Friday, September 21, 2007

One Angry Man.

Don't click if you don't want blunt, honest language... (Gratuitous profanity alert, too. You've been warned. This cat ain't happy.)

Thankfully collectibles, especially ones that go *BANG!*, traditionally do well in an inflationary environment...

(H/T to ExistingThing.)

8 comments:

Anonymous said...

Waay past blunt honesty and clean over into gratuitous vulgarity ...can't disagree with his sentiments, just his language.

farmist

TBeck said...

Tne rate cut happened because we are headed into a recession regardless. The Fed's hope was to free up enough liquidity (by reducing the cost of debt)to scrape by with a couple of soft quarters instead of a recession.

Will it work? Probably not. The underlying weakness in the market right now is the billions of dollars of mortgage-backed assets that were bought up like Lindsay Lohan in the back room of a pharmacy. These securities are in pension funds, they are being used to collateralize loans, they are being held by hedge funds and money markets, they are being held by banks.

Here's the problem; nobody knows what these securities are really worth. They are no longer tradable unless one is willing to accept fire-sale prices for them. Bear Stearns just took a major hit this month because they had to write down these assets.

It gets better. There are hundreds of thousands of Americans out there with mortgages they can't hope to afford. Their big plan was to buy the house as an investment (because real estate can never lose money, right?), then "flip" it before the note repriced. Oops. Nobody wants to buy your hiuse right now, genius. All that equity that you pulled out to buy the big screen and pay of the credit cards is now gone.

The worst of the mortgage mess won't be seen until about the middle of next year. 2008 will be a great year to buy a house but a lousy year to sell one.

That's one reason I'm not worried too much about inflation. People won't be buying as much because they are terrified about their financial situation. Even with the value of the dollar dropping, businesses will thin their margins just to generate the cash flow to stay open. Yeah, oil's expenseive, but when the US economy slows down, so will the rest of the world. Under those circumstances demand for crude will drop and so will the proce at the pump.

That's the beauty of economics and feedback loops. You spends your dollar and takes your opinion.

joe said...

"That's one reason I'm not worried too much about inflation. People won't be buying as much because they are terrified about their financial situation. Even with the value of the dollar dropping, businesses will thin their margins just to generate the cash flow to stay open. Yeah, oil's expensive, but when the US economy slows down, so will the rest of the world. Under those circumstances demand for crude will drop and so will the price at the pump."

That thinning will also include jobs too, right? My company has hinted indirectly that my job is excess where I'm at now. Why do companies only care about the bottom line and the stockholders only? I guess I start preparing to eat Ramen noodles and dog food.

Joe R.

Kristopher said...

I need to move to Wyoming.

The state will boom once oil tops $100 per barrel.

Rabbit said...

Wyoming is already booming with the resugence in oil.

My first degree is in economics. Greenspan was cautious to a flaw.

Bernanke is insane.

When he was appointed to this job I cringed and gnashed my teeth. The man doesn't know how to act, only how to react. He's not capable of looking ahead if he had a calendar stapled to his forehead.

I'm gonna pull all my investments out and invest in the Vice Fund with everything. Screw this.

Regards,
Rabbit.

comatus said...

Rabbit, if the frequency of coal trains in western Nebraska was any indication, Wyoming ought to be a hole about two miles deep by now. The oil should be on the surface.

"Why do companies only care about the bottom line and the stockholders only?" 'Companies' don't; corporations do. For a corporation, plus profit on the quarerly is like breathing. You can't plan or invest unless stockholder confidence is with you, because they OWN the company. There are few individual stockholders now. Funds make buy/sell decisions almost automatically, by analyzing profit trends. Your retirement board sells off jobs. The fault, Brutus, lies not in our stars.

Oliver Hart-Parr said...

Woo Hoo! Pissed off Republican. Could 'ya die?
For the record: Collectables that go bang have an intrinsic value that transends economics.
And, isn't "...being butt-fucked up the ass" redundant?
No one less than Barry Goldwater warned us about corporations. Also Eisenhower but more obliquely.
Voted Republican for 20 fucking years? Sorry. I got better after two elections, Reagaon 1 and 2. Now, if I vote I vote for anybody but the GOP.

TBeck said...

"That thinning will also include jobs too, right? My company has hinted indirectly that my job is excess where I'm at now. Why do companies only care about the bottom line and the stockholders only? I guess I start preparing to eat Ramen noodles and dog food."

The Fed is trying to prevent that from happening by easing the cost of credit. The logic goes that if debt is cheaper, than more people and companies will be willing to borrow. This borrowing translates into spending which translates into more economic growth. That's the theory, and hopefully it will work.

If your job is tied to the housing market, though, it might be worth your time to begin searching the classifieds. Nothing the Fed did last week will divert the train wreck that is coming in housing.