Hell Street plunging again in devil’s bubblesmoke…-)

DID WALL STRETS TURN AGAIN TO A HELL STREET, or never stopped to be hellish?

“UP THE RALLY HILL, THERE’S A SISIPHO’S HELL” the City blues says.

A tale of  W street and the W recession

zerohedge

New post: Equities: Reaching The Danger Zone http://tinyurl.com/y94y8h7 /Monday 12 April, 5 pm GRT

Look at this elementary graph, that you can easily redo yourself on the 1st page of today’s wsj oL, even without being a subscriber – as I must be professionally.

Well, not only the bigger share of the dead bubble appeared in Wall Street, much more than in the RoW (Europe, BRICS and Japan: aggregated and implicit here, in the difference between the two curves – SIMPLICITY and SYNTHESIS matter, for a 1st look).

But, since from the 2009 policy-driven rallys, devil’s smokes reappear again at Hell St.; much before a recovery of Mean St. I don’t think there is any  serious debate about the fact that AT LEAST Hell\Wall St. is already in a new bubble: with all the self-evident, dramatic implications of such a tenet. The analytical-policy complex debate (where perspectives, schools and interpretations of the empirical facts necessarily diverge, before looking for a new convergence focus and a relative ricomposition of the profession) is about how much such a New Bubble is a matter of “CONGIUNTURA o STRUTTURA”, SR or LR in its very nature – i.e. the relevant dynamic forces behind this unsustainable model: of overvaluation of Western assets, at the price of a permanent Eastern overgrowth. My position is that the LR bubble is evident, and actually was never fully dried up; while we are about to enter also an additional SR one, starting from some asset markets. La musica  non cambia.

A lot of work for the world  Obamas, their teams and 1st of all the invisible college of CBs that saved us from another 1929\31 – until now. At a price.

According to the two distinct (but a bit overlapping: GLI ESTREMI SI TOCCANO SEMPRE) Austrian and post-Schumpeterian (evolutionary) schools: AT THE PRICE of  repressing the “Invisible Foot” who makes room for a New Wave of innovations and their bundles. No foot, no room.

As for the congiuntura, there are all the usual caveats about the VWL (VolksWagenLite) shapes of the recession in the different macro-regions of the world, and 20 days ago I listened to such an interesting breakfast time (03/25/2010 09:34) twitting as:

@zerohedge New post: Is Something Big In The Market Coming? http://tinyurl.com/y97jayc“.

The twitting and the post were introducing to an acute FINALE by David Rosenberg (Breakfast_with_Dave_032510.pdf), concluding that markets are signalling turnarounds

And lastly, there is no V-recovery anywhere, except in the Fed-prodded stock market.

Even that bastion might not be firm for longer. In fact, today at early dawn here in Verona, the same little Spring bird awakes me via TweetDeck sounds to tell me:

zerohedge

IMF Prepares For Cataclysm, Expands Backup Facility By Half A Trillion For “Contribution To Global Financial Stability” http://bit.ly/a4vMeh

With linguistic determinism, the philosophical WordPress blog cracking process distills down here such a nice continuation: the-gates-of-hell-open!!!

… what if the demons from Hell decided to enter Wall Street and other business sectors so as to better manipulate and corrupt society? And thus Hell, Inc. was born.

We are at a more ground level here, and we are looking at the devils in the markets details.

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Il crollo della borsa di NY nel 2009

Dal Bollettino RED.O ormai quasi pronto, anticipiamo oggi uno stralcio. Sono i nostri auguri di Buon Anno, senza cattiveria ne’ pessimismo. Occorre conoscere bene la Bestia apocalittica (il Capitale Finanziario ferito a morte, ma ancora sotto la tenda ad ossigeno del SOCIALISMO FINANZIARIO somministrato dalla tojka Bernanke – Geitner – Paulson, che al 20 gennaio perde solo un socio), con cui combatteremo corpo a corpo le nostre battaglie biopolitiche per  tutto il 2009; ed oltre.

Chi avesse letto i nostri blogpost di giugno (e vedo dalle statistiche che i visitatori se li rileggono con gusto), non avrebbe perso una lira su titoli Lehman Bros. Avrebbe persino avuto tutto il tempo di ricontrattare assicurazioni, pensioni integrative INDICIZZATE Lehmans (la fregatura peggiore, perche’ il “cliente”  non lo sa nemmeno: le associazioni dei consumatori hanno predisposto delle lettere standard per chiedere alle assicurazioni-banche una informativa in proposito).

APPROFONDIMENTO\1

IL GRAFICO DI SHILLER: 108 anni di p/e depurati dal ciclo

p\e ratio depurato, S&P 1900-2008Fig. 3. NYSE: p\e ratio depurati dal ciclo, S&P 1900-2008. Variazione dalla media secolare.

Da SHILLER, l’attento studioso delle bolle: riprodotto da Authers,  il 9 novembre nella sua rubrica sul ft, e ripreso il 25 nov. su

https://enzofabioarcangeli.files.wordpress.com/2008/11/eratio.gif

NOTABENE: IL VENTENNIO 1990-2008 DI SOPRAVVALUTAZIONE DELLE AZIONI e quindi dei  p/e,   NON HA PRECEDENTI, PER DURATA ED INTENSITA’.

Nel grafico si notano 2 valli profonde, attorno al 1920 e 1980 (quando arriva Reagan), e questa immensa montagna con vetta nel 2000 (a primavera di quell’anno viene giù il NASDAQ, ma il NYSE  – cui si riferisce il grafico – tiene ancora per qualche mese). La massa di tale montagna e’ tale, da spostare massicciamente in alto il p/e medio secolare che fa da benchmark, livello 0 del grafico.

ANALISI

IN RETROSPETTIVA

Avendo la bolla-1 Greenspan – New Gilded Age  raggiunto un Guinness nel 2000, superiore al 1929, in una situazione deflattiva (Aglietta) il mercato avrebbe dovuto:

i) scendere brusco, ed ora potremmo essere ad un minimo (- 0,5) da cui risalire con politiche globali keynesiane (monetarie e fiscali) reflattive.

ii) Invece la bolla-2 Greenspan dal 2003, ha creato un  falso-piano privo di punti d’appoggio. Il mancato aggiustamento in tempo reale, ha compresso energie  deflazioniste immense (come caricare una molla). Ora il crollo di Borsa e’ già, e sarà per un buon paio d’anni drammatico, per scendere sino a -1 circa.

IN PROSPETTIVA

La nostra ipotesi di lettura e’ che, uscendo – come ben sanno gli operatori – da un ventennio ECCEZIONALE, UNICO (1990-2008) di “sopravvalutazione” dei titoli mondiali quotati su NY, gli effetti concatenati originati dal buco nero subcrime (doppio sboom, delle bolle immobiliare e shadow finance) portano “naturalmente”, per dinamica sistemica (vedi Soros 2008: i sistemi si avvitano in giù), ad un decennio 2009-20 di valori “sottovalutati”:  non rispetto ai profitti attesi e “fondamentali”, ma alla media storica.

Quindi non e’ questo il momento, non e’ la fase di LP:

A)  per pensioni integrative market-based: sono un bidone (somministrato con incoscienza ed insipienza da Padoa Schioppa, Sartor, e Triplice Sindacale avida di rendite);

B) per schemi di azionariato operaio (salvo in imprese di successo): non perche’ siano una proposta “non marxista”, saint-simoniana o prudhoniana (questo sarebbe un punto a loro favore); non e’ il momento. Il wsj dice che in Borsa giocando non short ma sul trend, si guadagna sui 20 anni: si, ma solo in quelli “giusti”, appena passati. Altrimenti occorre attendere 40 anni!

il cannocchiale

No rally: full recession, fears of deflation and the spectre of Marx

happiness: http://www.freewebs.com/socialistcommonwealth/bralds_marx-s%20(2).jpg sadness: Tokyo stock exchange on another Black Friday, Oct. 24 2008 (AP)

ITALIAN SECTION

31 ottobre. BREAKING NEWS: – rottura tra CAI e piloti, l’Alitalia ad un passo dal fallimento. IN TAL CASO NON  SUBENTREREBBE NEMMENO UNA COMPAGNIA EUROPEA, ma si venderebbe a pezzi. Colannino a colloquio dal Premier (ore  7pm) – Draghi: non deve essere l’EURIBOR  il tasso di riferimento per i mutui casa

DOPO IL MASSIMO. Speriamo che me la cavo.

La riuscita manifestazione PD dei 750.000 del 25 ottobre, e successivamente lo sciopero generale della scuola,  alzano – ceteris paribus, benche’ non di molto – le chances che rinasca un’opposizione in Italia, quindi la lotta di classe possa ridurre il peso della crisi sugli oppressi, i  pensionati ed il popolo bue. La c.d. “sinistra di governo” taccia per sempre, dopo che mentre stava per crollare il capitalismo finanziario, ha cercato invano di far carte false e convincere  i lavoratori di mettere le loro liquidazioni e pensioni nei FONDI BIDONE. Anche questi Prodi ministri e sindacalisti hanno la faccia come il culo. Per fortuna c’erano i sindacati di base a fare contro-informazione.

