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You are here: Home / Politics / Domestic Politics / Why I Am Not a Stock Broker

Why I Am Not a Stock Broker

by John Cole|  March 18, 20085:38 pm| 97 Comments

This post is in: Domestic Politics

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If someone can explain why the stock market, in the face of an impending economic meltdown, soared 420 points today, I am all ears.

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Reader Interactions

97Comments

  1. 1.

    oh really

    March 18, 2008 at 5:45 pm

    The NYSE has been divorced from reality for some time now.

    The answer to your question is fairly simple:

    This country is filled with delusional morons.

  2. 2.

    Silver Owl

    March 18, 2008 at 5:45 pm

    swapping spit.

  3. 3.

    John S.

    March 18, 2008 at 5:47 pm

    Because the government has decided to put Wall Street on welfare and make it easier for them to borrow more money so they can continue to get rich off their shitty decisions in an even more consequence-free environment.

  4. 4.

    Snark Based Reality

    March 18, 2008 at 5:48 pm

    I wouldn’t be too concerned.

    It’s just the fools who somehow still have money being stripped of it by those who know how things really work.

  5. 5.

    Jason

    March 18, 2008 at 5:48 pm

    Idea 1: Cuz the Fed proved that they are willing to bailout even the evilest of companies with little recourse?!

    Idea 2: because with the dollar falling so fast, its not like you can buy much abroad with your money, so you may as well buy the cheap stuff we’re sellin’ here.

    Idea 3: The drugs wall st’s been taking to drown their sorrows finally kicked in.

  6. 6.

    zack

    March 18, 2008 at 5:54 pm

    Now, John, the “market” is too complicated for simple minds to understand. That’s why we must always defer to the experts and believe what they say. After all, they wouldn’t be on our TeeVee if they didn’t know exactly what they were talking about.

    Right?

    “Bear Stearns is fine … Bear Stearns is not in trouble. Don’t be silly … Don’t move your money.” 3/11/2008 ~ Jim Cramer

  7. 7.

    DougJ

    March 18, 2008 at 5:54 pm

    Obama’s speech made all the traders feel good inside.

    He can transcend an economic crisis, too, you know.

  8. 8.

    numbskull

    March 18, 2008 at 5:55 pm

    Because they’re gambling with other people’s money?

  9. 9.

    capelza

    March 18, 2008 at 5:55 pm

    I have always considered the stock market as about as reliable as a teenager going through puberty, and just as rational…

  10. 10.

    Liberal Masochist

    March 18, 2008 at 5:56 pm

    John – It’s a herd mentality at work. The Fed cut 75 bps. In a black box, this should be good for equities. Money is cheaper, overall cost of capital goes down etc. Given the real and/or perceived liquidity issues facing the financial markets, the spectre of inflation such a move would cause has taken a back seat. Inflation is yesterday’s worry. For now.

    Obviously, there is more to it than that. The see-sawing in the market we have been seeing the past few months is overreaction to different sets of conflicting news. The market should not have risen that much today nor should it have fallen so much at the end of last week when Bear unraveled. Confidence in the market is weak right and it appears to be amplifying movements quite a bit.

  11. 11.

    BFR

    March 18, 2008 at 6:00 pm

    Mr. Cole, please meet Mr. Dead Cat.

  12. 12.

    calipygian

    March 18, 2008 at 6:02 pm

    Because the stock market has fuck all to do with the economic position of the average Joe and everything to do with the economic position of those securities traders that aren’t putting their vacation homes up for sale this week.

  13. 13.

    Ted

    March 18, 2008 at 6:04 pm

    Simple, John. The Fed rate cut. Additionally, every time the Fed chairman says *anything*, the market activity level spikes. Sometimes the indexes go up, or go down, but the trades per second always spikes. At work we usually see the activity spike first, and then check the news to see what Helicopter Ben said.

  14. 14.

    calipygian

    March 18, 2008 at 6:05 pm

    Oh yeah. And thanks to the 75 bps cut, I hope you enjoyed having American currency that was actually worth something. Next stop: 2USD – 1EUR and $150/bbl oil.

    Cutting the funds rate this much was the equivilent of a Weimar Central Banker printing money.

    Hope you invested in wheelbarrows.

  15. 15.

    4tehlulz

    March 18, 2008 at 6:12 pm

    Because J.P. Morgan the stockbrokers understand that no matter what stupid decisions they make, the Fed will always bail them out.

  16. 16.

    DR

    March 18, 2008 at 6:16 pm

    Simple: day traders. They’re reacting to the 75 bps cut by thinking, rightly, that enough people will be fooled to get the market to go up a bit. Then they jump in, buying stocks they’ll most likely sell tomorrow (it’ll be called “profit taking”).

  17. 17.

    BFR

    March 18, 2008 at 6:16 pm

    There’s a severe information shortage right now that is partially driving the panic. No one really knows how much bad debt is held in all of these institutions, which is bad.

    Expectations before today was that there would be a 100bps rate cut, when it came in at 75, I think a lot of people concluded that the Fed’s relatively conservative action might indicate that they (the Fed) thinks that the situation isn’t deteriorating as badly as people feared yesterday. Plus Lehman (and someone else) beat expectations, which makes more people think things aren’t as bad as they appeared.

