Nom de guerre: Rivrdog

The last survival item...

Is now chosen. I had one full bottle of Clan Macallan sitting unopened in the liquor locker. It is now the official Celebration Hooch of the Rivrdog Bunker, which thanks to this news, is probably going to see action. I will only need a fifth of it, because there are going to be only one or two celebrations in the bunker, and I need to be straight to see the battle rifle sights AND the targets.

It all depends on Europe now, and about 4 1/2 hours is all we have to wait until the opening of the Bourse (Parisian stock market). If the Europeans can somehow buck this trend, find the magic words and turn the global markets around, then the Street will pick up on that and have an OK day. If Europe stays with the global doom market psychology that seems prevalent, The Dow will tank again tomorrow, and all it will take is one more domino, such as a big bank or one of the Big Three automakers going down, to enter the final sleigh ride to whatever the bottom is going to be (I noted previously that this might be at a 7500 Dow, or it could be at some "oblivion" point down to and maybe including total economic collapse).

If you are the breath-holding type, you may now hold your breath. The fate of the modern world is about to be decided in the next few hours.

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UPDATE: 100808 0100 PDT: You can breathe now. It's over. Good times are now in the history books. The Tokyo Neikki Index fell almost 10%, an amount not heard of since the Crash of '87. Europe opened moderately low, then the bottom fell out, with the Bourse (DAC-40) trading 7 percent off and the Germans about as bad. The Brits just announced their bank bailout plan, a GBP 87 BN direct-injection plan, but it has no influence, and the FTSE-100 is off over 5% and worsening.

In Moscow, their two indexes opened, and immediately crashed, with one being suspended until Friday, and the other being suspended in the short term, unknown re-opening. The ruble is history. Are they going to give the Icelanders smoked fish instead of rubles?

In the US, Obama said last night that the USA is in it's worst economic shape since the Great Depression. That is a considerably more bearish statement than any other US official has made. If ObamaDoration holds true, the US stock markets and commodity exchanges are toast today.

That is all, I need sleep to survive on, so do you.

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UPDATE: 100808 1730 PDT: Greed was the ultimate savior. Just enough equities bargain-hunters came out of the mist of panic to save the Street from another Dow-400-loss day, and it lost just under 200. Listening to the usual elves, I FINALLY heard one say, in a split-screen conference with 3 other similar elves, that trading in ALL Credit Derivative Swaps should be closed for the duration. Finally. One lonely voice with a little sense, so I'm promoting the rest of October as Dump Derivatives Month. If you haven't got the balls to actually INVEST, stay the hell out of the market and stuff your mattress (like I'm now doing). If you are a true INVESTOR, you will accept risk, and NOT have to lay it off in derivatives every time you go long. Derivatives trading got us here to this sorry pass, so let's recognize that and INVEST our way out of this mess.

So much for the bailout bill...

Awoke at 0655, watched the weather briefing...Fall weather. *CLICK* change to CNBC...oops, I did something wrong. Need to start over. The DOW below 10,000?
All DOW stocks at historic lows? Oil in freefall, below $90? Gold rising 4%?

I get a REAL bad taste in the mouth, so I brush the teeth. Nope, that didn't improve anything. Over to the computer. Look at the FOREX.

The Euro is getting pounded also, worse than the US Dollar, way worse. The USD was running about 0.69 Euro, now is almost 0.75, a HUGE jump.

OK, let's try to make sense of this.

The Street doesn't believe in the Almighty Dollar as expressed by the "bailout bill". That little $700 USDT fiasco made no difference. None at all. The Global Economy is King, and the King has gone into the tank.

Hang on, this could be, as they say at Talladega, the Big One. I'm not quite ready to push the button, because the Street will want to make it's vig off the troubles, and it will, so at some point, some money will come out of ratholes to buy these distressed stocks, and the market will turn around.

For a while.

Let's face reality, brothers and sisters

Why is it that in all the virulent ranting against the economic rescue (bailout, etc, whatever you want to call it is fine with me) that ALL of my right wing brothers and sisters have indulged in, no one, NOT ONE, has admitted the likelihood that without such a plan, there will be a "hard letdown"? The best I have seen is variations on "let the chips fall where they may", without telling us how the nation might survive among other nations, or how individuals within our nation might survive in an end-times scenario.

Is all very well to have an opinion, but I thought the thing that set us conservatives (yes, I'm STILL a conservative!) apart from most on the Left was that we thought things through to their logical consequence, and used that train of logic to make the final decision for or against something.