ALAN: LA FACCIA COME IL CULO

Per la prima volta sotto il fuoco di fila del Parlamento, alla Commissione Oversight and Government Reform, Alan Greenspan (resp. No. 1 al mondo del crollo del capitale finanziario) fa finta di fare auto-critica ieri: fu “a flaw” non regolare i derivati. MA IL BANCHIERE CRIMINALE DICE PURE IL CONTRARIO:

Greenspan, responding to questions, said only “onerous” regulation would have prevented the financial crisis. Stifling rules would have suppressed growth and hurt Americans’ standards of living, he said. (source: Bloomberg)

IL BANCHIERE BASTARDO, LA FACCIA COME IL CULO, ha sostenuto ancora una ricetta auto-regolativa delle sue, che hanno governato a colpi di bubbles, e stanno portando il mondo alla fame. Quando una finanziaria emette securities, se ne deve tenere per se una certa quota, così e’ incentivata a dare il giusto prezzo al rischio.

I PIFFERAI DI BREMA

Invece il nostro vituperato Cavaliere, in una delle sue 10.000 smentite aveva azzardato che si potevano chiudere i mercati: ebbene, lo dice pure – a Bloomberg – Roubini che se ne intende. Il Cavaliere, ormai lo sappiamo, vale sempre PRIMA della smentita. Il problema e’ che con lui, il geniale Brunetta  e Hood Robin Tremonti al governo vale la

LEGGE DI MURPHY

“Se qualcosa può andar storto, la catastrofe e’ assicurata”. Mentre l’ ultimo governo Prodi tergiversava, questi ci potrebbero portare dritti dritti …

CROZZA-DOLLARO

A share trader behind a false one dollar bill (much similar to the one alive, you see at Crozza Italia TV show) at the German stock exchange in Frankfurt, October 24, 2008.   REUTERS/Kai Pfaffenbach

CHRONICLES FROM A RED PLANET: MARX

Oct. 27 Reuters   Korean Confederation of Trade Union Vice-President Ju Bong-hee takes part in a protest against the ongoing meeting of the Global Forum on Migration and Development (FGMD) as he is blocked by anti-riot police in Manila, Philippines, October 27, 2008. The number of undocumented migrant workers across the world is expected to rise in the face of the global financial crisis, trade unions and business leaders warned on Monday, urging governments to respect labor rights.   MIGRANT ARE NOT COMMODITIES: REUTERS/Romeo Ranoco Oct. 24 Alphaville http://ftalphaville.ft.com/blog/2008/10/24/17413/black-hole-friday/

Recommended reading: Roubini’s latest take: We’ve reached a situation of sheer panic… There will be massive dumping of assets [and] hundreds of hedge funds are going to go bust. Systemic risk has become bigger and bigger… We’re seeing the beginning of a run on a big chunk of the hedge funds… don’t be surprised if policy makers need to close down markets for a week or two in coming days.

Here is our comment  to Fabius Maximus, http://fabiusmaximus.wordpress.com/, posted on rge http://www.rgemonitor.com/globalmacro-monitor/254129#125448

New recommendations to solve our financial crisis (and I admit that I was wrong) Fabius Maximus | Oct 23, 2008 Summary:  Please vote, and do so carefully!  This could be one of the most important elections in American history, as continued economic crisis might require a massive (and hopefully temporary) expansion of government power — unlike anything we have seen except during wars. On September 25 I sketched out A solution to our financial crisis, in three parts. (1)  Stabilize the financial system – Being attempted, probably now it’s too late. (2a)  Stabilize the economy with monetary stimulus– Rates are coming down and money printed, but probably with relatively little effect. (2b)  Stabilize the economy with fiscal stimulus — Just now being considered; will work but slow to implement and slow to have effect. (3)  Arrange long-term financing for steps #1 and #2 with our foreign creditors – Unacceptable to our leaders at this time. Parts 1 and 2 are being implemented, much as described.  Part 3 was described as necessary at some point in the future.  I said that these probably would not work over the medium to long term, but would mitigate the downturn (slow or even reduce the economic decline, and alleviate the resulting suffering). I was wrong.  The rate of decline — destabilization of the global financial system – has become so great that these measures will prove insufficient.  In my opinion (these are, of course, guesses).  Since I doubt our leaders have a Plan B, here is a suggestion. Extreme mobilization by the government of our economic resources, as we have done during wars.

Hei Fab I always read your blog and I quote it, suggest it from mines. Thanks for the self-critique, actually more convincing than Greenspan’s… I agree on a war-like mobilization for the immediate short term, a sort of OBAMA NEW DEAL or even more than that. The war metaphor is important in the US, where only military Keynesianism is allowed by the “public opinion” and pop culture. And beyond? I can’t see how this severe recession and credit meltdown might not go into sharp deflation and then depression, until wealth redistribution is taken seriously and DRASTICALLY into account. Yours Fabius Minimus Reply to this comment By enzo fabio arcangeli on 2008-10-24 03:25:21    Oct. 21.

THE FRENCH STATE entropy: from champions nationaux to no selection, saving everybody.

Sarkozy applies financial socialism and semi-nationalise 6 banks. Meltdown financial capitalism rediscovers “Partecipazioni Statali”, i.e. what Mussolini  already did in the 1930s. ft – France injects €10.5bn into top six banks

The French government’s injection in the form of subordinated loans will shore up balance sheets and maintain credit provision for consumers and businesses – 11:28 Crédit Agricole would receive €3bn, BNP Paribas €2.55bn, Société Générale €1.7bn, Crédit Mutuel €1.2bn, Caisse d’Epargne €1.1bn and Banque Populaire €0.95bn.

WE REPRODUCE HERE THE ABSTRACT OF OUR STATIC PAGE  “AAA UPDATES …”, that we strongly  recommend to our readers and students, since it develops in real time a collection and comment of economic analyses and policies. This ABSTRACT answers the historical FAQ no.1, after the Wall Street collapse.

SUMMARY

THE DEFINITIVE CRISIS OF FINANCIAL CAPITALISM? MAYBE; BUT NOT  NECESSARILY, and the game is not over yet. Its Greenspan – Reaganite standard version is certainly dead forever –  in the earthquake moved by the shadow finance meltdown. But – doing  their business as usual of collaborationists with Rentier Capital –  social-democrats “doc” à la Gordon Brown (followed willy nilly by such neophites as Bush, Merkel and Sarkò) are desperately looking for a “financial socialist” escape from this cul-de-sac, meltdown and ruins of a Glorious Years past.  Most likely, they won’t succeed: a. first of all since their analysis is wrong (it’s not based  on Keynes, Kalecki and Minsky), b. therefore their cures are just palliatives; c. they just use State muscles, not the brain (see a Lex editorial on this, on Oct. 13: Brownian Motion in Europe). We can take these two Marx-Keynesian axioms for granted. For sure: 1) By Bernd Debusmann

WASHINGTON (Reuters) – Capitalism as we used to know it is on its deathbed. And those who predicted that the old brand, the unfettered, American-promoted system, was a danger to the world, are being vindicated. They include Karl Marx … (our red-bold and underlining).

2) Giorgio Ruffolo, following but also updating Marx: “Il capitalismo ha i secoli contati (its end is a matter of centuries)”. Now Financial Capitalism might be dead. But capitalism as such will not disappear soon, not before an evolutionarily fitter “mode of production and distribution” emerges – within the same social evolution and organisation, carrying the irreversible decline of Late Capitalisms (Ernst Mandel). 3) Carlota Perez (in sintonia with Wallerstein, in a LW perspective on deflation – see also Aglietta and Berrebi): behind the financial eltdown catastrophe, there are institutional and political nodes delayed for decades. An ICT-led long wave almost aborted as a result: https://enzofabioarcangeli.files.wordpress.com/2008/06/subcrimebiosocialscience1.pdf 4) Wallerstein, the marxist historian, concludes his Oct. 15 post on  badmatthew: http://badmatthew.blogspot.com/2008/10/wallerstein-on-return-of-depression.html by saying that – 4A)  capitalism IS DEAD – a dissenting view – as a matter of decades, NOT centuries (versus Ruffolo), – 4B) and joining post-Schumpeterian Carlota’s and neo-marxist Aglietta’s regulation arguments: What happens when we reach such a point is that the system bifurcates (in the language of complexity studies). The immediate consequence is high chaotic turbulence, which our world-system is experiencing at the moment and will continue to experience for perhaps another 20-50 years. (…)  We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it, because it will be the result of an infinity of individual pressures. But sooner or later, a new system will be installed. This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times. As for our immediate short-run ad interim prospects, it is clear what is happening everywhere. We have been moving into a protectionist world (forget about so-called globalization). We have been moving into a much larger direct role of government in production. Even the United States and Great Britain are partially nationalizing the banks and the dying big industries. We are moving into populist government-led redistribution, which can take left-of-center social-democratic forms or far right authoritarian forms.”

ft Man in the News: John Maynard Keynes Keynes’ ideas for saving capitalism from itself look increasingly relevant, and his words are a fair assessment of the dangers we face once again – Oct-17 The cautious, prudent wsj on  Oct.18, Bernanke and the Famous Helicopter:

with even the talk of deflation on the horizon, as unlikely as the prospect may be, get ready for more caricatures of Ben Bernanke sitting in a helicopter and dropping cash from the sky.

