Archive for September 29, 2008

Chronicles Of Depression 2.0: #287: Countdown

September 29, 2008

There are now only five days left.

All Chronicles of Depression 2.0 posts.

Chronicles Of Depression 2.0: #286: $1.4T

September 29, 2008

CNBC: $1.4 trillion in market value lost today.

That’s about $1.8 billion per stock market point.

Chronicles Of Depression 2.0: #285: YOU

September 29, 2008

This is what you should be told on TV. This is what none of you have considered.

How the failure to pass the bailout will inevitably and inexorably affect you:

1) Your credit card will be canceled without warning

2) No credit card could mean no cellphone (you do have a landline phone, right?)

3) No credit card could mean a crash-course in cash-only, which many people simply cannot do — especially those newly unemployed — and for you techies: say goodbye to your PayPal account!

4) Your insurance rates will go up: car, home, small business, medical

5) If you run a business, you will not be able to meet payroll

6) If you are an employee of such a business, good luck meeting your bills — especially if your credit card is gone

7) Certain goods will become scarce or very expensive because oceanic shipping companies cannot get the loans they need to operate

8) Certain goods will become scarce or very expensive because domestic truckers will go out of business due to lack of credit

9) If your daily needs have been run via credit card, say goodbye to your Internet, cable TV, pay TV, etc.

10) Expect utilities to hammer down on overdue payments

11) Your local government will curtail services as well as greatly increase fees, such as tolls and licenses

12) You will encounter people asking you for money all the time. Not just on the street, but people ahead of you in line in a store who “come up short.”

Those are just twelve things. Off the top of my head.

At some point, someone will do a comprehensive article. Maybe then you’ll believe.

I’ve already covered what happens beyond that: American Gotterdammerung.

All Chronicles of Depression 2.0 posts.

Chronicles Of Depression 2.0: #284: EuroZone 2

September 29, 2008

I want you to notice just how rapidly things are deteriorating. Four days ago in Chronicles Of Depression 2.0: #241: EuroZone, I quoted:

“The situation we face here in Europe is less acute and member states do not at this point consider that a US style plan is needed,” said Joaquin Almunia, the EU’s economics commissioner, in a tense session at the European Parliament.

That is now thoroughly null and void. Here’s Ambrose Evans-Pritchard, in one of his longest columns, listing crisis after crisis in Europe: Banking crash hits Europe as ECB loses traction

Choice excerpts:

Analysts say German finance minister Peer Steinbrueck may have spoken too soon when he crowed last week that the US would lose its status as a superpower as a result of this crisis. He told Der Spiegel yesterday that we are “all staring into the abyss”.

Emphasis added by me.

And:

Carsten Brzenski, chief economist at ING in Brussels, said the global crisis was now engulfing Europe with devastating speed.

“We are at imminent risk of a credit crunch. Key markets are not functioning properly. The Europeans thought the sub-prime crisis was just American rubbish that the US should clean up itself, but now they are finding out that it is their rubbish too,” he said.

Data from the IMF shows that European banks hold 75pc as much exposure to toxic US housing debt as US banks themselves. Moreover they have mounting bad debts from the British, Spanish, French, Dutch, Scandinavian, and East European housing markets, where property bubbles reached even more extreme levels that in the US.

Emphasis added by me.

Like an out of control treadmill, things are going faster than anyone expected.

Chronicles Of Depression 2.0: #283: Asia #1

September 29, 2008

This is what Asian markets looked like Before Monday:


Click = big

This is what happened to Asia while I slept overnight in NYC:


Click = big

As I type this, still over an hour to go before Asia opens for Tuesday.

Chronicles Of Depression 2.0: #282: eRuns

September 29, 2008

The bank runs won’t be televised.

And when they are, it will be too late to get any cash.

This is from Nouriel Roubini’s blog: The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever

The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates – as it may now – a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.

Emphasis added by me.

There’s a factor I never considered. Who will have first priority on funds by virtue of being fastest? Those ginormous banks. And we won’t even know that such runs have taken place. Until it’s too late.

Chronicles Of Depression 2.0: #281: Your Card 2

September 29, 2008

American Express Randomly Cut My Credit Limit From $25,000 to $1,800

Reader Pierre is a small business owner who has an American Express Business Account that used to have a $25,000 limit, but has now been cut to $1,800. He says his company’s bill is usually around $12,000 a month, and it is always paid in full — on time. While Pierre is clearly upset with American Express, the Wall Street Journal says that all banks are cutting access to credit.

That is very strange, to go after business customers first. Perhaps they are trying to equalize the pain?

Credit cards: the next crisis?

My advice: If you have to use your card, use it now. But don’t use it foolishly. Even if you get cut off, you won’t be off the hook. Your debt will be sold to a collection agency. Do not further damage your credit score.

Previously here:

Chronicles Of Depression 2.0: #280: CapOne
Chronicles Of Depression 2.0: #273: Your Card
Chronicles Of Depression 2.0: #247: Plastic

Chronicles Of Depression 2.0: #280: CapOne

September 29, 2008

One of the stocks that lagged in closing was Capital One.

All of us have seen their credit card TV ads.

Capital One Financial Corp. (COF)

I’m not going to pretend I can parse that information. I just want to point out two things:

1) What it lost today
2) Its 52-week low

If it got that low in the past 52 weeks, why couldn’t it get there again? Especially with this fast-deteriorating situation.

And there is this hanging over it now too: Form 8-K for CAPITAL ONE FINANCIAL CORP, in which they planned to offer 14 million shares at $49/share. Their current stock price is below that. Oops.

Previously here:

Chronicles Of Depression 2.0: #273: Your Card
Chronicles Of Depression 2.0: #247: Plastic

Chronicles Of Depression 2.0: #279: -777.68

September 29, 2008

An hour before the closing bell, I had an intuition the close would be a loss of 777 points.

I watched it snap back into the upper 500s, then when the closing bell rang, Maria Bartiromo of CNBC announced it closed at 611.

No.

It kept going. And going. And sinking.

To that 777!

My intuition now tells me the Dow will close below 10,000 tomorrow, at 9,56x, for at least an 805-point loss.

Maybe that would convince Congress of the urgency of our situation.

As I type this, Asian markets open in about 3 hours and 15 minutes.

Bloodbath ahead.

Chronicles Of Depression 2.0: #278: D.O.A.

September 29, 2008

The New York Daily News website:

The New York Post website:

The New York Times website: