IMF head: worst of financial crisis may lie ahead
JEDDAH (Reuters) - The worst of the financial crisis may still lie ahead and more major financial institutions may face trouble in coming months, IMF director general Dominique Strauss-Kahn said on Wednesday.
I just wish I knew what definition of "lie" he was using.
Still, the world economy was very resilient and should rebound in 2009, Strauss-Kahn said to reporters after a meeting with Gulf Arab finance ministers and central bank governors.
Oh oh. I think I know which definition it is.
Stag,
ReplyDeleteMore lies. More falsehoods. The big one: free markets.
These bailouts are out of hand. I despise hedge funds, but I actually feel sorry for these guys. You put your money down and they change the rules right in the middle of the game. WTF! Doesn't seem legal to me. Talk about getting poned.
I was debating a "Mish bot" at CR last week. He, like Mish, was convinced of deflation. No other outcome was possible. I mentioned that the wealthiest 1% own 60% of all assets and that it was very unlikely they would stand by idolly and accept a deflation of their asset based wealth. He claimed they didn't have a choice. No clear winner yet in that debate.
Anyhow, I think we've unleashed a socialist monster. I just don't see how tax cuts on capital gains and high income brackets can be justified now. The charade of wall street and CEOs adding mega value is over - I hope.
That said, how can congress not bailout the auto workers after bailing out wall street and wealthy asset holders. How can joe six pack and democrats allow CEOs and asset holders to garner huge paydays after being bailed out by main street.
The sham has been exposed and I'm grateful for that. But the bailouts keep the bad debts alive and that spooks me. Somebody has to pay. Likely all of us now.
Your stagflation call looks better than ever. You should play chess - thinking ahead is key.
BTW, that 5 year TIP still looks underpriced. Can inflation really average 1% over the next five years? I don't think so, you'd need free markets for THAT.
MAB,
ReplyDeleteYour stagflation call looks better than ever. You should play chess - thinking ahead is key.
I did manage to beat Civilization IV on deity level again last night. That's always fun. I played as the Germans. I can't tell you how many times the Americans asked for peace, then the English, then the Spanish, then the Chinese. I was fortunate that all the powers were on the same continent. I had but one ship and it was 2000 year old galley. That being said, it did a great job transporting armies of modern tanks to the front lines, lol.
BTW, that 5 year TIP still looks underpriced. Can inflation really average 1% over the next five years? I don't think so, you'd need free markets for THAT.
Yeah, the yield on the 5 year TIPS is looking pretty decent these days. I'm hoping these yields stay high for the next auctions (as I continue to build my long-term TIPS ladder).
MAB,
ReplyDeleteI was debating a "Mish bot" at CR last week. He, like Mish, was convinced of deflation. No other outcome was possible.
Lacks that certain humility of Buffett, doesn't it? I think that's one reason Buffett does so good. You rarely see him speak of black and white. Everything's a muddy gray area. I think the biggest risk of all is arrogance: thinking that no other outcome was possible.
If forced to predict, I'd put the odds at 1% hyperinflation, 69% stagflation, and 30% deflation right now. I'm braced for the average of all that but deflation wouldn't hurt me much (I'd pay less taxes). If I was complelely sane, I'd probably be 10% hyperinflation, 60% stagflation, and 30% deflation. At current prices, I just can't get myself to buy gold over toilet paper and there's only so much toilet paper I can buy though.
I can say that Albertson's is selling Campbell's Cream of Chicken soup for 50 cents a can this week. That's pretty darned cheap. The hyperinflationist in me will buy all I think I can eat before it expires. Sales continue to happen, even on food.
Nancy and I also ate out at an actual restaurant. Well, sort of. $1.50 per Big Mac was too tempting (2 for $3). We shared a medium Coke. Big spenders, huh? Perhaps it was not the Fed who turned this economy around. Perhaps it was us. Perhaps we single handedly brought this country right back onto the economic tightrope with our massive restaurant spending spree. I did notice 27 investment bankers with clipboards noting our purchase and doing Toyota dances, lol. Okay, maybe I exaggerate a bit. ;)
Check out the TIPS volatility today.
http://finance.yahoo.com/q?s=tip
My big losing position for the day has turned positive. No idea what it will do next.
The same can not be said of the non-inflation protected bond fund near equivalent, at least so far.
http://finance.yahoo.com/q?s=ief
The "Mish Bot" has some explaining to do.
Stag,
ReplyDeleteMy big losing position for the day has turned positive.
That makes sense to me. I don't see easy real yields ahead. And that's a scary thought in a way. In fact, nothing has made sense for so long that people have totally screwed themselves. They've spent too much and saved too little. What's worse, they invested in lies - at high valuations no less.
I think when the realization sets in and the cost of these bailout dawns on people, todays exhuberance will turn to a 1970s style malaise. The adrenalin will be gone. But not the problems.
I've been in short term stuff for years because I really thought rates would rise. I never bought into the asset inflation game. Life is not that easy. We can all be rich - no way. All confidence scams promise something for nothing.
Anyway, now that everyone knows that Americans really can't pay their bills, I see interest rates rising. And maybe, I will be just as surprised at how long & far things go in the opposite direction. We sure don't like to hover around the mean.
MAB,
ReplyDeleteThe adrenalin will be gone. But not the problems.
I get the same feeling. I heard the following on the radio today.
If you take out the financials and look at the underlying economy...
I'm once again wondering about definitions. Define "take out". Is that to be taken literally? I think that's why the government stepped in. We can't afford to have the financials taken out, presumably behind the woodshed to be old-yellered. Further, in my opinion the financials ARE the underlying economy.
We sure don't like to hover around the mean.
We used to hover around the long-term trend that was only up. Then we liked hovering around the short-term trend that was only down. Now we're gyrating with ruthless inefficiency around the mean while trying to keep our feet firmly planted on the tightrope. Hovering really isn't an option any longer. The winds continue to pick up and unknown forces are plucking the rope to the beat of Don't Fear the Reaper. More cowbell!
What a week this has been. The Dow has gone EVERYWHERE (huge losses followed by huge gains).
Looks a lot like stagflation to me though. There was a lot of wheel rotation and it may appear we've gone everywhere, but we haven't actually gone anywhere. The Dow is pretty much the same price it was a week ago.
Traction action and monster trucks! We're tuning this economy into a giant mud pit Thursday, Friday, and Saturday! This ain't no mama's boy Sunday picnic! We'll be paying for the whole seat but we'll only use the edge!
In other news, the phone just rang. The automated voice on the other end said, "Don't be alarmed. This is your final notice for lower interest rates." No joke. I hung up. Maybe I should have listened to the entire message. I have this uneasy feeling that it was not a solicitation but an actual warning from our government.
Stag,
ReplyDeleteYou had to mention monster trucks!
http://www.gravedigger.com/dungeon
I've been to the Digger's Dungeon! For real!.
I think a lot of people have dug themselves into such deep holes it will feel like a dungeon.
MAB,
ReplyDeleteI think the following video pretty much sums up my thoughts on the future of our economy. I'm thinking smaller, more fuel efficient vehicles. Don't get me wrong though. I still see plenty of risk. ;)
http://www.youtube.com/watch?v=vLrDhxDN_S4