That isn't happening this time, and I haven't seen such a fervent output of vitriol against an idea since, since, what was the name of that Florida corpse who the entire right wing wanted to believe was alive, and diverted the entire resources of the Administration and Republican majority in Congress to try to revive that corpse? Ah, yes, Teri Schiavo.

Ah, yes. Excuse me then, railing against this "Wall Street bailout" must be a RELIGIOUS quest.

That must be it. No excess can be committed if God's name is in there somewhere. Inquisition? Merely interesting times. Torquemada? A Holy man who MUST have been doing God's Work. Yeah, right.

So, my fine conservative brothers and sisters, do me a favor. Over the top of each of your anti-bailout rants, please write a post outlining what YOU believe will be the scenario for the nation if no rescue of the stricken financial system results, and an economic crash happens/continues.

That means ALL of you, please.

Now, I've already done that. This is mostly an end-times blog now, and I've certainly painted the picture for you by now.

Remember that the 'ol Rivrdog is a past nuclear bombardier, and I know where my "H-Bomb" is. If I use it, by name, each pundit so named will feel that horrible death. No, not as the radiation burns the flesh from their skeletons, not THAT H-Bomb.

This H-Bomb's main ingredient is the label of hypocrisy, well applied, and eternally-lasting. Or maybe you see yourself as a "suicide bomber", ready to run up to a crowd of fellow citizens and blow yourself and them into Kingdom Come just because they don't BELIEVE the things that you BELIEVE.

Hypocrite, suicide bomber, each of those labels seems equally horrible to me.

How do they fit YOU?

Waiting on the Street

I've become quite the observer of Wall Street in the past week or so, primarily because they've become the premier newsmaker in the nation, but partly because I've been in the recovery mode for the 'ol bod after my recent surgeries, etc, and have a lot of sit-around time, as opposed to boat-maintenance time or reloading-bench time, for example.

So I've been watching mostly CNBC on the telly. I don't get Fox Financial or I would watch that. CNBC is OK, since what you want is the tickers, not the blather, anyway.

So, the nation has entered an economic meltdown and I watched the process. Here's why yours truly thinks that the meltdown is happening.

1. Overpriced real estate. Due primarily to demand, but also to greed, the price of real estate managed to get at least 30% too high in the past decade or so. There are a few places where that didn't happen, mostly in the South.
2. Failure of the Street to police itself. The "derivatives" (stock and commodity derivatives) market, which is a pure gambling empire, took over the Street as surely as Al Capone took over the crime empire in Chicago back in the 1920's. Actually, the Street takeover could have been engineered by Capone. Aside from bodies floating in the East River, things were done about the same in both takeovers. Derivatives, of course, like criminal instruments of investment (crack cocaine, prostitution), are glamorous and took money from actual equity investment in business ventures.
3. Overextension of credit availability. I'm an average Joe, but if I applied for every credit card I was offered, I could have leveraged maybe $200,000 in short-term credit before I would have been cut off. Thirty years ago I couldn't have gotten more than $5,000. I KNOW (wife is a retired credit collections agent) that folks of far LESS creditworthiness were offered almost equal amounts in the hundreds of thousands. The mortgage banks USED to apply a general 25% rule to mortgages: your mortgage payments couldn't exceed 25% of your take-home pay. While that rule was applied, the mortgage industry was safe (I know this because my first wife's father was a mortgage banker).
4. Government hands-off policy. Government, of both flavors, has kept a blind eye to the Street, contenting itself with only figuring out how to tax the trillions in paper profits made on derivatives trading. It hasn't tried (before the current crisis) to regulate derivatives trading itself.
5. Bond rating agency malfeasance. If an "ugly" mortgage contract is drawn up (ugly meaning too much money granted to too poor a credit risk), the resale or assignment of that mortgage paper should be of GREAT interest to Moody's or whichever other bond-rating agency surveys the quality of investments for financial houses. The rule which SHOULD have been applied is the "one bad apple CAN spoil the whole bunch" rule, because if just one of these "toxic" mortgages exists in a package of say, ten others, that package itself becomes "toxic", and a poor investment. Moody's allowed itself to be fooled (or worse, might have been PAID to issue phony high ratings) on the investment quality of these mortgage bundles. Instead of rating them as to their potential for total write-down, a factor which could be accurately derived, they rated them on their earning capability. Since the "toxic" mortgages carry higher interest, Moody's and other rated them higher, not lower as they should have been.