BEHIND THE CORNER – the possibility, risk of a  SHORT-TERM ACCELERATION, CONSOLIDATION OF THE LONG-TERM DEFLATIONARY GLOBAL REGIME (analysed by Aglietta and Berrebi in their book), that is already governing the global markets (commodities, finance, money, and final products) from 15 years on.  That is, a sharp fall of prices and (consumer, investment, intermediate) demand delays, in a deadly downward spiral. The Fed is worrying about it; although they believe this risk is still low: A NEW RATE REBATE WILL FOLLOW SOON, and this signals they are worrying a lot, and planning “liquidity trap” policies (at zero real interest rates).

THE SPECTRE OF MARX

(Derrida was right)

Marx reappears after so long on top of Reuters news, with a nice picture (I told you so),  in an Oct. 15 column by  Bernd Debusmann:

Karl Marx and the world financial crisis

Those measures included buying stakes in major banks – in effect partial nationalization – and would make Marx smile if he could rise from his grave. In the Communist Manifesto he and his collaborator Friedrich Engels published in 1848, Marx listed government control of capital as one of the ten essential steps on the road to communism. Step five: “Centralization of credit in the hands of the state …” … the control center of the financial market has already begun shifting from New York to Washington. (…) Amid the gloom and anxiety of the worst financial crisis since the Great Depression, which started in the United States in 1929 and then spread to the rest of the world, there are hopes that Capitalism 2.0 (if it ever comes about) will result in a more equal society. “There is a tremendous opportunity now to narrow the income gap,” says Sam Pizzigati of the Institute for Policy Studies, a Washington think tank.

The ft certifies what markets have announced again and again, with NO rally – after the October 6-10 BLACK WEEK, and the policy answer:

a sudden and massive nationalisation of the entire Atlantic  (US-EU) credit industry.

An interesting debate was occurring in Italy between Alesina and Draghi: Why didn’t you nationalise before? According to Draghi, in August the current scenario was unthinkable.

Shall we suggest the Bank of Italy to read Roudini and de(e)pre(ce)ssion?

ft – Editorial

Saving the banks was just a first step

Published: October 17 2008 20:40 | Last updated: October 17 2008 20:40

The tide, finally, seems to have turned on the banking crisis. More financial institutions will run into trouble, but governments have moved ahead of the crisis and can – at long last – deal with it systematically. If banks now support the real economy by providing credit, more drastic steps – like full-blown nationalisation – ought not be necessary. Despite arguably the worst financial problems in a century, parallels to the Great Depression now seem hyperbolical. That is a serious step forward. We are, however, still heading into a vicious real economy slowdown. Forecasters seem to have been competing in a reverse auction to cut their expectations for growth in the next two years. A prolonged period of stagnation and recession now seems likely for the US, UK and eurozone, likely to be the worst slowdown since the early 1980s. Pain will not be confined to or concentrated in any one sector – patterns of unemployment are impossible to predict. But some industries are particularly vulnerable; makers of hefty durable goods are the first to suffer. Sales of cars, furniture and home appliances are already in free-fall. (…) Governments have, suddenly, risen to the challenges facing them, turning horrifying problems of bank confidence into manageable fiscal woes. They may even need to do the same with problems of growth by expanding public spending.

Better later than never. What is missing in the authoritative London paper, is the implicit class conflict: Hood Robin or Robin Hood? Which fiscal policy? Ask Joe the plumber… The wsj is certifying today (Oct. 18) that the LR deflation (that they ignore) is possibly giving pace to an acute, SR one, the Fed is seriously thinking and even acting about:

Threat of Deflation Looms

Policy makers navigating the U.S. through the global credit crisis may have a new concern on the horizon for 2009: deflation. The risk of deflation remains slim. But the financial shock and a faltering economy can set the stage for a deflationary environment.

Bernanke and the Famous Helicopter

Today’s financial shock and deep economic turmoil are common preconditions for deflation. As reported in Saturday’s Wall Street Journal, however, Federal Reserve officials see a broad-based decline in prices as possible though highly unlikely.

The central bank faced the prospect of deflation five years ago, as core inflation (excluding food and energy) and the federal funds rate sat around 1%. … options to stimulate economic growth even if the federal funds rate were to drop to zero. Among them: using communications to shape public expectations about the course of interest rates; increasing the size of the central bank’s balance sheet; and changing the composition of the balance sheet to target particular areas. (The Fed is already doing some of that targeting with a balance sheet that has expanded enormously in recent weeks.)

Fed speeches and papers on deflation: Deflation: Making Sure “It” Doesn’t Happen Here (Bernanke) Conducting Monetary Policy at Very Low Short-Term Interest Rates (Bernanke and Vincent Reinhart) Monetary Policy Alternatives at the Zero Bound (Bernanke, Reinhart and Brian Sack)

Brownian motion: a cure for subcrime cancer?

While the G7 in Washington was inconclusive, Europe advanced more yesterday by generalising G. Brown’s approach: each country will use its own resources, but the plan is coordinated –  aiming to interbank lending and temporary quasi-nationalisations (taxpayer- based recapitalisation of banks). Today’s rally (now 6% in Europe, at 4 pm GMT) is meaning nothing: we were observing a decreasing length of rally periods after injections of money and policies. The political good news is the return to a Berlin-Paris axis, which traditionally marks political waves of Europe building.

LEX

 G. Brown is a Robin Hood PRO TEMPORE: after the crisis, he’ll give banks back to rentiers, and Nottingham will be exploited as  it was before.

Brownian Motion in Europe

Published: October 13 2008 09:48 | Last updated: October 13 2008 16:24

Perhaps Gordon Brown should travel more often. The lugubrious British premier, out of sorts at home and seriously adrift in the polls, has been styled as a swashbuckling conductor in the Spanish press, and a “magician” in France. Europe has apparently bought into Mr Brown’s conviction that this is a severe, but transient crisis of confidence that can be overcome by piling on more and more government debt.

While the wisdom of that strategy is questionable, it is clear that there is strength in numbers. If governments all muck in together, using taxpayers’ money to recapitalise banks while providing guarantees on new debt issuance, they sacrifice their balance sheets en masse. Some budget deficits will widen more than others. But if they cock a collective snook at fiscal rules and targets, they’ll discourage capital arbitrage within the Union …

RGE

Roubini Hood is optimist for the 1st time in years

I spent the weekend in Washington attending the IMF annual meetings and giving a series of talks in a variety of public and private fora (IADB talk, C-Span interview, Euro 50 Group meeting, IMF panel, etc.). After last week crash in stock markets and financial markets (and it was indeed a crash as during the week equity prices fell as much as the two day crash of 1929) policy makers finally realized the risk of a systemic financial meltdown, they peered into the systemic collapse abyss a few steps in front of them and finally got religion and started announcing radical policy actions (the G7 statement, the EU leaders agreement to bailout European banks, the British plan to rescue – and partially nationalize – its banks, the European countries plans along the same lines, and the Treasury plan to ditch the initial TARP that was aimed only buying toxic assets in favor of plan to recapitalize – i.e. partially nationalize – US banks and broker dealers. While many details of these plans are fuzzy and there will be some national variants the contour of the approach are similar andclose to the recommendations that I made in this forum

Black Monday degenerated into a 6-11 October BLACK WEEK

Today’s Slate cartoon, by Mike Thompson, http://cartoonbox.slate.com/mikethompson/

homeless, but not hopeless

The point on policies: great expectations on 2 world w\e meetings in Washington. 

FORGET THE FINANCIAL SYSTEM’S PERFECT STORM: IT’S JUST DEAD, AND NO OXYGEN WILL MAKE IT RESURRECT.

RADICAL SOCIALIST INCOME REDISTRIBUTION MEASURES ARE NEEDED NOW, IN ORDER TO AVOID A 2010s DEPRESSION.

ONLY A STONG CLASS STRUGGLE CAN SUPPORT THIS ALTERNATIVE TO THE ENSLAVING OF STATES TO RENTIERS.

Moment of Truth Paul Krugman – ANCHE I PROFESSORI TALORA S’INCAZZANO.

Moment of Truth, by Paul Krugman, Commentary, NY Times:

Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson … was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse.

The consequences of Lehman’s fall were apparent within days, yet key policy players have largely wasted the past four weeks. Now they’ve reached a moment of truth: They’d better do something soon — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.  (..)

Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting Saturday and Sunday. If these meetings end without at least an agreement in principle on a global rescue plan … a golden opportunity will have been missed, and the downward spiral could easily get even worse.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort. 