    I don’t think it means anything significant – I think it’s a dead-cat bounce. The fundamentals still suck and there’s no clear evidence that the Fed knows anything more than anyone else does. I’m guessing that there will be some other piece of shitty news in a couple of days that will erase all of these gaines.

  18. 18.

    Sid

    March 18, 2008 at 6:18 pm

    Cross-posted from Kevin’s:

    I’m a derivatives trader at a hedge fund.

    The simple explanation is that these big up days frequently happen after being down 2-3 days in a row.

    The market’s been beaten down quite a bit this year, but short-term, there’s been a lot of fear over financial earnings, which are/were released this week. The market was literally at this level around last Friday morning just before the Bear Stearns news hit. The market nosedived, and the Fed has cut interest rates A FULL POINT since then. We are now back to where we were Friday morning.

    The biggest up days always occur in bear markets. Go back to the charts from 2000-2002. And we’ve been trading in a bear market since we broke key trendlines in mid-January.

  19. 19.

    Studly Pantload

    March 18, 2008 at 6:18 pm

    Zack sed:

    “Bear Stearns is fine … Bear Stearns is not in trouble. Don’t be silly … Don’t move your money.” 3/11/2008 ~ Jim Cramer

    I thought his first name was Cosmo?

  20. 20.

    p.a.

    March 18, 2008 at 6:19 pm

    When one is desperate one grasps at any available straw. Try this peach pit extract to cure your cancer. Spend your last paycheck on Powerball. Bet the Raiders to make the SuperBowl. An interesting question, how much of today’s upswing was because of institutional investors? How much by individual schmucks?
    Eventually the market reflects economic reality. It just gets there clawing and screaming.
    Only 2.25% left. Then what?

  21. 21.

    rawshark

    March 18, 2008 at 6:21 pm

    Jason Says:

    Idea 3: The drugs wall st’s been taking to drown their sorrows finally kicked in.

    Since it soared 420 points its obvious they’re all potheads.

  22. 22.

    HyperIon

    March 18, 2008 at 6:24 pm

    all economics is voodoo IMO.
    our system of capitalism requires eternal growth.
    we have rejected perpetual motion machines.
    but we accept perpetual growth economies.
    we are fucked…either now or later.

  23. 23.

    Dennis - SGMM

    March 18, 2008 at 6:25 pm

    Cocaine

  24. 24.

    anonymous 37

    March 18, 2008 at 6:26 pm

    Just before a major crash and after a significant market downturn, the bear market will enter a bull market phase. The thing is that markets have a hard time moving further down when the short interest (people betting that the market will go down) is very high. There needs to be a significant percentage of assets betting that the market will go up in the short term for there to be enough money to go the other way and cause a downturn.

    If the sentiment is as bearish as it’s been, any reason for an upturn will tend to cascade. Owners of put options will panic and get out; short sellers will cover. You should watch for Wednesday’s and Thursday’s action. It is possible that there will be an even more ferocious upturn when a bunch of out-of-the-money put options expire.

    There are always exceptions. Had an asteroid the size of Cleveland had slammed into a populated area in an industrialized democracy today, the market would have managed to go down anyway. But barring the extraordinary, it’s a reasonable explanation for why crashes can often happen after a short term recovery from an extended bear market.

  25. 25.

    BFR

    March 18, 2008 at 6:27 pm

    our system of capitalism requires eternal growth.
    we have rejected perpetual motion machines.
    but we accept perpetual growth economies.

    As long as technology is increasing productivity and the population is growing, it’s actually unlikely the economy would shrink for an extended period of time, at least in real terms.

    It’ll take a hit once and a while, but it’s going to keep expanding so long as the population is expanding. This isn’t a perpetual motion machine – the economy grows because inputs to the economy are growing.

  26. 26.

    TR

    March 18, 2008 at 6:31 pm

    The NYSE had a couple brief surges in late September and early October 1929, right before the Black Thursday crash. Brace yourself.

  27. 27.

    Ted

    March 18, 2008 at 6:31 pm

    Simple: day traders. They’re reacting to the 75 bps cut by thinking, rightly, that enough people will be fooled to get the market to go up a bit. Then they jump in, buying stocks they’ll most likely sell tomorrow (it’ll be called “profit taking”).

    I like the Casino Royale investment strategy better.

  28. 28.

    Ted

    March 18, 2008 at 6:33 pm

    “Bear Stearns is fine … Bear Stearns is not in trouble. Don’t be silly … Don’t move your money.” 3/11/2008 ~ Jim Cramer

    If I was that guy’s boss, I’d have fired him yesterday. But I guess in financial punditry, as in political punditry, being monumentally wrong only gets you promoted.

  29. 29.

    Zifnab

    March 18, 2008 at 6:33 pm

    Didn’t Bernenke just dump another 3/4th of a point of federal dollars on the market? Don’t worry, John. They’re not gambling with your money. They just put the market on another point of margined buy.

    This’ll all collapse by tomorrow and Bernenke will be cutting some new interest rate by another 1/2 point by April to bail everyone out again.

  30. 30.

    demimondian

    March 18, 2008 at 6:34 pm

    Despite the fun I have invoking the memory of 1929 — and you may be sure that I do — I would be careful drawing too many parallels to the Great Crash. We’re certainly in for an extended bear (stearns) market, but it is unlikely that things will fall apart quite as badly as they did in ’29.