So, add it all up and you have the current meltdown. Now, 3 of 4 of MY children, when presented with this fact set at age 10, could have presented the case for re-regulation and the cleansing of the money-changers from the temple. With decades to see the problem unfolding, neither political party, or any of the minor ones, either, came to the conclusion we were all just lemmings headed for the cliff. Even conservative investors, such as pension funds, etc, sucked up to the derivatives gamblers, because making and collecting on the bets was SO easy.

So now we're all in the same bucket of shit and brother, we AREN'T coming out of this smelling like a rose. If the Street breaks it's fall, and it might, because the Asian and European markets just slowed THEIR precipitous declines, we will all breathe sighs of relief. That's too bad, because a true crash to the bottom, probably a loss of at least 20% more of the inflated value of equities, would have been the correct starting place for a recovery.

Look around you, people: there are exactly 5 banks left standing, and two of those (Wells Fargo and Citigroup) aren't standing too tall, and there are TWO investment houses left (none, if you consider the "magic" conversion of both to "bank holding companies"), Goldman Sachs and Morgan Stanley. Two weeks ago there were twice as many major banks, and three times as many investment banks. The hedge fund bankers (primary derivatives traders) haven't been touched.

The Street won't learn a thing from this "correction" as of today. Congress will AGAIN shirk it's duty to save true banking and finance from the crooks in the derivatives houses, and we are all still at risk.

The smart players have prepared for, and embrace the cleansing of the Temple, but from here, it looks like it ain't gonna happen.

Take care what you wish for

I don't know about the youngsters, but at almost 65, I am old enough to have sat at my parent's knees and listened to their personal, first-hand tales of the Great Depression. Those were scary times, when a LOT of folks actually had to worry when their next meal would be and if it would keep them alive.

Now we add in history. The fact is that the Great Depression, as bad as it was, did NOT have a disastrous money-value crash along with it, because the US Dollar was backed by gold in those days, making a nickel always worth a nickel, regardless of what Wall Street or the banks did. What crashed in the Great Depression was lending, speculative investments, and corporate finance systems. The Dollar did not crash.

If we were to have Great Depression 2 in these times, the Dollar would crash along with all of the above. Even if you've been careful and have saved dollars in several forms as I have, you WILL be wiped out because those dollars will shrink drastically in value. Imagine paying $10 for a loaf of bread, and $25 for a gallon of gas, and you would be lucky if inflation got no worse than that. Sure, the gummint would try to make those price rises illegal, but the result of those actions would only be shortages, as bakers of bread and refiners of gasoline couldn't produce their products for the government-mandated price and they would simply shut down production, for if they continued very long, they would be totally out of business quickly.

So, for all of you out there (and until a little while ago I was one of you) who say "let it all crash, not one dime to bail out anyone", remember that it is your life and your family's lives you are willing to degrade or waste by doing nothing.

As I pointed out here, the entire world's economy is not even a house of cards, it is a house of tissue paper, just waiting to collapse, with all the world's major currencies backed by nothing of substance for the most part. If the world figures that out, and panic sets in as everyone tries to gain a survivable position at the expense of everyone else, the entire world's financial systems will fail, all at once or in a cascade. That Depression will not only be Great, it will be unsurvivable for a significant percentage of the world's population. Advanced societies like ours will NOT be immune to starvation, war and disease, we may just last a bit longer than the third-world.

So, when you declare "not one penny for Wall Street or the Banks", you certainly have my sympathy, but barring a WORKABLE government-mandated and regulated solution to this impending disaster, we are doomed to be severely tested, in a situation that not all of you reading this screed will survive.

To-do List

Here's today's to-do list:

Read this article. You don't have to be a graduate economist, it actually lays out the current money and banking crisis in layman's terms.

Now that you are sufficiently alerted to this crisis, you need a plan. I have discussed this type of planning before in these pages, just go to the sidebar, find the category "End Times" and start reading. Hopefully, I have laid out enough ideas there for you to form your plan.

Here are some steps to take today, though.

There are some strong banks which will survive the initial crumbling of the banking structure (which has already started), but there are also some banks already on the edge. You can watch a few hours worth of CNBC and the money wonks will tell you who the on-the-edge banks are. Here's a hint: their common stock is trading for just a few dollars, whereas it traded in the fifties and upwards in the past year. If you have any money in these banks, get it out, TODAY. If you have a paycheck or pension check going to one of these banks, stop that and have the check sent to you directly.

Cash will be king if we get into a full-fledged money crisis, because the banks will probably freeze all the credit and debit cards, which also puts the ATMs out of action. You will need to have several month's worth of cash on hand. That would be the cash to conduct a minimalist lifestyle, buying food, a little fuel, etc. For the average family, two to three thousand dollars ought to suffice. To pay things like rent and utilities, you will have to use a government-backed money order (Postal Money Order), so, if you have sufficient cash now, buy them before you have to stand in a 3-hour line to do so.

