A bubble graph of “the BBBubble”

Read carefully and .. meditate (COMPENSATION obviusly refer to top executive incentives). But, please (see previous post, below, in case of TEMPTATION), don’t hurry up to ANY scapegoat conclusion, pleeeeeeease: it’d be highly misleading, just a proto-antropoid RITE for the sake of changing nothing. And we are sincerely FED UP with scapegoat mechanisms (René Girard had explained it almost all, but perhaps this was useless, since we are still Sapiens doomed to repeat horrific rites  on and on- Le Sacré du Printemps, et c’est juste Printemps).

I cut and copy:

http://ftalphaville.ft.com/blog/2009/02/25/52906/tempting-fate/

Tempting fate

Dare we put up a bubble chart? Apparently we do. From Zero Hedge.

Zero Hedge - Writedowns, leverage and compensation

Related links:

The Merrill bubble – Zero Hedge
Salaries from a bygone era – FT Alphaville

This entry was posted by Tracy Alloway on Wednesday, February 25th, 2009 at 13:55 and is filed under Capital markets.

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G 20: the real start is in April – RIMANDATI AD APRILE

Photo: January 30, 2007. REUTERS/Jason Reed

The Times cartoon. © Peter Brooks

0811_st-barack

QUASI BOCCIATI, RIMANDATI AD APRILE.

ITALIAN SUMMARY.

ASPETTANDO B.Ob. LA TELA DI RAGNO DI GORDON BROWN, laburista annacquato.

LI PENSAVAMO BOCCIATI; INVECE SON SOLO RIMANDATI AD APRILE: e’ un risulato magro ma sopra le aspettative.

Il G20 era atteso come  un buco nell’acqua, invece ha sorpeso, pur senza entusiasmare affatto:

– da un lato, ultimo grido liberista del 2° Millennio, seppellito nel marzo-settembre 2008

– dall’altro, un primo vagito del nuovo millennio Chindiano che avanza: focus sulla regolazione forte (?) della Finanza, anche se .. leggete il testo finale integrale: final statement. Le rating agencies? Devono … registrarsi, e’ tutto. Ma erano ben note e nelle dita di una mano!  Niente guillotine per  il loro top management, non una notte in prigione e nemmeno a casa senza liquidazione. Il FT le aveva trovate con le dita nella marmellata: usavano modelli TRUCCATI per valutare il rischio, lo sapevano e coprivano per mesi e mesi, continuando a barare.  Al confronto, il Watergate era una cosa da educande.

– Occhio Obama: col gradualismo alla Gordon Brown non si va da nessuna parte, si lasciano tutti gli attori e le istituzioni-chiave al loro posto. CI VUOLE UNA RIVOLUZIONE (al momento senza nome, così sarà più creativa ed al passo coi problemi).

 

AND THE WINNER IS …

Surprise surprise: Gordon Brown again, the win-win guy of global summits! 

For  a sorting out lame-duck (GWB, US), another one (GB, GB) stays with us forever. Gordon Brown had reached below zero poll evaluations, for his treacherous delaying tactics on Northern Rock: oh, dear! He was so shy and  timid (Blair complex?),  before statalism became fashionable again (the real Millennium cut is in 2008, either March or September). But now he’s the star, at least before B.Ob. enters the stage.

wsj

 

Brown Wins Reform Demands

U.K. Prime Minister Gordon Brown appeared to win many of his key demands to reform the global regulatory system and restart the Doha round of trade talks at the meeting of G-20 

As expected by everybody, lame duck GWB did not get anything from  Sat. 15th G20 meeting. Markets didn’t bet a buck on such a meeting, so perhaps they will not fall down dramatically on Monday. The G20:

+ has already become a focal institution (as Gordon Brown has underlined), and will have some work to do next year, particularly in the next meeting before April 30. First of all, verify whether the March deadline (see G20 document below) has been met for the emergency Global Finance re-regulation. By now the G20:

did not start any coordination of fiscal stimuli (from now on  the focus of policies), nor of  monetary and credit policy guidelines; in such a way, national and (at most) regional policies are already ending up: either  in “beggar your neighbour”; or becoming a ground for knittimg new international alliances: e.g., see the rge discussion on China’s fiscal plan:

the timing of the Chinese package is likely influenced both by domestic demands, and the external outlook. The timing before the G20 heads of state is clearly significant.

 

The hypothesis sounds right to me. China is trying to knit alliances around the US, to decouple.

+ dealt mainly with the financial meltdown, with a gradual approach (not mentioning the roots of today’s problems);

+ further work might follow, namely in the FSF coordinated by Mr Draghi, which should include BRIC and deal with change in  Bretton Wood institutions;

  –  no real finance reform, nonetheless: look at RATING AGENCIES (perhaps the most bastard subcriminals, the FT found them conspiring and treaching). They just need to … register !!!  Fuckoff.