    However, if I were a large capitalist, I would be looking for a place to park my money. It’s going to be a bad time to be rich for a while — and that’s a good thing.

  31. 31.

    ACK

    March 18, 2008 at 6:34 pm

    The biggest up days always occur in bear markets. Go back to the charts from 2000-2002. And we’ve been trading in a bear market since we broke key trendlines in mid-January.

    Bingo. That trendline break was key.

  32. 32.

    demimondian

    March 18, 2008 at 6:35 pm

    I like the Casino Royale investment strategy better.

    I dunno. That whole “drowning trapped in the cage of an elevator in order to avoid prison” part doesn’t really appeal to me.

  33. 33.

    Ted

    March 18, 2008 at 6:40 pm

    I dunno. That whole “drowning trapped in the cage of an elevator in order to avoid prison” part doesn’t really appeal to me.

    I’d have to watch it again, but I don’t recall that being the reason. Whatever; as the movie is a bit convoluted.

    I meant the (attempted) blowing up of the plane manufacturer’s prototype just after you’ve short-sold a crap-load of its shares. Nice.

  34. 34.

    BFR

    March 18, 2008 at 6:41 pm

    I was apparently remembering what I’d read Krugman saying today on his blog:

    When the Fed cuts less than you expected, there are two common but opposite reactions:
    1. Sell! Ben didn’t give us what we wanted — that means he isn’t willing to flood the markets with money! Run for the hills!
    2. Buy! A smaller cut means the Fed knows that things aren’t as bad as we thought!
    Reaction 2 obviously won the day today. But you know what? Both reactions are silly.
    On the one hand, Ben is clearly determined to do everything he can, and never mind the inflation risks (I agree, by the way.) The only question is whether he’s got the tools, which is as doubtful now as it was last Friday.
    On the other hand, the Fed really has very little special knowledge of the economic/financial situation. Maybe a slightly better view of a few balance sheets, maybe some early glimpses of economic data, but when all is said and done they’re reading the same data and reports the rest of us are.
    So what was that about? Not much.

  35. 35.

    Zifnab

    March 18, 2008 at 6:41 pm

    Don’t worry, John. They’re not gambling with your money. They’re not gambling with their own money. They’re gambling with your money and just put the market on another point of margined buy.

    Self Fix. Sorry, listening to Obama and got entranced.

  36. 36.

    mac

    March 18, 2008 at 6:46 pm

    BFR got there first–it’s a dead cat bounce, and the volatility of a bear market. Uncertainty in valuation can drive things up as well as down. At some point, the bullish will be correct: stock is eventually undervalued, and starts to recover.

  37. 37.

    Xenos

    March 18, 2008 at 6:48 pm

    Many of us have hundreds of thousands of dollars in 401(k) accounts. We can’t use them to buy commodities, we don’t dare put dollars into money market accounts (god only knows what sort of paper is in there), corporate bond funds will get murdered when interest rates rise (and they can only go up at this point), and quality international funds are getting too expensive, and will themselves get creamed when the European banks hit their own real estate crash starting in six months.

    Since fairly bad inflation is unavoidable, I can’t hold cash much longer without guaranteed losses. So, into stock funds I go, because there is nowhere else to turn. This is gonna suck.

  38. 38.

    Martin

    March 18, 2008 at 6:51 pm

    The rule of the day trader: Only the last guy out loses.

  39. 39.

    Pixie

    March 18, 2008 at 6:53 pm

    Yay! At this rate the interest rate will be cut to 0% in no time =) Can’t wait to get my first house!

  40. 40.

    Ninerdave

    March 18, 2008 at 6:56 pm

    Ninerdave’s retirement plan:

    1) Buy total stock market mutual funds.
    2) Ignore daily and short term ups and downs.

    The market fluctuates all the time, sometimes logically sometimes not. If you are investing for the long term it doesn’t matter. If you are close to retirement you shouldn’t have most of your money in the stock market anyway as you are vulnerable to short term fluctuations.

  41. 41.

    BFR

    March 18, 2008 at 6:57 pm

    Yay! At this rate the interest rate will be cut to 0% in no time =) Can’t wait to get my first house!

    That’s not how it works. The fed rate basically controls only the interest rate that banks pay when they have to borrow from the Fed.

    It’s loosely connected to mortgage interest rates and the like, but if banks are getting risk-averse, then a reduction to a 0% fed funds rate isn’t going to change their (the banks) lending strategies (and thus interest rates) when it comes to lending money to you and me.

    I’m guessing there are others here who can explain it way better than I can.

  42. 42.

    CFisher

    March 18, 2008 at 6:59 pm

    Saw a graph the other day that if you factored inflation into the market numbers, we haven’t actually ‘gained’ anything since 2000.

    So I imagine that the more money crazy Ben’s printing presses help put into the market, the bigger the numbers will get.

    Until folks start worrying about inflation again and then they’ll start looking for investments that are better inflation hedges than stocks.

  43. 43.

    Conservatively Liberal

    March 18, 2008 at 7:00 pm

    Economic indicators from the past have no relationship to now, there is no way to really compare our condition now with that of the past using the manipulated data the economy operates on now.

    We make up the rules for the economy as we go along, and it is all based ‘irrational exuberance’ (as Greenspan called it, but I call it greed). They turned housing into an investment, demand skyrocketed, people bought in and/or cashed out. When the game of musical chairs stopped, everything fell apart. The fix? Just crank up the printing presses and keep borrowing money, this Ponzi scheme of an economy knows no end. Keep shopping and buying houses people, if you don’t then you are supporting the turrists!!

