Friday, August 22, 2008

How Do I Know You're Lying? Your Lips Are Moving!

As Michael Caine said in A Shock to the System, "You, you, and you panic, everyone else remain calm." An appropriate title these days as the credit shock is continually underestimated by our Fed leaders who, about an hour from now, will spew a load of garbage about how their hands are tied and give no real info about the horrible state of the economy and continuing credit debacle.

Despite a $5 rise in oil yesterday, an event that just last month would've panicked the street, stocks were flat and FNM actually rose. The bulls are grasping at any straw that could be deemed a silver lining. I refuse to believe the insolvency of the world's largest mortgage guaranteers can be viewed as good news along with the destruction of all common shareholder equity.

Unemployment and domestic growth numbers continue to be disgusting. We continually hit low-levels not seen in 20 or 30 years, but the government thinks pumping the market is more important than rampant inflation and diminished wages, killing most Americans.

I've written several times about the portend of CRE destruction as an obvious future loser in the distressed credit scenario. It was the basis for my GGP puts, which hit 100% profits earlier in the day yesterday. "Bankers believe the headwinds may be shifting after a large apartment complex in Harlem warned last week that it might not be able to make good on a $225 million mortgage payment by September." "Broader real estate indexes are already showing signs of trouble. Moody’s/REAL Commercial Property Price Index has dropped nearly 12 percent since its peak last October." Shocking that the free credit may translate into commercial properties that were sold to developers without proper funding as well....

And what about the global economy? John Markman asserts that there's no way U.S. stock can thrive in a world of sinking stocks. "How about Asia, the crown jewel of global growth? It's a wet noodle. The Chinese market is down 31%, South Korea is down 27%, once-hot Malaysia is down 29%, and India is down 43%. The best in the region are down half as much but still a lot, as Japan has lost 16% of its value this year. Taiwan is off 14%, Australia is off 21%, and Singapore is down 19%." European stock markets have taken similar plunges. Are we decoupled? I don't think so. China just became Japan's largest customer, knocking us off the top rung.

So let's see what's next. Gold made merely a $60 gain in 4 days immediately after notes came out that it was heading back to $600. Listen to the analysts if you want. Me? I'll keep listening to myself.

On a side note, my first fantasy football draft takes place Sunday night. I'll be sure to list my winning team next week, or what should be the winning team before my star players get injured in preseason. Never, never draft before preseason is over!


Tiger Coach said...

Another Pep Rally today... that's all. Remember these words "Inflation will be curbed by slow growth."
-Ben Bernanke

Maybe just maybe these characters are cooking up some real ideas at this Fed meeting... or the other side is, they are figuring out a way to keep things floating until the election...

Are there people who are still buying Fannie and Freddie before it "hits the backstop."

Are Koreans really interested in purchasing LEH?

Was Big Foot sited in Georgia?

AX said...

Since when was inflation a concern? Bernanke has made it clear that they've focused on growth, not inflation, so why is the market so gung ho about diminished inflationary prospects. He did say the financials are not getting better.

Nevermind that GM, FNM, and FRE are all bankrupt and will ask for almost $300 billion in loans by the end of next month....

Tiger Coach said...

Pay close attention to the number that is estimated ($300 billion) and the actual number... which will probably be in the trillion range.

Seen any Carlton Sheets advertisements lately:)