If you run a small business, I'm sorry, but I don't have any advice for you. If all the banks have their doors closed (which they will for a while, maybe a week or so), you will just have to hang on to your daily receipts. You will have to decide if you can continue with the bank you have been doing business with, or if you will have to move.

If you have credit card debt, you may expect that the bank holding that debt will try to collect it ALL from you quickly. They demand at least 4% of the balance on monthly credit card debt now, and that will likely rise to at least 10%. You will have to face that crisis by yourself, but bear in mind that tens of millions of other folks will be in the same boat, and I expect that some political solution will ease the pain there.

There may or may not be civil disorder arising out of this banking crisis. It's hard to predict one way or the other, but you should be ready for it.

Keep an eye on this $700 billion bailout plan working up in Congress. If it fails to get traction, and the Congress goes home to campaign without doing the bailout plan, the full blown crisis will be on us as early as next week. If they DO approve it, it will put off a major crisis for a while, but only for a while.

Have you ever smelled a summer thunderstorm long before the rain got you wet? I can SMELL this crisis, it's THAT close.

Beaten to the punch...

...and soundly, too. By a retired Senior Master Sergeant.

I've been mulling over a long post about the unraveling of the US (and the world's) economy, and why there is no need to point fingers, just be prepared to gut out the result.

GuyK, over at Charming, Just Charming beat me to it. You can't say it any better or simpler than this:

"Capitalism is a great economic system...provided the government lets the system work. Part of the Capitalistic system is opportunity..for success and failure. There are no guarantees for success but government intervention is a guarantee for failure of the system."

For a self-critiqued purveyor of "shit and wit", that's pretty good. In fact, it's an entire graduate Economics Degree in one short paragraph.

You can close the Econ book now, students, get out your work gloves, pick up that shovel, and go break ground for your survival potato patch.

As a side note, both Freddie Mac and Fannie May are now pretty much officially in the toilet, with their stock selling for about 10% of what it did just a few months ago. There will be talk of a bailout, and when that talk gets going, you'd better have a biting bullet handy when you read the numbers. They are going to be HUGE, or else they are going to be open-ended, and maybe they will be BOTH.

These two outfits, of course, guarantee about 60% of the residential mortgages in the country, some 5-6 TRILLION dollars worth of them. The government is going to have to have a general foreclosure amnesty program as part of the bailout, but when they put THAT into place, they have just admitted that they can't write a check big enough to bail out the two "companies". THAT admission will sink in about election time, and it will mean that the government is bankrupt.

The November Presidential Election may very well boil down to who do voters think would be the best Depression-time President.

I'm VERY afraid that the majority will feel that the charismatic Obama would be better at that sort of work, just as the majorities thought FDR was with HIS Socialist make-work systems back in the last Depression.

It took a World War, with it's attendant economic upheaval of starting and running the "Arsenal of Democracy" to bring the nation back from the last Depression.

What will it take THIS time?

Readers?

It's all here

...almost makes me wish I'd stayed away from the keyboard.

Seriously, this End Times blog is FAR AND AWAY the best I've read so far, and that includes my own work. It is comprehensive and easy to read, but it will take you hours, so allot some time for it.

If you don't bookmark this, you might as well haul down your Flag and put up a white bedsheet in it's place.

It ain't over yet, folks

Go read this short post by Brick Oven Bill, then mosey on back here and I'll put it all together for you.

OK, consider this: large national banks in the developed nations are not radical investors. National Australian Bank invested it's reserves in US mortgage paper, which, at the time they made the investment, was considered a good investment, because the paper was sold in packages, and you didn't get all sub-prime loans, you got some good ones (like mine, for instance) in the mix also. If NAB is saying that they will have to write off 55% of that investment, that tells us something, ET fans: it isn't just the sub-prime market which is failing to perform, it's the WHOLE MORTGAGE MARKET.

The thirty-percent figure bandied about as the stop-loss point in the real estate market is probably highly underestimated (see update at bottom of post). It has to be closer to the 55% figure quoted by the article.

A thirty-percent loss, if properly managed, would NOT be the end of the financial world as we know it, it would just cull out all the marginal operators, but the real strength, the big banks, would pull through with astute management and rebuild themselves in a few years.