    Dead cat? Nope, they will squeeze as many bounces out of it as they can. A favorite toy for some at Calculated Risk is the ‘Kitten Cannon‘. My personal best is 1,689 feet. The game works like our markets; fire the cannon, and when the kitten stops bouncing just load up and fire another one off!

  44. 44.

    Edo

    March 18, 2008 at 7:06 pm

    Since fairly bad inflation is unavoidable, I can’t hold cash much longer without guaranteed losses. So, into stock funds I go, because there is nowhere else to turn.

    Exactly right.

  45. 45.

    petereugene

    March 18, 2008 at 7:09 pm

    Whee! Being an early casualty of the sub-prime implosion, I sent in the surrender forms for a couple of smallish retirement accounts last week and can only hope that today is when they’re processed. Because, after all, it’s all about me!

    Next: sell the rental house. Gawd damn I love this country!

  46. 46.

    Xenos

    March 18, 2008 at 7:18 pm

    Saw a graph the other day that if you factored inflation into the market numbers, we haven’t actually ‘gained’ anything since 2000.

    Check out a graph that takes into account inflation that includes housing and energy costs. Or you can just use the methods for reckoning growth that were used until Reagan came into power – those show that we have been in a recession for over a year now.

    The republican war on reality is nothing new. Corporate and Wall Street insiders have known how fucked we are for decades, and have been rearranging the deck chairs on the Titanic all along. Hint: the deck chairs for the top 1%ers were put on the life boats, and those boats are long gone. Go look for them in Dubai.

  47. 47.

    Ted

    March 18, 2008 at 7:34 pm

    Hey everybody! Moe Lane is banning people at Red State today! For saying Obama’s speech was very good!

    ;)

  48. 48.

    jake

    March 18, 2008 at 8:02 pm

    That’s easy: The pResident didn’t blurt out another “Boy howdy the the economy shure is swell, why don’t ya’ll go shoppin’ hyuck, hyuck, hyuck!” bonehead nothing-to-do-with-reality comment today.

    I swear if that big-eared schmuck spoke about nothing but the economy for six days in a row, on the seventh the entire fucking country would be fighting over the sturdiest cardboard boxes and fattest rats.

  49. 49.

    capelza

    March 18, 2008 at 8:07 pm

    No recent open thread..so here goes..Arthur C. Clarke passed away today. :(

    I read him as a child and a young adult and have always had a very soft spot for him. Rendevous With Rama, Childhood’s End. and others that slip my mind right now, though one of his short stories led to 2001.

  50. 50.

    Chris Johnson

    March 18, 2008 at 8:16 pm

    Many of us have hundreds of thousands of dollars in 401(k) accounts

    hee, hee, hee… not for long…

    It’s hard to have a lot of sympathy for your at-risk hundreds of thousands of dollars. Look: even in economic disaster the rich don’t go hungry. It’s like Heinlein said- when you’re down $100,000 you still are having dinner. It’s the poor bastard who’s down $100 who has to go without.

    I’m not THAT mean, so good luck with that, may you find safe havens for your hundreds of thousands of dollars.

    I’ll just carry on trying to go for high foreign sales numbers as the exchange rates are increasingly making my products- even with VAT- as accessible as a cup of coffee to places like Sweden. I’m trying to work out whether paying down mortgage debt on a fixed-rate mortgage is the priority here, or whether I need to be investing in gear that holds resale value. In my own way, my concerns are just like yours- I’m not skipping dinner for money reasons anytime soon.

  51. 51.

    demimondian

    March 18, 2008 at 8:20 pm

    Yeah, I saw that Clarke died. I’d always hoped he would live forever.

  52. 52.

    Chris Johnson

    March 18, 2008 at 8:20 pm

    Like I’ve said in other places- when Heinlein died we ACTUALLY GOT ‘the Crazy Years’, so maybe now we can get the adult, reasonable, civilized future of ‘Imperial Earth’.

    UNLIKE what I’ve said in other places, and since this is a politi-blog: so, full speed Obama! Because he is plainly an Arthur C. Clarke hero walking around in the real world, right down to the cafe-au-lait color. He’s ‘Duncan Makenzie’ in real life, what’s not to like?

  53. 53.

    chopper

    March 18, 2008 at 8:30 pm

    a coupla hundred grand aint a whole lot when you’re talking about retirement savings.

  54. 54.

    Chief

    March 18, 2008 at 8:48 pm

    People = lemmings You buy the stock, not the market. I went to an all cash position in my IRA before Christmas.

    I’m posting about how gov’t economic policies affest all of us at http://libertystreet.wordpress.com/ and Kathy is posting about politics.

  55. 55.

    Xenos

    March 18, 2008 at 8:51 pm

    I’m not THAT mean, so good luck with that, may you find safe havens for your hundreds of thousands of dollars.

    The point was not to boast, but to explain where the money is. Enormous funds have been sitting out the market for the last few years. Now, with significant inflation on its way, a lot of people who would rather hold cash are forced into buying equities, since every other investment has too much inflation risk or interest rate risk.

    FWIW, I predict another upsurge in the market for a couple more weeks, and another big blow-up. Good luck timing this market with mutual funds!

