Posts from — September 2008

Position: 24.8 N 68.0 W [10 PM CDT 0300 UTC].
Movement: North [010°] near 13 mph.
Maximum sustained winds: 50 mph [85 kph].
Wind Gusts: 60 mph.
Tropical Storm Wind Radius: 105 miles [165 km].
Minimum central pressure: 994 mb ↓.

It is 555 miles [890 km] South-Southwest of Bermuda.

Here’s the link for NOAA’s latest satellite images.

[For the latest information click on the storm symbol, or go to the CATEGORIES drop-down box below the CALENDAR and select “Hurricanes” for all of the posts related to storms on this site.]

Oh, I’m sorry, that should read “Ireland going broke?”… well actually the BBC reports Irish economy goes into recession

The Irish Republic’s economy has fallen into recession after shrinking for a second quarter in succession.

The Central Statistics Office (CSO) said gross domestic product (GDP) had contracted by 0.5% in the three months to the end of June.

The economy had shrunk by 0.3% in the first quarter of the year. Technically, a recession is defined as two or more successive quarters of negative growth.

It is the first time Ireland has experienced a recession since 1983.

[Read more →]

Update: Like I thought: Bailout talks in disarray. House Republicans don’t agree with the plan.

The media is nuts. They are flashing the “news” that Congress has a plan [CNN-Money version]. No, Congress has a proposal to submit to Paulson, there is no “plan” yet.

The Dow leaps up on nothing, which shows that they are gambling, not investing which part of the overall problem, i.e. there has been too much gambling and almost no investing.

I’m shocked to discover that someone is not being straight forward in this crisis. Paul Krugman has A sneaking suspicion that the “Bailout Boys”, Paulson and Bernacki, do not intend to allow the market to decide the price of the assets, as Warren Buffet assumes, but intend to begin a process of “price discovery”.

I have a gut feeling that the “price” will be “discovered” to be as high as they think they can get away with before Congress takes away the “credit card”.

I guess this is why they didn’t announce the plan described by Mr. Buffet, which would have been reasoned and in accord with many of the basic principles of the market. I must assume when it comes to their friends, Karl Marx trumps Adam Smith.

According to the BBC: Bernanke demands bail-out action

The chairman of the US Federal Reserve has urged politicians to “act quickly” to support the proposed $700bn (£378bn) bail-out of the financial markets.

The US economy risked “very serious consequences” if measures were not taken, Ben Bernanke added.

Mr Bernanke said Congress must “address the grave threats to financial stability” which were being faced.

On Marketwatch we learn that Buffett says risk of financial meltdown has declined.
Update: Mea culpa, they have had so many “meltdowns” I should have checked. This was the Spring Meltdown.

Reuters tells us that in the bond market TREASURIES-Yields rise after Buffet’s investment in Goldman.

So while the Chairman of the Fed and the Secretary of the Treasury are demanding $700 billion with no strings attached immediately, Warren Buffet invests $5 billion in preferred stock at Goldman Sachs and Wall Street calms down. The difference is that people trust and believe Warren Buffet.

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From CNN: House Democrats will allow offshore drilling ban to expire. The Republicans would have talked mean to them if they didn’t allow drilling.

Also from CNN, Biden, Obama helped keep ‘Bridge to Nowhere’ alive

DEWEY BEACH, Delaware (CNN) — Although Democratic vice presidential candidate Joe Biden routinely mocks his Republican counterpart, Alaska Gov. Sarah Palin, for her onetime support of the infamous “Bridge to Nowhere,” Biden and his running mate voted to keep the project alive twice.

Both Biden and Democratic presidential candidate Barack Obama voted to kill a Senate amendment that would have diverted federal funding for the bridge to repair a Louisiana span badly damaged by Hurricane Katrina, Senate records show.

And both voted for the final transportation bill that included the $223 million earmark for the Alaska project.

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This should sting. On CNN an interview: Dodd: ‘I have a lot of reservations’ about bailout plan

[“American Morning’s” Kiran] Chetry: You yourself said this is not a natural disaster, and a lot of people have been asking, “Why didn’t Congress see this coming?” In fact, this is a quote from Henry Paulson, the treasury secretary, back in July. This was during the time of the Fannie Mae and Freddie Mac bailout. People thought that was the beginning and the end of this.

He writes: “Remember our economy has got very strong long-term fundamentals, solid fundamentals. Your policymakers are here; regulators were being very vigilant.” How can the argument be made that they were vigilant when we see the bottom fall out of the market?

