Seth Godin asks, how many record label executives does it take to screw in a light bulb?

Why Bear Stearns? A quick lesson in the trillions cooking beneath, and why the Fed cares, and why you should care.

JHK put it this way:

“Over the weekend, the Federal Reserve engineered a $30-billion dollar Saint Paddy’s day present for the JP Morgan bank by handing them the corpse of Bear Stearns. The object of the game is to prevent the ‘assets’ of Bear Stearns from going to the auction block, on which they would be discovered to be nearly worthless, which would instantly render all similar assets held by the other big banks to be similarly worthless, and would result in a universal margin call that would pretty much unwind the hallucinated ‘wealth’ acquired over the past ten years.”

Read the rest of this entry »

The rare moment I agree with Bush.  Let the market correct itself.

The unraveling of the financial fauxconomy appears to be accelerating. After lying earlier in the week about their liquidity problems, Bear Stearns is on the brink of collapse. Today’s emergency bailout - hastily orchestrated in the wee hours of Friday morning - was the first such move by the US Federal Reserve since the Great Depression. The Fed is authorized to take such action only under “unusual and exigent circumstances,” and the threat of a full market seizure certainly qualifies.

Read the rest of this entry »

Carlyle Group collapsing; California home prices already 20% off peak; next up - I dunno, maybe bank runs to get some of these fancy new fivers, which are worth about a buck?

Err, and what does this kind of pressure do to the rich history of contract law?  Not to mention what it does to the idea of individual responsibility?  Then again, personal responsibility isn’t very “in” these days.

JHK says,

“I’m concerned that the American people will hate the new president if he tells them the truth: that an old way of life is over and a new one has to begin now. We’re about to find out how much ‘change’ the public can really stand.”

Read the rest of this entry »

Consumer Reports’ list of 2008’s worst cars.  Mostly domestics, of course.

Employee alleges waterboarding, drawing on employees’ faces, and other fun stuff were de rigueur at Prosper, Inc.

Where housing is headed, according to Fortune. And, “Millions who believed the happy talk are now paying the price.”

Of the messy bed we’ve made for ourselves, legendary investor Jim Rogers says, “Conceivably we could have just had a recession, but it’s going to be much worse… it’s not a good scene.”

Mortgage crisis spreads beyond subprime.

Vallejo on the brink of bankruptcy.

Might some Wall Street heads roll?

Stern’s Professor Nouriel Roubini says America’s economy risks “mother of all meltdowns.”

Stay tuned for more about Zeno Media.

Interesting blurb over at Housing Panic; Fortune asks about an “arson boom”; the 100 worst zip codes for foreclosures; this monoline shit is the tip of the iceberg; and finally, economists are finally catching on to it all.

The Fed did not panic -  “The move was imperative to prevent a grave financial crisis spiralling into disaster. The threat of a melt-down in the $2.4 trillion market for US municipal bonds had suddenly moved from possible to imminent. No monetary authority could ignore such risks… Calvinist monetary discipline at this point would wreak havoc, and possibly endanger the political stability of several countries (in Europe, if not in the US). The best we can hope to do is right the ship slowly, and turn a blind eye to moral hazard for now. It is not pretty. It means a lot of pin-stripe villains and leverage louts in the City will escape their condign punishment.”

US slides into dangerous 1930s ‘liquidity trap’ - Nobel economist Joseph Stiglitz says “The Fed has finally got around to closing the stable door, but the after the horse has already bolted … the distress is going to be very severe.”

Hilarity ensued.

The thing I like about Mike Adams’ writing is that he doesn’t just speak of doom - he occasionally offers some practical solutions along the way, too.  See his latest piece on what we’ve gotten ourselves into.

Alleges “one of the largest housing investment deceptions in modern U.S. economic times.”  And we’re not even seated for the show yet, folks.

An OpEd by Soros in the Financial Times.

Also, an IHT piece about the US as “wounded giant” at this year’s Davos conference.

Too little, way too late, sir. Before my analysis, a short reminder: I hate sounding like a doomsayer. I love my country and don’t want this to be true, but it is true; we are in some deep shit. And we did ask for it.

What kind of fucking country do we live in if the way out of economic trouble is to spend money? That’s been our problem in the first place. Also, $100 billion is spitting in the ocean considering the size and scope of this problem. The financial fauxconomy I’ve been grousing about is finally coming apart - and that’s going to be incredibly unpleasant for lots of people. The financial fauxconomy alone is measured in the hundreds of trillions.

Bernanke is going to keep the printing presses humming - lowering rates (when he shouldn’t) and further inflating our currency. This will turn America into a bargain basement for the world and drive the price of most of our imports up drastically. Conversely, foreign investors will scoop up these bargains and become majority shareholders in what we used to call America. The dollar is extremely unlikely to be the “world’s currency” ever again. Aside from some vague notion that there’s something weird in the real estate market, I suspect most Americans have no clue how putrid things are (after all, the new season of American Idol is on.)

Many “too big to fail” institutions will fail. State and municipal budgets will fall deeply into the red as revenues dry up, thus endangering the state investment pools that pay for things like police officers, firefighters, teachers, snow plows and traffic lights. There is a dreadful feedback loop emerging in the real estate market presently, and the upper middle class and “wealthy” will soon face the same problems that were supposedly limited to the sub-prime market. The “second mortgages” will blow apart, too, and with it all will go the mortgage and bond insurers. Despite the economic slowdown, energy prices will continue to climb. Our imperial adventures in the Middle East will need to be brought to an awkward and humiliating end. And who will be left to clean this mess up? The citizens, the cities and even the states who will have been bankrupted by it.

My fellow Americans are in for some nasty surprises, and, in our blame-someone-else culture, I wonder whose heads they will demand?

“I intend to manage the economy.” - Hillary Clinton to NBC News, 1/16/08

Manage the economy? How?  A US President has basically no ability to “manage” the economy.   Most people know that, right?  Does Hillary know that?

I was having a conversation last night with a friend about another mathematician friend who once told me that in any discrete area, more than 90% of Americans don’t have tastes - they just look to others to tell them what’s cool and what isn’t. These people think they have taste, but they are generally just social emulators - they look to a relatively small population of coolhunters / tastemakers to tell them what to think and enjoy. I offer FM radio as one example. But - if a person thinks they have taste and thinks they like something, what difference does it make if they actually do? This piece got me thinking about how that very phenomenon fits into marketing and pricing.