  56. 56.

    Notorious P.A.T.

    March 18, 2008 at 8:52 pm

    If I was that guy’s boss, I’d have fired him yesterday. But I guess in financial punditry, as in political punditry, being monumentally wrong only gets you promoted.

    Sure he was wrong–but at least he’s serious!

  57. 57.

    jake

    March 18, 2008 at 8:52 pm

    No recent open thread..so here goes..Arthur C. Clarke passed away today.

    Well. Fuck.

    – “God said, ‘Cancel Program GENESIS.’ The universe ceased to exist.”

  58. 58.

    Incertus

    March 18, 2008 at 8:54 pm

    On the upside, if inflation goes through the roof, my student loans get a lot cheaper–after a world of hurt for a lot of people (including me) for a long time. If this goes bad, my mortgage-sized student loan could wind up being a month’s pay.

  59. 59.

    demimondian

    March 18, 2008 at 9:08 pm

    “And overhead, quietly, one by one, the stars were going out.”

    RIP, Sir Arthur

  60. 60.

    Thepanzer

    March 18, 2008 at 9:14 pm

    Humanity is fucking stupid. And since Americans need to do things twice as large, loud, and proud as anyone else we’re twice as fucking dumb.

  61. 61.

    DarkSyde

    March 18, 2008 at 9:15 pm

    More buying than selling.

  62. 62.

    Dennis - SGMM

    March 18, 2008 at 9:25 pm

    Requiescat in pace, Sir Arthur. Thank you for dreaming such grand dreams for the rest of us.

  63. 63.

    Thepanzer

    March 18, 2008 at 9:28 pm

    And on a semi-related topic of dumb traders. I put CNBC on in the background and listen to it while I’m working. I’ve noticed that most of the time I want to drag the chearleading pom-pom waving bobbleheads through the TV screen and club them like baby seals. But they are actually pretty easy to endure when compared to the commercials. Anyone else seen the commercial where the guy just bought 6 flat screens because his pal bought 4, and he’s going to use his flat-screens for 5 screens worth of day trading, porn viewing, and the 6th “regulating chumps in gears of war.” If I couldn’t find anything else to represent how fucking stupid people are then that would be it. The advertisment caters to the apparently growing “playing video games while day trading and keeping up with the joneses set”. If you wanted to know which demographic pushed up the market by 420 today while sinking in a sea of troubles look no further. They were probably distracted by gears of war and didn’t realize they clicked on the buy tab on their 5th or 6th monitor.

  64. 64.

    Dug Jay

    March 18, 2008 at 9:28 pm

    It’s going to be a bad time to be rich for a while—and that’s a good thing.

    Shame on you, Demi. You know better than this; when the big, bad guys have a bad time, as you approvingly suggest, those little guys really get it in the shorts.

  65. 65.

    p.a.

    March 18, 2008 at 9:33 pm

    I swear if that big-eared schmuck spoke about nothing but the economy for six days in a row, on the seventh the entire fucking country would be fighting over the sturdiest cardboard boxes and fattest rats.

    Harken Energy, Arbusto, and the Texas state budget were in shambles when he left. Is there a name for this phenomenon? The Peter Principle involves being promoted one step above one’s competency level, but that implies a display of competence somewhere, sometime. The first, last, and only time GW accomplished anything on his own without Bush family retainers being involved he had a flagella. Please note I have not said ‘accomplish anything positive‘. And la famiglia can’t help now, the disaster is just too large. You can’t ‘mulligan’ a nation.
    What a fucking legacy. (sorry, using #!@#@ now just won’t cut it)

  66. 66.

    Xenos

    March 18, 2008 at 9:39 pm

    a/k/a the Sidam (opposite of Midas) touch – every thing he touches turns into, well, not gold.

  67. 67.

    demimondian

    March 18, 2008 at 9:46 pm

    Actually, Dug Jay, you have it backwards — when the little guys really start taking it in the shorts, they turn on the big bad bad guys.

  68. 68.

    GSD

    March 18, 2008 at 9:54 pm

    Stockbroker: Balloon Juice?

    Madge: You’re soaking in it.

    -GSD

  69. 69.

    Dennis - SGMM

    March 18, 2008 at 9:57 pm

    It’s no accident that the Bush family has established a stronghold in far away Paraguay. If “the little guy” ever realizes how Bushco has sold out his future, that of his children, and that of his children’s children, the burning will go on for months.

  70. 70.

    p.a.

    March 18, 2008 at 9:58 pm

    Xenos Says:

    a/k/a the Sidam (opposite of Midas) touch – every thing he touches turns into, well, not gold.

    I like it! Sidam Syndrome? The Bush-Sidam Effect? Might be confused with GW’s doppelganger though; Saddam Hussein. Bushsidamics? Bushsidamania? Bushsidamentia!!!!!

  71. 71.

    Johnny Pez

    March 18, 2008 at 10:05 pm

    full speed Obama! Because he is plainly an Arthur C. Clarke hero walking around in the real world, right down to the cafe-au-lait color. He’s ‘Duncan Makenzie’ in real life, what’s not to like?

    I think we’ve just found our new right-wing smear: Barack Obama, secret clone! I can see the viral e-mail now . . .

  72. 72.

    Stoic

    March 18, 2008 at 10:12 pm

    Um, what part of “dysfunctional” don’t you get? Another way of looking at it is, “Nothing like an orderly market, huh?”