0K. Nonetheless, although Paul is a flagship Keynesian, he keeps just proposing here FINANCIAL socialism (part-time nationalisations, HOOD ROBIN), and not a Keynesian blend  – ROBIN HOOD, namely restoring a balance in income redistribution, against the rentier class, therefore attacking the current Marx-Kalecki-Keynes-Minsky node: “How to avoid a severe recession to become a decade depression”.

Another Paul, Paul Thoma, not a revolutionary socialist indeed, already got it today.  And he also quotes, in his precious blog, The Guardian’s Time to grasp the fiscal nettle, by Barry Eichengreen yesterday: A MILESTONE PAPER, moving  faster than Paul k. along neo-keynesian lines (aggressive, internationally coordinate fiscal policies; we agree 100%, and just add the redistributional dimension with more stress and with an open connection to a class struggle revival, from Milan to Mumbai and Shangai,  on technology appropriation, profits, rents and wages). Giacomo Vaciago, in today’s il Sole 24 ore edito, on the same line: the emergency now is growth, and consumer expenditure.

Don’t despair: Paul is slow in changing his mind but, when he does, he moves the public and intellectuals median opinion to the point. 

It’s a diffusion of innovations geography game: Nouriel,  Paul, then the critical mass. 

 

Saturday’s newspapers: Slate

TODAY’S PAPERS
Worst. Week. Ever.

By Jesse Stanchak
Posted Saturday, Oct. 11, 2008, at 6:03 AM ETThe Dow Jones Industrial Average had its most volatile day ever Friday, oscillating more than one thousand points before ending up 128 points down, capping the worst week in the Dow’s 112-year history. The index lost 18.2 percent of its value between the opening bell Monday and closing bell Friday. Amid the panic, some very somber discussions are being held and all the papers lead with some kind of reaction to the bad news.

The Washington Post leads with finance ministers from the U.S. and six other wealthy nations vowing to take “all necessary steps” to deal with the burgeoning financial crisis. The Los Angeles Times leads (at least online) with Treasury Secretary Henry Paulson coming out of that meeting and saying the U.S. government would buy non-voting stakes in financial institutions, as part of an ongoing attempt to restore market liquidity. The New York Times leads with a double billing of the international cooperation announcement and word ofpossible merger talks between General Motors and Chrysler. The Wall Street Journal devotes the top half of its front page to summing up Friday’s manic market activity; it tops its world-wide newsbox with both presidential candidates issuing new economic proposals in light of the crisis.

Friday’s facts.

il Sole 24 ore. Borsa: l’Europa chiude un’altra seduta da brivido. Milano -7,1%

 Sui mercati prevale una situazione di estrema volatilità. Le Borse europee, appesantite dai cali registrati a Wall Street, chiudono in forte ribasso. Milano perde circa il 7 per cento. Francoforte è la peggiore e cede l’8,05 per cento. Le vendite hanno colpito l’intero listino. Attesa per misure straordinarie dal G-7 a Washington.  …» 

Friday, October 10,  3.30 pm GMT

11:32 a.m. EDT (3.32  pm GMT)  10/10/08 Major Stock Indexes (wsj

  Last   – Change  – % Chg

DJIA (Dow Jones) 8171.39 -407.80 -4.75

Nasdaq 1577.94 -67.18 -4.08

S&P 500 861.01 -48.91 -5.38

DJ Wilshire 5000 8712.03 -475.91 -5.18

Russell 2000 479.83 -19.37 -3.88

DJ World exUS 145.66 -11.31 -7.21

Japan: Nikkei Average* 8276.43 -881.06 -9.62

DJ Stoxx 50* 2090.58 -201.19 -8.78

UK: FTSE 100* 3981.70 -332.10 -7.70

Brazil: Bovespa   34246.43   -2833.87   -7.64%

China: DJ Shanghai* 204.20 -9.95 -4.65%

Bombay Sensex* 10527.85 -800.51 -7.07%

FTSE/JSE All-Share* 20595.23 -657.06 -3.09%

 * at close

CHART: S&P 500 the last 2 years: now (before closure) at 869, 1 year ago twice at 1550 (in July and October) – http://online.wsj.com/mdc/public/npage/2_3050.html?symb=&sid=3377&page=us&symbChange=aaaaa~0&time=2yr&freq=1dy&DrawChart.x=63&DrawChart.y=2&startdate=&enddate=&type=64&compidx=aaaaa~0&comp=Enter+a+symbol&ma=1&maval=100&lf=1&lf2=4&lf3=1024

 

This early morning in Asia

TOKYO

Asian stocks dive as panic erupts over financial crisis (from India Times)

10 Oct 2008, 0950 hrs IST,AGENCIES

Tokyo dived more than 11 percent as investors took fright at news that Yamato Life Insurance will file for bankruptcy protection, becoming the first Japanese insurer to go bust amid the global credit crisis.

The bloodbath quickly spread to other markets. Sydney plunged 6.5 percent, Singapore lost more than seven percent, Seoul was down 7.5 percent and Shanghai opened 3.8 percent lower. Hong Kong followed, opening down 7.7 percent.

“It’s beyond panic,” Oh Hyun-Seok at Samsung Securities told Dow Jones Newswires. “Concerns about the global economy are deepening further and there is no signs of easing in the global credit crunch.” 

Shangai is down 60% frome year start. The Nikkei ends the day almost at -10% – in its biggest one-day drop since the 1987 crash –  with a weekly fall of  -24%. Nikkei limps to 24% weekly drop.

MUMBAI

Fearing recession, markets end sharply lower

10 Oct 2008, 1632 hrs IST,  www.economictimes.com

Bombay Stock Exchange’s Sensex closed at 10,536.69, down 791.67 points or 6.99 per cent. The index touched an intra-day low of 10239.76. 

Retired Bill is poorer and poorer

Buffett pips Bill Gates to top new Forbes list: Report
10 Oct, 2008, 1602 hrs IST, REUTERS

Warren Buffett has overtaken Bill Gates to become the richest American in Forbes list, said a media report. Young Billionaires | Top Global Brands | Richest people of US


The euro-american afternoon.

Now, at 3.00 pm GMT (Italian legal time 5.00): – 4% then – 5% NY, -6% Bovespa SP,  – 8% Paris and London; Frankfurt closing worst, at – 8.7%.

Although Milan (-7.4% Mibtel at close)  suspends all the “vendite allo scoperto”:  UniCredit at -14% (falling towards €2,  after a title suspension), Intesa SP recovering from the morning and “only” – 4.8% but at €2.9, i.e.  under  €3 per share, Mediaset suspended for excess obscillations. People laugh at today’s new Berlusconi appeal (during stock markets opening time !!! he’s just crazy and silly) to buy now undervalued shares, namely ENEL (- 7.5% today)  and ENI (-6%) –listen to the audio file – and (yesterday): don’t sell Mediaset. Telecom Italia down at €0.75. Portfolio, fund managers must sell “good” shares, and therefore contribute to diffuse the fall to energy and manufacturing industries. Berlusconi from Naples: in Europe we will rewrite all rules in a new Bretton Woods, and we might suspend markets (than he denies having said the latter); “non  siamo ad oggi in una recessione”.

He’s even more funny, stupid and unreliable than a prudent, and lately metamorphic President Bush.

BBC at 2:14 pm GMT

The Dow Jones Industrial Average dipped below 8,000 but then recovered slightly to trade down 3% at 8,321 points.

President Bush has sought to reassure traders, saying the US government was acting to resolve the crisis and restore stability to the markets. 

Wall Street has lost more than 20% of its value in the past ten trading days and is heading for one of its biggest weekly falls since the Dow was created 112 years ago. (..)

In Europe share prices falls have been much steeper. In London the FTSE 100 share index was down 6.9%, Paris was down 8.4%, and Frankfurt was down 8.9%.

Finance ministers from the G7 are to meet in Washington later.

As well as the G7 meeting, talks will be held at the International Monetary Fund (IMF) in Washington.

(…) The BBC’s business editor Robert Peston said markets were worried about Friday’s auction of insurance claims on the debts of the collapsed US investment bank, Lehman Brothers. 

Wall Street was sharply lower after a dizzying open session that saw the Dow fall more than 600 points before recovering most of its losses. London’s FTSE 100 fell 9%. European indices also tumbled. Japanese shares touched 20-year lows, leading Asia-Pacific down as fears of a global recession mounted – 14:53

wsj

Global Indexes Plunge

European stocks tumbled, with Germany losing 9.9% and the FTSE falling 9.3% to below 4000 amid heightened anxiety about the global economy and a distressed financial sector. Asian markets posted sharp losses, with the Nikkei closing down 9.6% and Sydney dropping 8.3%.

October 10, 2008 10:46 A.M.ET

Zooming back to flat
Dow industrials below 8,000 for first time in five years before bounce
        

With aggregate losses deep in the trillions, U.S. stocks suffer latest brutal open, picking up from Thursday’s bloodbath — and the waves of selling that ensued around the globe — but the comeback is stirring.

