So It Begins [View All]

[Daveparts]

So It Begins
By David Glenn Cox


The run on the bank that George Bailey faced on his wedding day in, “It’s a wonderful Life” made him ask, “How did this start?”

“I don’t know? How do these things ever start George.” But for us in 2008 the answer is simple yet complicated. It starts by outsourcing jobs and moving manufacturing over seas, naively believing your global competitors will be satisfied with just a piece of your business. That the student could never better the master that crumbs from the table would satiate rather than make them hungrier

The breaking down of regulations separating investment capital from savings allowing the co mingling of funds and risky investment devices. Each with insurance to protect it from failure provided by those in the same investment business. Saying in effect that if your end of the boat begins to sink, I’ll bail you out.

The ludicrous belief that a country can run a budget deficit, a trade deficit, and a tax deficit all at the same time for any amount of time that they choose, under some odd belief that the rules don’t apply to them. Of course, if I walked into a bank and asked to borrow $10,000,000 on the promise that, hey I’m a great guy, I’m smart, educated, I’m productive, I’m a leader and people like me. The bank would ask for my history and I would explain. I always spend more than I take in, I’ve squandered more opportunity than most countries ever had. I give away money to the people that need it least and try to make up the difference by closing down opportunity to those who need it most. I start a trillion-dollar war just cause it seemed like a real good idea at the time and then I ask, can I get that money today?

Dow futures down 514 points or 4.25%, S&P 500 futures down 60 points or 4.54%,
NASDAQ down 76 points or 4.11% How bad is that? So bad that Bloomberg Television deleted showing the futures from their crawl at 11:00AM and ran Friday’s numbers instead. The Martin Luther King holiday has US markets closed today but world wide it is the largest drop since 9-11

In Europe, the FTSE 100 (England) down 323.5 points or 5.48% the DAX (Germany) down 523 points or 7.16%. In Asia, it is no better, Nikki 225 down 535 points or 3.86% awful numbers but by world standards the Japanese economic strength keeps their numbers among the best. The Japanese banks have the least exposure to sub prime investments or maybe a long memory of being burned on American Real Estate investments once before. Hong Kong’s Hang Seng index, down 1,383 points or 5.49%, Singapore Straight Times down 187 points or 6.03%.

Australian Markets closed down for an eleventh straight day, a new record. Chinese indexes are off 5% on average and South Korea off 3%.

The dollar appears to have gained in strength relative to the Yen and the Euro but it is not the strength of the dollar but the loss of faith in their own currencies. Oil is down due to the fear of a global recession / depression and even gold is down on the global uncertainly of when the other shoe will drop our how many shoes will drop. Or was that a shoe or a body hitting the floor?

``This is a stock-market crisis,'' said Alberto Roldan, head of research at Inverseguros SVB in Madrid. ``Investors believe that neither a government package nor a huge rate cut is going to help evade a recession in the U.S.''

The markets hate uncertainty, uncertainty will always drive markets down. The Wall Street Journal is always the most conservative voice on Wall Street. When the Wall Street Journal says we are facing the largest recession in 25 years it is akin to Custer saying, “There might be Indians out there.” The day off for Wall Street may be a blessing in disguise and tomorrow morning alone will tell just how well disguised it is. Either the US markets will calm themselves with a good night’s sleep and time to reflect or hell’s a poppin!

White House spokesman Tony Fratto said in Washington today the government doesn't comment on daily market moves.

“The risk of European companies defaulting soared to a record today on speculation credit-rating cuts at bond insurers including Ambac Financial Group Inc. may trigger forced asset sales. European Central Bank council member Nout Wellink said economic growth in the region may slow more than policy makers had expected.”


``We're confident that the global economy will continue to grow, and that the U.S. economy will return to stronger growth,'' The White House spokesman Fratto said in an e-mailed message. Wishful thinking at its best! Because thinking the alternative is unthinkable