  73. 73.

    TS

    March 18, 2008 at 10:19 pm

    short covering.

    markets don’t go straight down, even in catastrophic economic times. the 1930 market made up nearly all it’s 1929 losses despite an economy that was clearly imploding across the world. outside of the financial companies, the rest of the economy is struggling, but people still need food, beer, entertainment, etc. i expect a lot of these days over the next couple years.

  74. 74.

    Perry Como

    March 18, 2008 at 10:40 pm

    LOL JP Morgan.

  75. 75.

    Tax Analyst

    March 18, 2008 at 10:41 pm

    Shit, John, the Stock Market ALWAYS goes apeshit over an Interest Rate cut. Only one thing USED to make it go higher, and that was an announcement by a major corporation that they were going to lay off 15,000 or 20,000 working stiffs. Boy, that would make that old Stock Market fly like one of them whirly-bird helicopters. But laying off working stiffs doesn’t seem to do the trick anymore, maybe because the remaining working stiffs are starting to look over their shoulders and just aren’t BUYING any of the products those wunnerful major corporations are trying to sell.

    But the Stock Market is a weird-assed game, emphasis on the word “game”. The only thing that props it up at all now, IMHO, is the tons of deferred wages that get pumped into Mutual Funds automatically every payday across the nation. I know a lot of people who wouldn’t put a plugged nickel into the current market except their payroll check is set to do it rain-or-shine every week or two. Of course, as someone who is a “saver” I take it right in the shorts every time the rates go down. I really wouldn’t mind if I thought it was the right thing to do, but it’s not. These rate cuts have reached the point where they are undermining the dollar and that’s not healthy. The FED is printing money as fast as they can and throwing bushels of it at the Banks to try and keep things rolling.

    Unfortunately, rather than providing funds to any honestly qualified prospective home buyers or, more importantly, business people with legitimate needs, it appears the banks are hoarding the low-cost money they’re borrowing from the Fed and investing it in Treasury bonds paying higher interest yields. Then they are pocketing the windfall profits to repair their own ravaged balance sheets. Their “thanks” to the taxpayer for this largesse is something I believe is known as “The Finger”, as in “Fuck You”.

    Honestly, the Stock Market looks like a crappy choice at the moment, but these FED parlor games and the economy make it appear the best of a bad lot of choices. You hold cash and the rising inflation just sucks the value out of it as it sits in your hand.

    CD return rates have fallen in the toilet. I renewed a 1-yr CD last July at 5.22% and I’m guessing if I tried to renew a 1-yr CD now I’d probably get somewhat less than 3%. An interest-drawing checking account that was getting around 3.8% less than a year ago brought me 2.06% on my last monthly statement and I expect it will go under 2% on the next one.

    Full disclosure: I’m OUT of the Market anyway. I’m just too fucking old to make the money back if it all goes sour, so I’d rather take the inflation hit and have my Principal protected by the FDIC at this point. I’m still working and I like what I do, so I’ll likely be fine either way. Glad I’m not younger…boy, never thought I’d say that.

  76. 76.

    Perry Como

    March 18, 2008 at 10:51 pm

    I renewed a 1-yr CD last July at 5.22% and I’m guessing if I tried to renew a 1-yr CD now I’d probably get somewhat less than 3%. An interest-drawing checking account that was getting around 3.8% less than a year ago brought me 2.06% on my last monthly statement and I expect it will go under 2% on the next one.

    28 day t-bills are at .5% right now. I’m sure there are a lot of people trying to snap up that deal.

  77. 77.

    markwilliams

    March 18, 2008 at 10:53 pm

    Funny thing Ted, I was expelled by Moe Lane today as well. I didn’t have a chance to praise the speech by Obama. I was thrown off for commenting that Rev. Wright’s sermons are G-rated compared to the genocidal fury of Evangelical Christians who pray every day for the rapture to begin. The rapture clearly advocates the use of WMDs on American citizens. I don’t understand why the rapture ready crowd isn’t arrested and transfered to Gitmo.

  78. 78.

    Asti

    March 18, 2008 at 11:04 pm

    John, you ever heard of that thing called a PEP RALLY where a bunch of foolish crazy people cheer on the thing that hasn’t happened yet? Same thing, only the cheering is replaced with money.

  79. 79.

    flavortext

    March 18, 2008 at 11:07 pm

    On the upside, if inflation goes through the roof, my student loans get a lot cheaper—after a world of hurt for a lot of people (including me) for a long time. If this goes bad, my mortgage-sized student loan could wind up being a month’s pay.

    Thinking the same thing. After I graduate, I could pay off my student loans with a few hours’ worth of work in Europe should inflation spiral out of control. Of course, the downside would be coming back to an American version of Weimar Germany…and we all know how well that played out.

  80. 80.

    Martin

    March 18, 2008 at 11:09 pm

    Ninerdave’s retirement plan:

    Martin’s retirement plan:

    Bacon every day, because your retirement dollars go farther if you don’t live as long.

  81. 81.