SECTOR IN FOCUS: FINANCE
Morgan sits out sector turnaround
Financials rise, pacing broad-market bounce off day’s low. But Morgan Stanley remains in the grip of a damaging sell-off.

 

PREVIOUS PARTS OF THIS BLOG POST FOLLOW, looking at yesterday and this morning again:

Friday October 10; 9.30 am GMT

Yesterday afternoon, ice shower on markets from “champagne socialist” Strauss Kahn’s (IMF) certification of our analysis: a global recession is on, and will hit hard in 2009 even Brazil,  China, and then it will be a global stop. Wiping out all the nonsense that has been said against the mere economic reality and truth (the credit crunch monetary mechanisms of transmission into a severe real recession).

il cavalier Pinocchioni

But imbeciles are still in power:  yesterday’s Guinness of PINOCCHIO-of-the-day goes to Cav. Berlusconi (waiting for today’s Bush speech), recommending Italian people to hold stocks, since in the long run they will re-evaluate. Not saying that in the short run, on average they will lose another 50%: stock capitalisations are now 1/3 down from  1 year ago’s maxima. In a few months the will be grosso modo another 50% down, to 1/3 of their maxima: only then a floor will be in sight. This is a rough estimation of fundamentals, in the middle of the hardest world recession of the last 80 years.

Friday morning Tokyo opened at  -4.5%, Mumbai closed at – 7% (see above); in Europe, markets were opening from  -6% to – 10%, then they were correcting upwards during the morning, but only slightly, with Frankfurt still at – 7.8% (now, at 9 am GMT) and Milan’s MIB – 6%. UniCredit is losing 12%, Intesa SP 10%, Italy’s Telecom 9% down to €0.75 (our target price: €0.25). 

 

A review of some top oL pages today, in the European morning:

ft

Equities plunged after a dramatic late sell-off in New York. London’s FTSE 100 opened 10% down before recovering somewhat to stand 5% lower. Japanese shares touched 20-year lows, leading Asia-Pacific down as fears deepened that the world economy was heading for recession. Overnight, Wall Street suffered its biggest fall since the 1987 crash – 09:37 (London time)

Guardian

NAKED CAPITALISM

European Markets Open With A Crash

http://www.nakedcapitalism.com/2008/10/european-markets-open-with-crash.html

It was bad enough that the Nikkei traded down over 9% today and most of the rest of Asia fell 6% to 8%. But the opening of European markets is a dramatic vertical trajectory down: DJ Stoxx 50 down 8.3%, FTSE down over 10% in five minutes, now down a comparatively modest 9.23% Dax 30 down 9.8% CAC 40 down 9.8% The yen is at 98 to the dollar, Brent crude is at $79 a gallon, gold is $926 an ounce. …

nyt

Markets in Europe and Asia Plunge

Global stocks plummeted, with selling momentum accelerating after a Japanese insurance company was driven out of business. In Tokyo, the Nikkei fell 9.6 percent.

wp

Fears of Recession Deepen Rout

Fear and foreboding took hold on Wall Street yesterday, as the stock market again plunged and investors became convinced that the nation is on the verge of a deep and prolonged recession. The rout continued in Japan, where stocks plummeted in early…

3 hours ago in The Washington Post

wsj

Global Indexes Plunge

European stocks tumbled, tracking a global stock market rout, amid heightened anxiety about the global economy and a distressed financial sector. Asian markets posted sharp losses, with the Nikkei closing down 9.6% and Sydney dropping 8.3%.

Blue Chips Slide 678.91 Points, or 7.3%

The Dow industrials plunged 678.91 points, or 7.3%, to 8579.19, falling for the seventh straight day, or more than 20% over that stretch. An early rally morphed into a broad-based selloff that picked up speed near the end of trading.…

5 hours ago in http://online.wsj.com

On Wall Street yesterday (Detroit’s capitalisation was sinking, GM in a moment was at -33%), also:

http://ftalphaville.ft.com/blog/2008/10/10/16871/overnight-markets-rout/

The US stock market suffered its largest loss since the crash of 1987 on Thursday (our bold) amid panic over General Motors, Morgan Stanley and several big insurance companies. The market collapse heightened speculation that the US would unveil a bank recapitalisation plan in the coming days. More…

This was – by contrast – the sunny picture yesterday morning in Europe, when markets were still quiet (after and before the storms), before IMF ice shower:

Thursday October 9, 12 am GMT

After 3 days  underwater, starting from Tokyo and Hongkong, today stock exchanges are actually taking a breath and a holiday finally,  – e.g. – UniCredit was even gaining +8% at mid-day, some fresh air.

But, read below in previous posts (and in AAA updates … page, our always longer and longer selection of economic facts) what we were reading just 1 week ago from Roubini. At the wsj live blogging, Oct. 2, at the FAQ “What if Paulson plan fails ?”, the answer was: nationalisation. Lead by the socialist premier Gordon Brown, even Amerika is fast moving into that dramatic direction of fully fledged bourgeois, financial socialism (reverse Robin Hood, people call it  

“HOOD  ROBIN”:

stealing from poor taxpayers to guarantee and save the rich rentier).

A symptom is Technorati percolation temperature now: in the news the no.1 percolating news is this one:

http://technorati.com/

U.S. May Take Ownership Stake in Banks

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash into banks that request it.…

1 day ago in The New York Times
JUST PAULSON’s DICTATORSHIP from now to Obama taking power in January. The voted plan said exactly the opposite: we buy toxic derivatives; the day after they moved into commercial papers, and  now to FINANCIAL SOCIALISM. Because markets discounted already the failure of Paulson’s Plan A.
Finally, this quasi-news is becoming now a critical mass news,  getting  on screen top in the wsj oL:

U.S. Mulls Stakes in Banks

The U.S. Treasury is considering ways to inject capital directly into banks, possibly by taking equity stakes.

U.S. officials are discussing temporarily backing all U.S. bank deposits if economic conditions continue to worsen, a move that would mark another unprecedented step.

U.S. Mulls Direct Capital Infusions

The U.S. Treasury is considering ways to inject capital directly into banks, possibly by taking equity stakes.

Deal Journal: The World’s Biggest Hedge Fund

The NYT is adding on Friday that

    The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos sweeping the world, one day before a crucial meeting of leaders begins in Washington that the White House hopes will result in a more coordinated response.

    The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans….

Of course, Yves Smith   at Naked Capitalism is unhappy, arguing that banks shareholders took their risks and should face them. He concludes Friday morning, at 12.44 am:

Dear God, Rome is burning, and the Treasury Department is hung up on niceties like executive comp and the standing of existing shareholders. If the bank needs capital, current sharedholder WILL be diluted. The fact that this is coming up in discussions about how to keep the financial system from imploding is deeply troubling. 

Among comments to Yves:

    October 10, 2008 2:46 AM 

baychev said…

    The FDIC has coverage for only 0.8% of all deposits, now the gov’t will back debt that probably exceeds GDP. How is this going to soothe any sane investor?

    And what happens to the CDSs written on this debt? Cancelled, default is triggered, or the protection sellers get a free ride from the gov’t?

    October 10, 2008 1:08 AM 
LJR said…
    I think a stake has been driven through the heart of the Republican party’s penchant for deregulation. There’s a bright side to everything that happens.

MORALE. AN AUTO-CRITIQUE: mea culpa …

YESTERDAY WE MADE a good point (nationalisations in the US) but at the same time such A BIIIG MISTAKE, when we predicted that this step would have perhaps occurred in January. It started to get critical mass the day after. It is difficult, BUT NECESSARY, t otake the exact pace of the HYPER-CRITICAL MASS global village ( markets, media, web 2.0 and word of mouth) where phenomena and meta-phenomena happen. That is: the crisis itself, and all the related class struggles,  game powers,  ideologies, narrations and self-fulfilling “news”. No immaterial economy, ON THE CONTRARY: a word of mouth becomes so quickly a Material Tsunami, with megatons of economic power shifting hands in a few hours.

At  the  moment, Paulson has more power than a G8 enlarged to China. FAQ 1: Will he keep it intact until January?

FAQ 2: Is Obama socialist? At the moment, only the far right believes it. 

http://astuteblogger.blogspot.com/2008/10/evidence-is-clear-obama-was-member-of.html,

quoted by Technorati,  argues that 12 years ago, the young lawyer was a member of the “New Party”:

What was the “New Party”? It was a far-left “workers’ party” fighting for:

full employmenta shorter work week

a guaranteed minimum income for all adults and a universal “social wage”

full public financing of elections with universal voter registration

“the democratization of banking and financial systems”, which included public control and regulation of banking

a more progressive tax system

reductions in military spending and an end to unilateral military interventions.

 

 

Black Monday: the day after

ENGLISH ABSTRACT

Understanding Black Monday. IT IS NO “NEGATIVE BUBBLE”, as silly bulls say.

a) It’s a low fundamentals issue, STUPID !!!