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Even MSNBC is not amused: First fear, then loathing, toward Wall Street

As Americans digest a dizzying series of events that has left Wall Street shaken to its core, the mood on Main Street is shifting from fear to loathing. They are angry that government regulators did not do enough to prevent this — and protect them — in the first place. They are upset the government is proposing billions of dollars in bailouts for Wall Street, even as many regular Americans are struggling to hang onto their homes and pay their bills.

They also are livid that massive financial firms in which they trusted took wild risks and made incredibly bad decisions, in turn impacting their personal finances. Some wonder why, in the face of such a massive financial crisis, so few of these executives have stepped up to apologize for, or even try to explain, their actions.

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I saw this AP story, Bernanke: Recession more likely without bailout, at the Miami Herald.

So, who is going to tell the Chairman of the Federal Reserve System that we have been in a recession since at least November of 2007? I realize that the official announcement hasn’t been made, but I have also noticed that people are playing with the numbers to make it seem like it hasn’t happened.

The surest test of a recession is the Christmas stocking index. It has nothing to do with feet, it deals with the preparations that retailers make for their largest sales period in the year. You watch when they start stocking for Christmas and how much stock they put out. Then you factor in the timing of the sales.

In 2006 you could barely get through the aisles, but there was no problem at all in 2007. In 2007 some of the earlybird special sale merchandise for the first people into the store on the Friday after Thanksgiving were still available on Sunday. It was a grim season indeed.

Fewer people still have jobs, and those that do are not keeping up with inflation. That is a big factor in the public reaction to this bailout – Main Street is hurting, but they want to help Wall Street.  The real people are not amused.

If you are going to create a solution, you have to define the problem. Paulson and Bernacki want to throw money at Wall Street, but they don’t explain why, or what the money is going to do to solve “the problem”, because no one has defined in clear, unambiguous terms what precisely the problem is.

There has been talk about a “liquidity crisis” and a “credit crunch”, and that this is all part of the “housing bubble”, but how does buying up bonds and derivatives, rather than the mortgages, do anything other than save fools from incautious investments?

When you read an article about large tech companies borrowing billions to finance stock buybacks and to pay higher dividends, you have to ask how can they do it if there is no money in the system [liquidity crisis] and no one is willing to make loans [credit crunch]?

You might think that only some people are having problems because they wasted their money and are a bad credit risk. I don’t think raising their “credit card limit” is going to help these people.

Paul Krugman notes that Daddy doesn’t know best, and expresses his opinion that the Dodd proposal [PDF] is definitely on the right track.

After looking at the proposal my initial response was, Dodd didn’t whip this out over the weekend, someone had it sitting in a file and did a little editing for the discussion copy. You don’t come up with all of the references to the various laws, rules, regulations, and government entities that are contained in the proposal when you start with a blank screen. I feel somewhat better knowing that someone in the government realized there was going to be a train wreck and wrote a law to deal with it.

It doesn’t contain the option of stoning CEOs, or making them take a credit counseling course before applying for assistence on the food stamp forms at the local social services offices, but it’s not the worst approach.

CNN-Money has a sample of readers’ opinions on the bailout: Mad as hell – taxpayers lash out

NEW YORK (CNNMoney.com) — “NO NO NO. Not just no, but HELL NO,” writes Richard, a reader from Anchorage, Alaska.

“This is robbery pure and simple,” Anna from Denver posted on CNNMoney.com’s TalkBack blog this weekend.

“It’s our money! Let these companies die,” added Claudio from Plainville, Conn.

McClatchy asks a pertinent question about Paulson: Can you trust a Wall Street veteran with a Wall Street bailout?

The Miami Herald has some good news on their local situation: Vulture funds may lift real-estate market in South Florida. As long as the owners are will to accept between 40 and 50 cents on the dollar, these guys have the cash to buy up the empty condos.

Sean-Paul at the Agonist says Let Me Be Clear On Something. He won’t vote for anyone to approves giving Treasury the money without significant oversight.

You can watch the arrival of the equinox at Archæoastronomy. It takes place at 10:44AM CDT this morning.

It’s time to man the rakes in northern climes.

The BBC reports that US banks make shock status switch

The last two major investment banks in the US have changed their status to become bank holding companies, allowing them to take deposits from investors.

The changes should enable Goldman Sachs and Morgan Stanley to raise more funds by opening commercial banks.

The move – part of a huge restructuring effort on Wall Street – will also give them access to Federal Reserve support.
…

Analysts speculated that both institutions would be acquired by commercial banks, whose ability to take deposits would give them a stable source of funding.

Instead, the banks filed requests with the Federal Reserve to change their status.

And late on Sunday, the Fed said in a statement it had granted the requests.

Regular people have to wait until Monday if they have a problem after 5PM Friday, but these guys get decisions from the Federal Reserve on Sundays. Now we have to protect the FDIC in addition to all of the other problems.