Has Meltdown II Already Started?

[william the wie]

Housing prices are down, unemployment is up, QE II set sail immediately after the election and the overseas economic news is not good either. So here are my questions:

Will this time be faster and harder? By 2005 widespread mortgage fraud had been uncovered, in 2006 housing prices cracked, in 2007 specialty Bear Sterns hedge funds failed and in the fall of 2008 full scale meltdown hit. This time the people who pulled the trigger the fastest, most and hardest in 2004-8 are the ones with the most money. So the rush to the exits will most likely be bigger and faster this time.

Will congress cut off the Fed and the treasury at the knees this time because of their failure last time? It does seem likely since Obama kept most of the same team in place.

How bad is this next time likely to be?

 

[Baruch Menachem]

What is the new problem? Is China going to use some other currency? Or OPEC?

 

[loosecannon]

We are beginning this cycle closer to the floor. So we don't have as far to fall.

The next 17 "dips" will be less shocking than the first, but they will span decades.

Will congress cut off the Fed and the treasury at the knees this time because of their failure last time?

are you kidding? The congress won't do shit until we burn the Capitol.

 

[william the wie]

What is the new problem? Is China going to use some other currency? Or OPEC?

Maybe but meltdown refers to not enough people lending to maintain markets in financial assets: stocks, bonds, mortgages, rentals, money markets and so on.

 

[uscitizen]

MeltdownII?
this is just a continuation of our fall. The fall is not an even curve and will even have a few upward bumps from time to time in a few areas but the fall will continue.

 

[uscitizen]

What is the new problem? Is China going to use some other currency? Or OPEC?

Maybe but meltdown refers to not enough people lending to maintain markets in financial assets: stocks, bonds, mortgages, rentals, money markets and so on.

LOL yeah that is what we need more borrowing

Another few jugs of the hair of the dog that bit us.

A country of debtaholics.

 

[Baruch Menachem]

MeltdownII?
this is just a continuation of our fall. The fall is not an even curve and will even have a few upward bumps from time to time in a few areas but the fall will continue.

Referred to in the investing trade as "Dead Cat bounces."

 

[uscitizen]

Dead cats do not bounce.

 

[william the wie]

MeltdownII?
this is just a continuation of our fall. The fall is not an even curve and will even have a few upward bumps from time to time in a few areas but the fall will continue.

Referred to in the investing trade as "Dead Cat bounces."

You may know that, I may know that and despite using different terms I'm pretty sure US Citizen knows that but does team Obama know that?

 

[uscitizen]

MeltdownII?
this is just a continuation of our fall. The fall is not an even curve and will even have a few upward bumps from time to time in a few areas but the fall will continue.

Referred to in the investing trade as "Dead Cat bounces."

You may know that, I may know that and despite using different terms I'm pretty sure US Citizen knows that but does team Obama know that?

I expect they do. they as all politicians spin things just as positive for themselves as they can. But I am not sure they have a clue on what to do to actually have long terms improvements in our situation.
The same experts advising Obama are the same ones that did not see this coming or predicted a 6 month adjustment.

imho the old rules of economics in America are no longer fully valid due to permanent loss of jobs, a world economy, and conversion to a consumer spending economy. But not limited to thse items.

 

[william the wie]

We are beginning this cycle closer to the floor. So we don't have as far to fall.

The next 17 "dips" will be less shocking than the first, but they will span decades.

Will congress cut off the Fed and the treasury at the knees this time because of their failure last time?

are you kidding? The congress won't do shit until we burn the Capitol.

Right now we are in the eye of a really big storm with several others lined up behind this one. The debris won't stop flying until all of the undercode structures are gone.

 

[finebead]

I don't see meltdown II. The economy created jobs, just not as many as workers who tried to re-enter the workforce. So, unemployment rate went up. That's not as bad as it may appear. No recovery goes in a straight line upward, they have all had fits and starts. This is not new nor should it be that worrisome IMO.

There is still a problem out there in housing, and hence with the mortgage backed securities the banks hold, and mark to market is suspended. I just won't buy home builders nor banks for a couple of years, until I am sure what is on their books.