    Asti

    March 18, 2008 at 11:09 pm

    But the Stock Market is a weird-assed game, emphasis on the word “game”. The only thing that props it up at all now, IMHO, is the tons of deferred wages that get pumped into Mutual Funds automatically every payday across the nation. I know a lot of people who wouldn’t put a plugged nickel into the current market except their payroll check is set to do it rain-or-shine every week or two. Of course, as someone who is a “saver” I take it right in the shorts every time the rates go down. I really wouldn’t mind if I thought it was the right thing to do, but it’s not. These rate cuts have reached the point where they are undermining the dollar and that’s not healthy. The FED is printing money as fast as they can and throwing bushels of it at the Banks to try and keep things rolling.

    Aww come on! Don’t be so mean to the only lottery system your boss contributes to and helps you to try to win! (disclosure: I no longer have a 401(k). – I don’t contribute anything to that game these days.)

  82. 82.

    TenguPhule

    March 18, 2008 at 11:10 pm

    If someone can explain why the stock market, in the face of an impending economic meltdown, soared 420 points today, I am all ears.

    The short answer: People are stupid and don’t know when to walk away instead of doubling down.

    The longer answer: Trading programs invented by people who could never imagine complete and utter failure across the market have indicated that stocks are a steal right now. Combined with vultures and other bottomfeeders trying to make a quick buck before getting out in time (or so they think), it’s throwing the shit into the air and calling it gold….right before it crashes back down into hopeful upturned faces.

    If you jump into the market now, you are a fool.

    If you get out of the market now, you’re an even bigger fool.

    And if you stay in, you’re fucked.

  83. 83.

    TenguPhule

    March 18, 2008 at 11:17 pm

    You know better than this; when the big, bad guys have a bad time, as you approvingly suggest, those little guys really get it in the shorts.

    On the plus side, by the end of the bad time, there are a lot fewer people like Dug Jay. One way or another.

  84. 84.

    Bruce Moomaw

    March 18, 2008 at 11:45 pm

    Kevin Drum asks the same question. I suspect he actually answered it himself yesterday when he quoted Alan Greenspan:

    “In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other’s movements, fell in unison on and following August 9 last year, huge losses across virtually all risk-asset classes ensued.

    “…Over the past half-century, the American economy was in contraction only one-seventh of the time. But it is the onset of that one-seventh for which risk management must be most prepared. Negative correlations among asset classes, so evident during an expansion, can collapse as all asset prices fall together, undermining the strategy of improving risk/reward trade-offs through diversification.”

    In other words, investors now make their investments following the guidance of computer models that are based on the fundamental assumption that the stock market as a whole will continue to rise forever — so naturally they make that a self-fulfilling prophecy even when the underlying economy has been completely hollowed out by the termites and is on the verge of collapse.

    It’s rather appropriate, given Arthur C. Clarke’s death today, that apparently the entire American economy is now at the mercy of HAL the Computer. As the President says, we should all just take a stress pill and get some rest.

  85. 85.

    ThymeZone

    March 19, 2008 at 12:08 am

    If you jump into the market now, you are a fool.

    If you get out of the market now, you’re an even bigger fool.

    And if you stay in, you’re fucked.

    In the last year, I have averaged about a 12% annual gain in equities. YTD this year, about the same.

    It took me five years of trial and error to get to the point where I feel like I can do this in almost any market. A lot of work, really, in terms of reading, researching, buying and selling and making mistakes and learning from them.

    Luckily for me, publicly traded equities are a small part of my nest egg and I can lose that money and be okay. But that’s just me. I don’t trade, I invest, and I don’t buy and sell options. I don’t do OTC and I am very picky about what I buy. Very, very picky.

    I started my stock investing career about a month before 911, so it was a trial by fire at first, to say the least.

    Nothing that has happened since then has been as hard to adjust to.

  86. 86.

    Kat

    March 19, 2008 at 12:38 am

    Tax Analyst Said: CD return rates have fallen in the toilet. I renewed a 1-yr CD last July at 5.22% and I’m guessing if I tried to renew a 1-yr CD now I’d probably get somewhat less than 3%.

    Wachovia’s offering 5% for the first year on savings accounts — 10% on the first $6,000. Of course that makes me think they’re gonna go under — but the account would be FDIC insured.

    Martin’s retirement plan: Bacon every day, because your retirement dollars go farther if you don’t live as long.

    For their entire lives, my maternal grandparents in Mississippi put bacon grease in everything they ate — and they lived to ages 93 and 96. But then, they also drank well-water their entire lives, and lived in a very stress-free rural environment.

  87. 87.

    TenguPhule

    March 19, 2008 at 12:40 am

    Wachovia’s offering 5% for the first year on savings accounts—10% on the first $6,000. Of course that makes me think they’re gonna go under—but the account would be FDIC insured.

    On the bright side, I-bonds are yielding 4.32% and their rates are only going to go up from here on.

    On the bad side, you can only buy $5,000 a year.

  88. 88.

    Dennis - SGMM

    March 19, 2008 at 12:56 am

    Need some help from ya’ll. Is there an actual word for the strategy of purposefully driving down the value of an enterprise so that you can purchase it for less than it’s actually worth? I’m thinking “Bush Administration” but there must be a real word for it.

  89. 89.

    dirge

    March 19, 2008 at 1:32 am

    If someone can explain why the stock market, in the face of an impending economic meltdown, soared 420 points today, I am all ears.

    Easy: The stock market didn’t go up; the dollar went down.

    The fed cranked up the printing presses, so the value of a dollar fell on basic supply & demand dynamics. In the mean time, the actual economic value of the goods and services underlying equities was unaffected. So equities rose in nominal terms without really going anywhere at all in real terms.