From yesterday on, global markets  are anticipating the real size of the  Main Street’s REAL RECESSION. The  shadow financial  – formal finance meltdown – credit crunch – deep recession chain is working from August 2007,  WITH NO COUNTERBALANCE in terms of policies and rules. Just post factum inadequate interventions on the consequences (even them, chaotic in Europe), and nothing upon the factors: neither Obama, nor McCain of course, are dealing prospectively with them (SEE OUR subcrime key document; in sum, long run deflation from a low global effective demand, hyper – concentration of income and wealth, imbalances and over-unemployment generated by: Reaganism, US private debts system and the post- communism “2nd Great Transformation”).

Prof. Roubini confirms today the title of our blog (which was inspired, last January, by our readings of Prof. Roubini himself):

The global economy is now already in a recession (as GDP is now contracting in all advanced economies and sharply slowing down in emerging market economies). We need now to take steps avoid a global depression.

And today’s rge papers aggregation “Are We Headed Towards a Global Recession?” specifies further:

IMF: The global financial crisis may have “extremely serious” consequences – including famines – in developing countries in Africa and Latin America.

◦ IMF: Signs of deceleration are most pronounced for several Emerging Asian economies that are tightly linked to the global manufacturing cycle: Philippines, Thailand, Malaysia, Taiwan PoC, Singapore, Hong Kong SAR, and—to a lesser extent—India.

b) In Europe, an institutional factor adds up. The ususal no-EU keynesian and structural policies issue. The one, that already made EU the only 0 growth world region (Aglietta and Berrebi).

WAKING UP FROM A DREAM: the gloom understanding that European finance is not free from the consequences of the $ 10 tr. global SHADOW FINANCE MELTDOWN. As Breakingnews said yesterday (see quotation in our Black Monday  post),

” It shouldn’t have come to this. A year ago, Europe looked well placed to fend off financial ills. True, the UK had US-style problems with a housing bubble and a big trade deficit, but the eurozone had few bubbles, balanced trade, reasonably prudent governments, a firm central bank and a strong tradition of government guidance and support in banking. 

It turned out, though, that some European banks had dabbled too much in overvalued and overly complex US assets. The authorities have also been slow.”

c) POLICY IMPLICATIONS.

After Reaganism, which blend of Socialism?

We quote from our ” AAA updates on subCrimes” static page, par. 2 on policies.

The Oct. 6 BLACK MONDAY, mainly but not only in  European stock markets (worst from 1987 Black Monday) confirms thet WE WERE RIGHT ON CONDEMNING THE PAULSON – BERNANKE  hurried up plan. Markets don’t care about it, and discount the recession is on and its size is much worst than they expected. Therefore the issue moves to the alternative between:

a) a financial (pseudo-) socialism: once failed again, the finance K party will move to nationalisations and direct State and SWF re-capitalisations … . It would eventually cure the financial meltdown, not the risk of the recession giving rise to a long depression in the 2010s.

b) a Keynesian socialism: redistribute drastically  income and wealth  (through policies, rules and Robin Hood fiscal policies) in order to gradually sort out of the 1990s longrun global deflation (Aglietta and Berrebi, Chesnais).

More in our .pdf –  subcrime key document.

SLATE

TODAY’S PAPERS

Drowned World Tour

By Daniel Politi
Posted Tuesday, Oct. 7, 2008, at 6:29 AM ETIt’s a new week, and the bad news keeps getting worse. “The global financial crisis has taken a perilous turn,” declares the Wall Street Journal. Hopes that the massive bailout package approved by Congress last week would give investors some breathing room were quickly dashed as soon as the markets opened. And pretty much the whole world is feeling the pain. Markets in Asia, Europe, and Latin America closed deep in the red yesterday, a pattern that was repeated in the United States. The Dow Jones industrial average plunged 800 points, or 7.7 percent, before rebounding late in the day to close down nearly 370 points, or 3.6 percent. It marked the first time the Dow fell below the 10,000 mark since 2004. USA Today helpfully puts it in perspective and points out that the Dow has lost nearly 30 percent since Oct. 9, 2007.

The New York Times and Washington Post highlight word that the Federal Reserve is considering a plan to buy large amounts of unsecured short-term debt–so-called commercial paper–in an effort to revive the financial system. This “radical new plan” (NYT) would essentially make the Fed “a major funder of a wide range of U.S. businesses facing imminent cash shortages,” explains thePost. While the growing financial crisis is putting pressure on government officials to act, the Los Angeles Times points out that if there’s a clear message from yesterday’s worldwide sell-off it’s that investors are increasingly concerned“that government intervention won’t be enough to stave off a potentially severe global recession.”

CRONACA DI OGGI

TENGONO LE BORSE EUROPEE, ma non recuperano il crollo storico di ieri, mentre a NY il Dow Jones scende di oltre  il 5%, S&P del 5.7%, a conferma della bocciatura del, e sfiducia nell’ affrettato ed elettorale Piano Paulson. I titoli finanziari di NY al loro minimo dal 1997 (solo oggi -25% Morgan Stanley e BoA). In caduta libera le grandi banche inglesi (-50% in 2 giorni  HBOS e RBS), forzando un Piano Straordinario di Gordon Brown tra i $60 e 90 bn. Paul Krugman commenta:

Britain leads the way?

 

According to the FT,Gordon Brown, the UK prime minister, on Tuesday night ordered a massive taxpayer-backed cash injection to rebuild the balance sheets of Britain’s high street banks, in effect part-nationalising the sector at a cost of tens of billions of pounds.

DA LEGGERE OGGI:

Marco Onado su Il Sole 24 ore.

– la autocritica del CEO UniCredit, Aless. Profumo, in una lunga intervista a La Repubblica: abbiamo fatto il passo più lungo della gamba e sottovalutato il financial meltdown. Il fatto: gli azionisti (le fondazioni bancarie) che ricapitalizzano la prima banca italiana, al momento si guardano bene (in piena crisi e tentativo di rilancio, risanamento) dal dimissionare Profumo (responsabile di una strategia di crescita del tutto azzardata e FUORI TEMPO rispetto al ciclo mondiale, come lui stesso e’ costretto ad ammettere POST FACTUM), ma lo mettono SOTTO TUTELA. Escludendo le liquidazioni, nel 2007 e’ il manager più pagato d’Italia.

– DA IERI, ripreso oggi in Italia su La Stampa, l’incredibile udienza parlamentare di Mr Fuld PADRE-PADRONE di Lehman Bros (che i nostri lettori conoscono MOLTO BENE).

– IERI SERA ottimo dibattito alla morente LA 7 (che la Telecom vuol chiudere), all’Infedele, con parterre de rois che includeva dei Grandi come Marcello DeCecco ed un lucido, mordace Tony Negri. Peccato che, dopo averla tenuta a bagnomaria con Tronchetti Provera, ora la chiudano di brutto. L’ultima voce libera, troppo ose’  per la thanato-politica cavalier-leghista.

ORA LEGALE 13: il punto.

MERCATI VOLATILI. Abortisce un primo tentativo di rimbalzo delle borse europee in mattinata, che dura appena un’ora. A mezzogiorno nuova spinta verso il positivo, MENO CHE  A  MILANO. Qui Piazz’affari appesantita specie da una  UniCredit senza pace. Le ammissioni a denti stretti di Profumo (intervista cit.) non rassicurano molto: costui ha sbagliato proprio tutto,  con una iper-crescita non proporzionale alla capitalizzazione, in tempi di deflazione mondiale strutturale e di evidente (ad ogni osservatore onesto) preparazione della catastrofe della shadow finance, con tutte le conseguenze che oggi si dipanano.

Alle 13: Milano sullo 0%, resto Europa + 1%. UniCredito -4.4%, Telecom – 5,5% e  sotto gli E 0,9, Impregilo – 7%, e sospesa per ribasso Tiscali (-15%).

Nel pomeriggio escono i 3 Nobel della Fisica: gli svedesi hanno fregato il Gabibbo, e dato il Nobel a 2 giapponesi che avevano sviluppato la sua scoperta. Che figura di merda ci fanno a stoccolma!

CHIUSURA BORSE

Come avevamo previsto, oggi nessun nuovo tonfo ne’ recupero dell’abbassamento fundamentals-driven di ieri, LUNEDI NERO. A Milano (-0 .6%) problemi specifici:

– LA POPOLARE continua a tonfare (qualcuno deve sapere perche’),

– UniCredit insensibile alle dotte auto-critiche EX POST, perde un altro 4% perche’, mentre ieri S&P aveva mantenuto il rating stabile, questo pomeriggio Moody l’ha abbassato.

– Pianto greco del CFO Telecom: a queste quotazioni frazionali sotto €0.9, improbabile si facciano vivi gli  investitori potenziali, come SWF libici, Q8 e russi.

peso el tacòn del buso

BREAKING NEWS, ore 4:05pm GMT

A 2nd, European BLACK MONDAY, 6 ottobre 2008.

