a huge dive in tax revenue and could be going cap in hand to Uncle Sam alarmingly soon. How bad could it get? The potential cost for all the 31 states facing both major and minor shortfalls could be as much as $53.4 billion.
The data is based on a study by the Center on Budget and Policy Priorities released at the end of September and shows the states that have seen the biggest shortfalls in tax revenue in their fiscal 2009 budgets.
Read the article to see a list of the states that are in trouble. As bad as this list seems, I am pretty sure that it is already out of date. New York’s short fall in particular looks too small considering the melt down of the stock market and how much Wall Street impacts New York’s budget.
For the fifth year in a row, emigration from the Netherlands exceeded immigration last year, reaching 123,000 emigrants, which amounts to 7.5 emigrants per 1000 inhabitants. Dutch media has repeatedly reported this phenomenon because it caught demographic forecasters by surprise. The last emigration wave occurred fifty years ago, and at present the Netherlands is the only Western European country experiencing net emigration, although similar trends are visible in the UK (Salt and Rees, 2006) and to lesser extent in Germany.
According to Baron Bodissey, a comparable outflow in the US would be 2.3 million people leaving the country. Most of these emigrants are moving to other places in Europe so some might argue that this not really a problem for Europe as a whole. But this attitude overlooks the real problem.
There seems a growing trend in Europe of the professional classes feeling little attachment to their native soil. Thus, they are more and more willing to uproot and go to where they think they can get a better deal. In the long run this is going to make it even harder to sustain Europe’s social model. It is hard to tax the better off to support the less well off if better off are willing to leave.
Wall Street capped its worst week ever with a wild session Friday that saw the Dow Jones industrials rocket within a 1,000 point range before closing with a relatively mild loss and the Nasdaq composite index actually end with a modest advance. Investors were still agonizing over frozen credit markets, but seven days of massive losses made many stocks tempting for traders looking for bargains.
That is a whole year’s worth of price changes in one day.
Hedge fund margin calls appear to be playing a role, perhaps a substantial one, in the precipitous fall in stock prices. One hedge fund manager told us yesterday that a West Coast hedge fund was supposed to have dumped a lot of risky fixed income positions late in the day yesterday. That affected the stock market over the fear that the distressed prices its paper was fetching would force banks and other financial firms to mark similar assets down, leading to further losses.
I thought as much yesterday, but today people are saying it everywhere. Admittedly there is no hard proof yet, but where there is smoke there is fire. At least that is how it has been so far.
From the Financial Post….
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.
“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”
So far the problem is mostly being felt in U. S. and South American ports, but observers say it is only a matter of time before it hits Canada.
I not big fan of government intervention. But if they are throwing money around like water anyway, why don’t they backstop some of these letters of credit so people can get food?
The Dow swung 780 points between its low point and high point just in the first hour of trading this morning. This is a crazy market, and it’s overloading the information systems:
While the government can certainly raise $700 billion in the debt market, the money to buy that debt has to come from somewhere. That somewhere will very likely be cash that investors could otherwise have used to finance productive, private-sector companies looking to help grow the economy. As a result, borrowing costs for companies other than the politically privileged recipients of the bailout cash will likely rise as they have to pay more interest to attract investors. That doesn’t exactly spur economic growth.
On the one hand, I was mystified that the stock market was up in the morning session given that the money market seize up was not at all improved and several key measures had worsened overnight. I was wiling to accept the view that we might have an oversold bounce and saw several bloggers indicate they had gone long in the last three days. But even with my bearish predisposition, given that the mess in the debt markets is now starting to engulf the real economy, I am still perplexed with the pattern of the last two days, with a plus 350 point end of session fall yesterday, and a roughly 600 point plunge today in the final hour.
I’ve long said that end-of-day market reports are silly, since the only thing reporters can normally say with any confidence is “the market moved and we don’t know why”. But what we’re seeing right now isn’t moves so much as fully-fledged earthquakes. Even during a bear market, you don’t expect three 700-point down days to come in quick succession like this: if anything, you expect big one-day rallies, followed by more grinding-yet-inexorable decline. The big one-day plunges happen at the top of bull markets, when bubbles burst. But we were already down 35% when the market opened today. Now we’re down 42%. Whatever that might be, it sure ain’t a bull market.
I think the hedge funds are blowing up myself.