    Of course this will all eventually show up in real terms when the businesses providing real goods and services are unable to finance operations due to the liquidity crunch — which is of course actually exacerbated in the medium-term by printing money in an absorbent, family-size-economy-pack, two-ply-roll form factor.

  90. 90.

    Chuck Butcher

    March 19, 2008 at 1:42 am

    I guess I’m in great shape, I have no stocks to lose money on. I have no cash to get eaten by inflation. I have a shit load of tools that aren’t getting worn out and gas hog vehicles that sit still using none.

    The only part that doen’t look bright is those fuckers that want house and truck payments and insurance payments. I suppose I’ll have to get some of that cash stuff. Since I just started a job that was bid 2 months ago I’d better hope this wheel barrows of money for a loaf of bread holds off a little.

  91. 91.

    Dennis - SGMM

    March 19, 2008 at 2:22 am

    I guess I’m in great shape, I have no stocks to lose money on. I have no cash to get eaten by inflation. I have a shit load of tools that aren’t getting worn out and gas hog vehicles that sit still using none.

    I have a roll away and two top chests full of machinist’s tools and measuring instruments, the $15,000 residue of three decades in machining. These days, the wages aren’t even worth loading them into the truck.

  92. 92.

    Kat

    March 19, 2008 at 3:23 am

    Dennis – SGMM said: Is there an actual word for the strategy of purposefully driving down the value of an enterprise so that you can purchase it for less than it’s actually worth?

    The Iraq War?

    Less snarkily… In his book The Politics of Rich and Poor, Kevin Phillips says these intentional bubble-burst cycles are always a prominent feature of what he calls ‘Republican Hey-days’. These hey-days have recurred about every 50-60 years throughout US history.

    Why such a long cycle? The Republicans have always had to wait until the vast majority of voters who remember, first-hand, their last crash have died before they can once again sucker a majority of voters into electing them. Case in point this time around: most of the adults who endured the worst years of The Great Depression had died by the time Reagan was elected.

    So how do they sucker each new crop of voters? They exploit class envy by convincing them that they, too, can be rich — if only they’ll sink their hard-earned cash into this, that, or the other bubble. Historically, the more and the bigger these engineered bubbles during any particular hey-day, the worse the ultimate crash.

    Due to his dust-dry academic style of writing, Phillips’ books are *ahem* under-appreciated. But I say, anyone who has a burning desire to understand the co-mingling of politics and economics throughout U.S. history will find Phillips’ books richly rewarding. To anyone who fits that description, I highly recommend The Politics of Rich and Poor and Boiling Point: Democrats, Republicans, and the Decline of Middle Class Prosperity.

  93. 93.

    Kat

    March 19, 2008 at 3:43 am

    I should have said…

    So how do they sucker each new crop of voters? Primarily they exploit class envy by convincing them that they, too, can be rich — if only they’ll sink their hard-earned cash into this, that, or the other bubble.

    Secondarily, they’re not above cynically exploiting any other group/method they believe will garner them additional votes, from the racism of white Democrats in the south, to the homophobia of fundamentalist Christians, to false-flag operations intended to terrify the populace into support and submission.

  94. 94.

    Prospero

    March 19, 2008 at 4:52 am

    I think we’ve just found our new right-wing smear: Barack Obama, secret clone! I can see the viral e-mail now . . .

    Actually, he’s a robot! Have you ever seen him punch somebody in the face?

  95. 95.

    gypsy howell

    March 19, 2008 at 7:10 am

    Q:

    If someone can explain why the stock market, in the face of an impending economic meltdown, soared 420 points today, I am all ears.

    A: Bernanke-Paulson Put.

  96. 96.

    jake

    March 19, 2008 at 7:11 am

    And the little guy picks up a rock:

    Inner City Press, a nonprofit group that has challenged the nation’s key bank mergers over the past decade in an effort to ensure poorer communities are served fairly, also questioned why only four of the five Fed governors approved the measure.

    The Fed approved the deal between JPMorgan and Bear Stearns under Depression-era laws allowing it to do so under “unusual and exigent circumstances.” This provision, however, requires an affirmative vote of not less than 5 members of the board.

    At present, there are only five members on the board with two vacancies, but only four approved the measure because governor Frederic Mishkin was not present, according to the Federal Reserve.

    But current law mandates that no less than five members can vote on the matter and states that members can be contacted through any electronic means, including by telephone and e-mail.

    Behold. The wonders of fine print.

    Add the class action lawsuits being filed against B.S. a $45 mil adverse ruling from another lawsuit and you start to wonder if $2 a pop was too much.

  97. 97.

    Kirk Spencer

    March 19, 2008 at 9:56 am

    I’m seeing an interesting answer to the question in a few places I’ll pass along here.

    The top dogs of BS are buying votes.

    Remember this deal has to be approved by the shareholders of BS. For some of the top dogs, spending 6 bucks a vote for ‘enough’ votes is profitable — conversion to JM stock (even at that nasty discount) vs totally unprofitable paper due to bankruptcy. Not to mention possible additional obligations and impact due to BS being a major (not sole) counterparty to a LOT of the CDS market. Going bankrupt makes the CDS to which they’re counterparty reduce in value, which could cause a cascading catastrophic loss in OTHER financial institutions… and the beat goes on.

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