Today European stocks are losing as never happened since 1987.

foto (Mara Bastone, AFP \ Getty Images): l’altro Black Monday, quello del 1987

I mercati finanziari, stanno oggi bocciando pesantemente le autorità monetarie US ed europee:

US

– la radicale insufficienza, il ritardo e la logica assente del grande bail-out di Paulson (le cui vere dimensioni non sono di $0,85 trilioni, ma assai di più, ma non bastano in un POZZO SENZA FONDO ed un EFFETTO DOMINO innesacoto dala loro GIORNATA DI DISTRAZIONE IL 15 SETTEMBRE SCORSO: Lehan Bros).

– IL “FINANCIAL SOCIALISM” classista, inventato a marzo (Bear Stearn bailout) dai LIBERISTI PENTITI (ma sempre banditi di classe, dalla parte dei RENTIERS) del Tesoro, d’intesa con la Fed di Bernanke (e Geitner, il giovane ambizioso Direttore della Fed nell’occhio del ciclone: NY).

EU

– la fellonia dei 4 paesi non-leader europei riunitisi sabato a Parigi per non decidere nulla: per decidere di non decidere e fare nulla a livello sovra-nazionale, ma solo IN ORDINE SPARSO. Il non-piano Merkel. Milano sta crollando nel pomeriggio (prima della chiusura) più del 7,4% dell’11 settembre 2001, vengono giù le borse prima asiatiche (che anticipano una dura crisi creditizia europea), e poi le europee del 7-8%, Milano peggio di tutte seguita da Londra e tutte le altre.   Più tardi Parigi cade del 9%, peggio dell’8% di Milano. Anche NY attorno al – 5% ed il Dw SOTTO LA SOGLIA PSICOLOGICA di 10.000.  Le banche scendono a precipizio, ma non specificamente UniCredit (il titolo, sceso al -15%, dopo sospensioni si e’ risollevato al – 3% diventando la migliore azione della giornata: le decisioni del Consiglio di riconsolidare il capitale  l’hanno fatto tenere).

Il Banco Popolare (titolo bancario oggi più debole) perde il 16%, Intesa Sp – 12% e Telecom scende sotto  1 euro per azione.

La decisione tedesca di assicurare tutti i depositi bancari (seguendo l’Islanda) e’ stata correttamente  letta come: “allora la situazione e’ assai peggio di come ce  la raccontavano”, ed ha creato l’attesa che gli altri paesi la introducano. Sospensioni  delle contrattazioni in Brasile e Russia.

Notizie, cronache del pomeriggio da: bbc, breakingnews, ft e wsj.

bbc

Page last updated at 16:01 GMT, Monday, 6 October 2008 17:01 UK

Financial crisis pummels stocks

World stock markets have plunged after government bank bail-outs in the US and Europe failed to stem fears of slower global economic growth.

London’s key UK share index lost 7.85% and France’s Cac-40 lost 9.04%. On Wall Street, the Dow Jones fell below 10,000 points for the first time since 2003. (…)

Trading on key stock markets in Brazil and Russia was temporarily suspended after share prices plummeted by 10% and 15% respectively. Russia’s RTS index ended 19.1% down.

breakingviews, 11:53

Decisiveness deficit

European banks: It was another tough weekend for European politicians and bankers. They did what they were supposed to, but it looks like another tough week lies ahead.

The authorities are certainly trying. On Sunday morning, three European banks faced serious challenges. The rescues of Hypo Real Estate in Germany and the Belgian part of Fortis had proven inadequate, while the Italian Unicredit looked short of capital.

By October 6, these problems had been resolved – by a bigger rescue, a takeover and a capital raising respectively. Not bad for a region with a reputation for muddled indecision. There were also new deposit guarantees in Germany, Austria and Denmark, warm words from the leaders of the four largest economies and broad hints of a recapitalisation of UK banks.

But investors weren’t comforted. The region’s stock markets dropped by 5-6% early on October 6 …

It shouldn’t have come to this. A year ago, Europe looked well placed to fend off financial ills. True, the UK had US-style problems with a housing bubble and a big trade deficit, but the eurozone had few bubbles, balanced trade, reasonably prudent governments, a firm central bank and a strong tradition of government guidance and support in banking.

It turned out, though, that some European banks had dabbled too much in overvalued and overly complex US assets. The authorities have also been slow. Governments solutions to institutional problems have been fragmentary and central bank liquidity provision reactive.

With Asia slowing and the US struggling, Europe cannot depend on the rest of the world to rebuild confidence. It needs to act boldly itself. Perhaps the UK, the most troubled of the big European economies, will take the lead. A comprehensive reorganisation – with taxpayers getting preferred shares and banks being led to an orderly deleveraging – could be just what the markets need.

Ft

http://www.ft.com/cms/s/0/8eafcd26-936f-11dd-9a63-0000779fd18c.html

Government action fails to halt global sell-off

By Michael Hunter and Neil Dennis in London and Lindsay Whipp in Tokyo

Published: October 6 2008 08:35 | Last updated: October 6 2008 17:04

Stocks suffered sharp falls on Monday, as worries about the extent of the crisis in the financial sector deepened after finance ministers failed to reach a consensus on how to react.

WSJ on line nel pomeriggio:

October 6, 2008, 9:13 am

Just Another Manic Monday

Posted by David Gaffen

U.S. markets are in for it this morning. The passage of the bailout bill Friday has not alleviated concerns about credit markets, particularly those in Europe, where a series of capital injections and bank failures has undermined confidence in those markets, which do not benefit from a central federalized system as in the U.S.

* EUROPE MARKETS

* OCTOBER 6, 2008, 11:03 A.M. ET

Bank Turmoil Sinks European Shares

European stocks plunged Monday as a wave of emergency government measures failed to stem concerns about the region’s financial system and economy. (…)

European policy-makers spent their weekend shoring up the financial system. The German government moved Sunday night to arrange a bailout for property lender Hypo Real Estate Holding AG. German officials also issued a guarantee for all consumer bank deposits. The Belgian and Luxembourg governments arranged for French bank BNP Paribas SA to take over the Belgian and Luxembourg operations of ailing financial firm Fortis NV after a previous aid plan failed to prevent customers from leaving. Iceland’s government is also scrambling to rescue its banking industry, while Denmark late Sunday took measures to protect its financial stability. The wave of measures largely overshadowed the passage of the U.S. government’s $700 billion market bailout last Friday.

“People are waiting,” said Benoit Hubaud, head of research at French bank Societe Generale in Paris. “They’re trying to understand the consequences of what has been announced.” (…)

In the credit markets, the cost of insuring against default on €10 million of European company debt for five years jumped to about €134,500 annually, from €125,000 Friday, according to the Markit iTraxx index. (…)

Worse, the markets that banks rely on for funding remained under severe pressure, despite efforts by the world’s central banks in recent weeks to pump more cash into the financial system.

The London interbank offered rate, which is supposed to reflect the short-term rates at which banks lend to one another, rose for overnight dollar loans to 2.37% from 2% Friday. The U.S. Federal Reserve’s target for the overnight rate is 2%. Three-month dollar Libor improved slightly, falling to 4.29% from 4.33%. However, a key gauge of concerns about banks — the difference between three-month Libor and market expectations for central-bank target rates — rose to 2.89 percentage points from 2.84 percentage points. Euro-based Libor rates also rose, with the three-month rate hitting 5.34% from 5.33%.

“The situation is not improving at all,” said Societe Generale’s Mr. Hubaud, who added that he expects central bankers to cut interest rates soon to pump blood into the global economy.

* TODAY’S MARKETS

* OCTOBER 6, 2008, 11:11 A.M. ET

Dow Dips Under 10000 As Bank Woes Persist

The U.S. market’s drop comes on the heels of a plunge in European markets during the overnight hours in New York. Investors around the world are increasingly worried that a deep global economic slowdown is taking hold despite measures like last week’s bailout of Wall Street and moves by the Federal Reserve prior to Monday’s opening bell to further encourage bank lending.


“It’s hard to be bullish based on monetary policy or bailouts alone,” said Chris Johnson, president of Johnson Research Group, in Cincinnati. “It doesn’t address the fundamentals of the stock market, which have some very deep problems right now.”

The UniCredit exception

 

1-year UniCredit  performance at Milano stock exchange, Oct. 3  mid-day, current price: 2.87 EUR0 (median price target suggested by analysts: 5.10 EUR0)

MONDAY, OCT. 6 UPDATE, 12.00 GMT

After yesterday’s extraordinary Council meeting and decisions, the title is highly volatile this morning, while all Euro arkets are down, and Milan more than 5% at mid-day; UniCredit is highly volatile: down to -15%, then up to -3% (becoming the best share in Milan, falling -8%). As with their decisions for discouraging speculation, they come late, and exactly at the time markets are discounting that there is ONLY A WALL STREET BAILOUT, but nothing similar in Europe (after the miserable and inconclusive meeting  in Paris last Saturday). Sincerely, UniCredit CEO Mr Profumo has admitted mistakes this morning, in a “mea culpa“.