 Pleaded for pursuing an “Open Global Economy”, AS IF it was not a dead walking: sooner or later bailout protectionism will give the floor to trade protectionism and capital controls; we bet the deadline of resurrecting the Doha Round by December  will NOT work;

apparently ignored the risks of an open deflation, signalled by the lack of response of gold and stock markets to the massive national rescue plans.  

∑ – Final G20 mark: – 5 + 3 = -2.  Only such a nerd as G Brown gets good marks! The other pupils most come back in the April session, with new essays 2B evaluated.

Even if its financial and institutional (IMF and WB) plan had to be timely applied, this would not change much of the current severe global recession by insufficient demand, on the verge of degenerating into a low consumption-led depression in the US – on behalf of the irresponsibility and laissez faire of Pres. Bush and his staff, even after the subcrime bubble imploded in August 2007, i.e. 15 months ago: 15 months lost, waiting for Godot. Luckily Godot is about to come from Chicago. This is why Russia asked to recall the G20 soon, and got it.

The real test will be whether their minimalist approach to focus upon an immediate stabilisation of financial markets will get any result soon. Dedline: March 31. This is the core of their long final statement:

9. We commit to implementing policies consistent with the following common principles for reform.

• Strengthening Transparency and Accountability: We will strengthen financial market transparency, including by enhancing required disclosure on complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions. Incentives should be aligned to avoid excessive risk-taking.

• Enhancing Sound Regulation: We pledge to strengthen our regulatory regimes, prudential oversight, and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We will exercise strong oversight over credit rating agencies, consistent with the agreed and strengthened international code of conduct. We will also make regulatory regimes more effective over the economic cycle, while ensuring that regulation is efficient, does not stifle innovation, and encourages expanded trade in financial products and services. We commit to transparent assessments of our national regulatory systems.

 Promoting Integrity in Financial Markets: We commit to protect the integrity of the world’s financial markets by bolstering investor and consumer protection, avoiding conflicts of interest, preventing illegal market manipulation, fraudulent activities and abuse, and protecting against illicit finance risks arising from non-cooperative jurisdictions. We will also promote information sharing, including with respect to jurisdictions that have yet to commit to international standards with respect to bank secrecy and transparency.

 Reinforcing International Cooperation: We call upon our national and regional regulators to formulate their regulations and other measures in a consistent manner. Regulators should enhance their coordination and cooperation across all segments of financial markets, including with respect to cross-border capital flows. Regulators and other relevant authorities as a matter of priority should strengthen cooperation on crisis prevention, management, and resolution.

• Reforming International Financial Institutions: We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation. The Financial Stability Forum (FSF – directed by Mr Draghi, NdR) must expand urgently to a broader membership of emerging economies, and other major standard setting bodies should promptly review their membership. The IMF, in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response. 

Today’s rge is full of interesting clusters on G20 related issues:

  •  G20 Nations Agree More Concerted Efforts, Regulatory Coordination
  •  Will Coordinated Policy Interventions Prevent a Global Recession?
  •  Towards A New Financial Order: Regulatory Issues Tackled At The G-20
  •  Liquidity Trap Possibility: What’s the Solution?
     G20 Nations Debate Coordinated Fiscal Stimulus
     Economists Debate: What Should Be Accomplished at the G20?

2nd & last (?) rally day

FAQ 1 –  IS THE RALLY ALREADY OVER? IN SUCH A CASE, A  “PLAN C” WOULD BE NECESSARY. FOCUSSING UPON MEAN STREET.

w post

live coverage

Posted at 2:09 PM ET, 10/14/2008

Reid Calls for More Stimulus

In a statement released moments ago by Senate Majority Leader Harry Reid (D-Nev.), he echoed calls by House Speaker Nancy Pelosi (D-Calif.) for an economic stimulus plan aimed at Main Street, now that the Wall Street bailout/rescue plan apparently is underway.

Faq 2. In a severe recession, on the verge of a decade (2010s) depression,  where are the fundamentals of profits actualisation? Likely at about 1/2 of current stock values, i.e. 2/3 down from the Autumn 2007 apex.  A different answer in the ft, by LEX (implicitly assuming we are so close to the bottom floor ?):

Time to buy?

Published: Monday 13 Oct 2008 09:55

With stock markets falling day by day, investment gurus suggest that it is time to buy – taking a 30-year view.  Certainly, there are plenty of companies across the developed world in little immediate danger and trading at eyewateringly low prices. But there is no telling how long a market recovery could take. The Dow Jones Industrial Average took 24 years to regain its pre-crash highs following the Great Depression. Japanese equities are still a quarter of what they were almost 20 years ago.


BREAKING NEWS.  -3% Nasdaq, at 2 pm ET, -4.5% at 3 pm ET

NASDAQ GOES DOWN! WALL STREET PUTS BRAKES TO THE EUROPEAN RALLY

LA FRENATA DI WALL STREET RALLENTA LA CORSA DELLE BORSE EUROPEE A FINE GIORNATA

Market Index Charts

 

At  5pm GMT = 1pm ET (see the self-updating graphs) the Nasdaq was losing 1.35%, at 5.30: – 1.75%, at 6.00: -2.45%; on expectations of  a severe recession hitting ICT profits and consumption (on a Pepsi profit warning). DIJA  + 0.34%, then becoming negative at 5.35pm GMT (1.35 ET).