A fifty-percent loss is a horse of another color. With around 8 trillion or so in residential mortgages out there, fifty percent of that figure is 4 trillion (a year's GDP), and bear in mind that we haven't even begun to look into the overvalued BUSINESS real estate mortgages. Why would inflated residential real estate take all the heat and have to correct down to actual value, while the hyper-inflated business holdings get to hold on to all their inflated value?

That's not going to happen, and a likely major correction in the commercial real estate market would finish off the economy, as in TEOT(financial)WAWKI.

Got any more of that happy-smoke to blow up our hoo-hoos, Mr. Bernanke? Better save some of it for yourself, though, your investments are headed over the same cliff as mine.

UPDATE: 072908 0643 PDT: Now go read this bearish news from AssPress. Housing values STILL plummeting (Las Vegas dropped 28% in a MONTH, that's MY definition of free-fall, and Vegas WAS the fastest-growing city in the nation). Do you STILL think that the light you see is the end of the tunnel, Mr. Bernanke (and all his foolish supporters of the "Great US Economy can never fail" variety)? I think it's the headlight of an express double-stack freight train, loaded with Chinese containers, of course, getting ready to run over you.

All those folks are ignoring their history. The one thing that drove the then-vibrant US economy into the Great Depression in 1929 was the fragility of the banking system behind that economy (which had paper investments as reserves, investments of margin-bought stock equities). With all this investment in mortgages which are not supported by the value of the properties they were arranged for, the exact same house of cards is set to tumble again. This time, though, we don't have the personal starch to stand up to evil times, and our whole society will become one cascading failure to be known as the End Times.

You.Must.Read.This.

Are you still in denial about the rapidly-deteriorating economy? Does the fact that oil dropped yesterday by $10/barrel, but gold rose by $20/ounce register with you? The dollar isn't in freefall yet, but it is probably in it's final decline before the bottom drops out.

Well, my friends, you don't have to take my word for it. After all, on the subject of economics, I am nothing more than an anecdotal observer.

You SHOULD listen when a Professor of Economics at a major business school tells you so.

Go here to read the article from Professor Nouriel Roubini of New York University.

Now is the time to begin your final preparations to survive the coming apart of the American Experience. Note that Professor Roubini makes no attempt to predict how this Nation will do during the coming crash (and like all Econ wonks, he refuses to use these accepted terms).

I will make those predictions for him.

The coming horrid decline of the dollar will force oil over $250/barrel, and soon. $250 crude oil means $10/gallon fuel. Even conservation, which is running ahead of predictions, will not stem this despite the bleating of the environuts who have, in cahoots with the greedmongers who speculate in oil delivery contracts, run up the price to it's current level.

If Iran attacks Israel or shows us major progress towards a nuke weapon, we will attack them, and that will momentarily redouble the price of crude oil. We could have crude over $300 by next year, and all the Priuses that Toyota can produce won't ease THAT.

This runaway pricing of oil will spike food prices (again), utility prices (Portland, OR price of natural gas is set to spike by 40% this fall WITHOUT any "stimulus" from runaway oil pricing other than what we have already posted).

Consumers' budgets, squeezed by these energy and food prices, will NOT be able to soak up the new increases. There will likely be food riots, fuel riots, and other various forms of civil disorder, which the government will be unable to stem as it will happen all over all at once, sort of like the "Watts Riots" or the "Rodney King riots", but much more wide-spread.

Now add in the "coup de grace", the end-times opener: with a failing dollar, banks start to close. General commerce grinds to a halt, and electronic commerce is suspended. Transport stops moving. You are where you are, you eat what you've stored, and you defend yourself because the government can't and won't.

Professor Roubini didn't predict THIS: Our "dumbing-down" of the population over the last two generations has resulted in a population which will not be able to think it's way through a crisis of this magnitude, and the government is NOT going to be able to offer much help, especially since the politicos who run it will all be fighting with each other over the destination of every truckload of relief supplies that gets dispatched.

Nope, you will live if you have prepared NOW to survive. That means months worth of food stored, some form of substitute money to spend when the dollar hyper-inflates and become worthless (or you stop getting paid because your company can't sell the widgets you produce for it).

You WILL survive if you WANT to, and if you are PREPARED to, and if you are ARMED and willing to use those arms to defend your family, your shelter and the survival supplies it contains.

All those dumbed-down people will NOT be prepared, and they will NOT have the supplies, but they WILL have access to arms and they WILL learn that YOU have what they need.

I guess it's going to be us against them, Pilgrim, and maybe worse, it might be us against them AND the government.

I have plans for all such contingencies, and I'm in the final stages of my preparations.

How are YOUR preparations coming?