Emergency Meeting

After its emergency meeting, UniCredit said it was cutting its 2008 earnings per share target to 39 European cents, before the €3 billion capital increase, from the previous 52 cents. The bank said the total amount of its capital strengthening measures was €6.6 billion. Also included is the placement of a €3 billion core Tier 1 convertible bond that has mostly already been sold to a group of institutional investors and some core shareholders of the bank.

The overall aim is to strengthen the bank’s capital ratios to 6.7% at the end of 2008 from previous 6.2% under so-called Basel II international capital requirements.

“Finally, management addressed the key problem which is capital,” said Marcello Zanardo, a banking analyst with Keefe, Bruyette & Woods Ltd. “This should have been addressed earlier, and it comes at the expense of management credibility.”

Source: wsj, Oct.6 – http://online.wsj.com/article/SB122322574130505585.html

See also ft: UniCredit seeks to raise €6.6bn – 09:10, today Monday, Oct. 6

 

UniCredit: not any specific deep crisis, but  MAINLY (NOT ONLY) a general one

While the credit crunch storm is hitting hard even the more robust European banking system, here is how the current share crisis of Unicredit is seen from Wall Street and London.

In brief, the fact that even such a robust, large bank, unexposed to subcrime toxic products, as UniCredit has been under speculative attack this week, is: 

a) a symptom of the wide diffusion of the subcrime virus: now the credit crunch is at full work (a financial accelerator with a negative sign), therefore the entire banking system is  hit, and consequently its clients as well  (Main Street);

b) as the WSJ notes below (please note that at mid September that Journal, as well as most analysts and economists, discovered we were in one of the worst recessions in history, although they didn’t understand much of it yet), the recession started in 08Q2 in Germany  (a core UniCredit business area) and spreading from there into East Europe (the major area of UniCredit expansion):

c) finally, UniCredit had some minor financial unbalances due to its high growth, aso illustrated by the wsj: no reason for a crisis or panic (wrongly and stupidly, some people in Italy thought they  better retire their deposits: my deposits are there and I have no doubt) – except that the credit-finance crisis is general, and  every minor imperfection looks like bigger.

d) THE UniCredit PARADOX (see Lex), in a moment of catastrophe’  of capitalism and globalisation, is that the bank is a target just because it’s the leader in the late (e.g., compared to Spain) internationalisation of the Italian credit industry.

e) Our suggestion is: BUY. But we are not the only ones suspecting that someone is buying already, and that an undervalued UniCredit creates appetites among competitors. Analysts suggest: 1st buy, 2nd hold. 

LEX, ft:

Unicredit

Published: September 30 2008 09:33 | Last updated: September 30 2008 23:01

“Welcome to the first truly European bank,” UniCredit’s website proudly proclaims. But the only Italian bank to break the national mould and spread its wings well beyond its Milan headquarters, getting half of its revenues outside Italy, is now paying the price. In today’s climate, being a global bank is to be on a hiding to nothing. UniCredit’s share price has collapsed to 10-year lows and trading this week has been suspended several times for excessive losses. Hedge funds, prevented from short selling in the UK and other markets, may well be having a field day, although questions about UniCredit run deeper.

One of these is UniCredit’s exposure to retail banking in Germany, where it controls HVB and has been roped in to help bail out Hypo Real Estate. UniCredit can also expect diminishing returns from its investments in eastern Europe as economies there slow (even if the rest of Europe slows more). Further writedowns are also expected on its investment banking exposure, the largest in Italy. After years of extravagant praise for his bold vision, chief executive Alessandro Profumo is now on the defensive. He uncharacteristically sent a memo to employees to reassure them the bank has no liquidity problems and has no need to raise capital. But perception, not liquidity, is the issue – although the fact that default swaps on UniCredit debt have widened no more than European peers such as Spain’s BBVA shows investor perceptions also vary across markets.

WSJ:

The UniCredit Exception

Credit default swaps of Italy’s biggest bank by assets are among the tightest in Europe, but its stock price has underperformed the DJ STOXX Banks Index by 25% this year.

Unlike many of its European rivals, UniCredit is well funded, with no need to refinance its debt until 2010. That’s reassuring for the bank’s creditors.

One factor putting a strain on the share price is that UniCredit was one of the world’s last few big banks whose shares investors could sell short — until Italy imposed short-selling restrictions of its own late Tuesday.

And even though it has little exposure to subprime-tainted U.S. assets, it is short of capital. To reach a 6.2% Tier 1 capital ratio target by year-end, the bank will have to raise cash, possibly by cutting its dividend or selling stock.

Another problem is that a $75 billion acquisition spree between 2005 and 2007, with buys in Italy, Germany, Ukraine, Kazakhstan and Austria, has resulted in a tenfold jump in the value of goodwill to €21 billion ($30.02 billion). This is straining UniCredit’s balance sheet because banking rules exclude goodwill when it comes to calculating capital adequacy, leaving it with relatively little tangible equity to support its assets.

These new assets are also unlikely to generate the returns UniCredit was expecting, as the euro zone may tip into recession later this year, with the slowdown sure to spill over to Eastern Europe, where the bank is heavily invested.

UniCredit has promised modest asset sales to raise a slice of extra capital. A more convincing move would be to slash its dividend.

SOURCE: http://online.wsj.com/article/SB122287368526894349.html?mod=djemheard

Published in: on October 1, 2008 at 7:11 pm  Leave a Comment  
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Shadow finance is actually MELTING DOWN, as Roubini predicted. “Financial socialism” doesn’t stop the slump

SHADOW FINANCE IS MELTING DOWN, TOGETHER WITH PAULSON-BERNANKE-GEITNER FINANCIAL SOCIALISM

We receive today this regular e-mail by Prof. Nouriel Roubini’s blog system (rge-monitor):

By requesting a status change from independent broker dealer to bank holding company, Morgan Stanley and Goldman Sachs have officially spelled the end of Wall Street as we know it.  Within six months, all five investment banks – Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs – have disappeared or are looking to merge with a commercial bank with a stable deposit base and permanent access to the Federal Reserve’s lender of last resort facilities.  The unraveling of the $10 trillion shadow banking system that started with the non-bank mortgage lenders, SIVs and conduits – now with the seizing of major independent broker dealers and money market funds – is in full swing and gathering steam.

THANKS, SUBCRIME CRIMINALS! Your extra – exagerations, extorsions, exxoneries etc. had such  a beautiful BY-product: FUCKING SHADOW FINANCE IS DEAD. FOREVER? We hope, and we’ll work hard for that.

OBAMA NEW DEAL: NOW !

The perfect storm -1

This week has seen the opening (much more to come in the next months) of the share market crash that was predicted with precision in this Autumn, and we had easily anticipated and predicted in our blog posts and the page “https://enzofabioarcangeli.wordpress.com/aaa-updates-on-subcrimes/”; the novelty is that it has preciptated in just a handful of days, with the involvement of all the US financial system, the no.1 world insurer AIG, etc.

A detailed chronicle of Bernanke-Paulson decision making this week in:

http://s.wsj.net/article/SB122186563104158747.html

Shock Forced Paulson’s Hand

This high concentration in space-time of the unavoidable redde rationem, has justified a 180°  change in the US economic policy that has no antecedent in history. Of course it is highly contradictory and just intervening on the effects of the credit crunch and recession: the entire bundle of US and Fed policies have lead to the financial-housing joint boom and bust, therefore to the deep nature of this financial meltdown.

This dramatic and fast fall of world financial markets has provoked, on a larger scale than in March, a new wave of Financial Socialism, and the paradox, the irony of History, is that the “lame duck” and hyper-free marketeer Bush was obliged to play such a role of Wall Street losses socialisation – with an evident feedback in favour of Obama’s chances to succeed at the White House in the very close Nov. 4 elections. Mc Cain is playing the role of dissent: he’s just offending the intelligence of the electorate, and increasing the drive in favour of Obama, with his little theatre à la Chicago.

In brief, we will analyse things in detail in the coming days, and this time all the media are focussing the crisis, telling the truth that was kept hidden until one week ago:

– yesterday the Bush adm. has saved Wall Street again, the n-th time in just one week, with the announcement of a huge project, more or less a federal fund targeted to buy the corrupted financial products that are only on sale, with no buyer;

– the n-1 intervention was a semi-statalisation of AIG, saved from bankruptcy with a federal loan of $ 85 bn; actuallu, an AIG default would have hit the world insurance industry, and created a dramatic social crisis in the US, where private pensions, health and social insurance are privately provided by this industry;

– in this sharp change of policy, the only bouc emissaire left was Lehman Brothers, with no serious reason, just chance: had it failed 1 week before or after, not Barclays but the US taxpayer would have rescued it.

Besides the US, all the big Central Banks have been injecting some hundred billions $ of liquidity every day.

Published in: on September 19, 2008 at 3:51 pm  Leave a Comment  
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