 

[william the wie]

I expect they do. they as all politicians spin things just as positive for themselves as they can. But I am not sure they have a clue on what to do to actually have long terms improvements in our situation.
The same experts advising Obama are the same ones that did not see this coming or predicted a 6 month adjustment.

imho the old rules of economics in America are no longer fully valid due to permanent loss of jobs, a world economy, and conversion to a consumer spending economy. But not limited to thse items.

The fact is that we can afford to and usually do provide everyone:

Food as in foodstamps.

Cell phones

Preventative healthcare through public health offices

Emergency healthcare.

What is missing is from the free to damn near everyone list is

Free housing and in the form of repo trailers and abandoned houses that can be provided cheaply.

Free public transportation.

Medical care for chronic conditions.

Minimum utilities.

Those minimums could be added cheaply but that is not what is desired. What is desired is a faithful spouse and some exclusive side action plus maid service and a nanny to watch the kids.

 

[Toro]

If it is, the market has a funny way of showing it. I'm seeing break-outs all over the place.

 

[finebead]

If it is, the market has a funny way of showing it. I'm seeing break-outs all over the place.

You have to be careful with that statement. I always remember, "The chart is not the patient" (hospital lingo) and "The stock market is not the economy".

Like the stock market sitting on all time highs in late 1999 at the peak of the dot com boom, and about to sink into 3 consecutive down years for the DJIA. Or the market at a peak in Nov. 2007, while clearly the legs had been sawed off the table the previous 3 years with the massive spike in subprime lending, and the attendant rating agency fraud (finreg has made it a law that the rating agencies can be sued over their opinion in the future, too bad not for the past).

But, when the market is wrong, it is usually wrong at the top and wrong at the bottom. I don't think we are at a top or a bottom, so I do lend some credence to the market action at this time. I reserve the right to declare the market is wrong sometimes also (it tends to be a minority of the time, but they are the most important times, i.e. when a major shift between bull and bear is about to occur).

 

[B. Kidd]

Housing prices are down, unemployment is up, QE II set sail immediately after the election and the overseas economic news is not good either. So here are my questions:

Will this time be faster and harder? By 2005 widespread mortgage fraud had been uncovered, in 2006 housing prices cracked, in 2007 specialty Bear Sterns hedge funds failed and in the fall of 2008 full scale meltdown hit. This time the people who pulled the trigger the fastest, most and hardest in 2004-8 are the ones with the most money. So the rush to the exits will most likely be bigger and faster this time.

Will congress cut off the Fed and the treasury at the knees this time because of their failure last time? It does seem likely since Obama kept most of the same team in place.

How bad is this next time likely to be?

A 2nd mortgage meltdown (even tho' we haven't cleared out the first one!) is on the horizon for 2011. I believe that I mentioned this many months ago. I just didn't provide evidence to back it up.

A Second Mortgage Meltdown? - The Ticking Time Bomb of Shadow Inventory | SwiftEconomics.com

 

[loosecannon]

Bernanke: US 'close to border' of recession, Federal Reserve may intervene

"We're not very far from the level where the economy is not self-sustaining" in its recovery, Bernanke warned. He described the economy as "close to the border," because annual economic growth of about 2.5 percent is needed just to keep an already-high unemployment rate from getting even worse. (About 125,000 new people enter the labor force each month, on average.)
More Fed action 'certainly possible'

As if to underscore Bernanke's point, the unemployment rate rose in November to 9.8 percent, even though the economy added 39,000 jobs for the month.

Bernanke said "it's certainly possible" that the Fed would expand its planned bond purchases beyond $600 billion during the next half year or so, if economic conditions warrant.

Bernanke: US 'close to border' of recession, Federal Reserve may intervene - CSMonitor.com

 

[william the wie]

I've seen those charts on other boards and last I heard there were 9 years of shadow inventory. With putbacks based on fraudulent loan originations, 90-95% price reductions and the failure of state revenue bases the situation will compound. LC, 2008 may turn out to be the gust front that precedes the big storm.

 

[loosecannon]

I tend to agree, but I still think the inertia change of 2008 can't repeat itself, so the next 17 steps down will be softer.

 

[william the wie]

I tend to agree, but I still think the inertia change of 2008 can't repeat itself, so the next 17 steps down will be softer.

The real inertia changes are ahead of us:

The unraveling of the EU

The state defaults

The collapse of demand for Chinese exports