The rally is over at Wall St., and it lasted JUST 1 day.

Tokyo up a Guinness 14%. Europe on average up 3% (DJ Stoxx 600), but it might be the end of it, and the slide down continue –  although not as catastrophically as last week.

bloomberg

Roubini Sees Worst Recession in 40 Years, Rally’s End (Update1)

By Eric Martin and Rhonda Schaffler

 

Oct. 14 (Bloomberg) — Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, causing the rally in the stock market to “sputter.”

“There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.”

The economist said the recession will last 18 to 24 months, driving unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs.

“This will be the first round of recapitalization of the banks,” Roubini said. “The government has to decide to intervene much more directly in the provision of credit and the management of these companies.” (…)

“The stock market is going to stop rallying soon enough when they see the economy is really tanking right now,” Roubini added. (…)

Roubini said total credit losses resulting from the meltdown of the subprime mortgage market will be “closer to $3 trillion,” up from his previous estimate of $1 trillion to $2 trillion. The International Monetary Fund estimated $1.4 trillion estimate on Oct. 7. Financial firms have so far reported $637 billion in losses, according to data compiled by Bloomberg. 

SEE OUR ESTIMATE (from last Summer) in our blog title: $3 tr, IRAQ cost = SUBCRIME cost.

wsj

Disaster Averted, EU’s Recession Looms

European governments can congratulate themselves on preventing the region’s troubled financial sector from collapsing. But the focus will swiftly return to the bleak macroeconomic outlook.

Actually, we expect the Wall Street worries on the recession to spread tomorrow, Wednesday in Asia and Europe.

Reuters 

Worry over profit outlook halts early stock burst

Tue Oct 14, 2008 12:05pm EDT = 16.05 GMT

By Ellis Mnyandu

 

NEW YORK (Reuters) – The Nasdaq fell in choppy trading on Tuesday as investors sold technology shares on fears that fallout from the credit turmoil would hurt profits despite the U.S. government’s plan to invest in banks to shore up the financial system.

The Dow and S&P 500 were moderately higher after a sharp rise at the open. Concerns about the broad profit outlook overshadowed the Treasury Department’s plan to inject $250 billion in major banks to stabilize the financial system in hopes of averting further damage to the economy.

A profit miss by soft drink company PepsiCo , whose shares were down 9 percent, added to worries over how consumer spending will hold up against declines in home values, stocks and tighter credit.

On Nasdaq, shares of chip maker Intel Corp fell more than 5 percent to $16.02 before it reports quarterly results after Tuesday’s closing bell.

The semiconductor index was off nearly 4 percent, a day after Wall Street roared back from its worst week ever with one of its best single days ever on Monday.

“We may be trying to establish the floor with the credit crisis, and that’s why you had the euphoria in the last day and a half,” said Alan Lancz, president of Alan B. Lancz & Associates Inc investment advisory firm in Toledo, Ohio. “Now people are starting to look at how much damage the credit crisis has done to the economy and earnings.”

The Dow Jones industrial average rose 58.86 points, or 0.63 percent, to 9,446.47. The Standard & Poor’s 500 Index climbed 6.59 points, or 0.66 percent, to 1,009.94. The Nasdaq Composite Index slid 24.42 points, or 1.32 percent, to 1,819.83.

Shares of software maker Microsoft Corp declined more than 5 percent to $24.17. Computer maker Dell slide nearly 6 percent to $14.32.

w post

Posted at 12:03 PM ET, 10/14/2008

Crisis Hits Real Economy: Pepsi Flat

 

PepsiCo. which, like Coca-Cola, has long been considered a “safety stock” — in good times or bad, folks drink soda — said this morning that people actually aren’t drinking soda. Result: The company will cut 3,300 jobs in the United States.

 

The company’s stock is being hammered thanks to a trifecta of bad news from the soda giant this morning: Third-quarter profits fell short of Wall Street expectations, the company cut its full-year outlook and it refused to give guidance for 2009.

 

Nearing lunchtime, shares of PepsiCo. are trading down about 10 percent. 

ft – Global markets rally as US launches bank rescue

Asian and European (Milan closes at + 3.6%) Markets

 (BUT – SURPRISINGLY – NOT WALL STREET !!!)  

are still in rally mood today, Tuesday Oct. 14, but Wall Street’s COLD SHOWER decelerated the European rally at end of the day.

The very short lived rally (1 day ad  a half) was an answer to the week-end instant diffusion of Gordon Brown’s pseudo-nationalisations (Plan B, after the useless Pauson’s Plan A) in US and Europe; in each country measures are undertaken, but also find a lot of social and economic opposition and discussion, A dramatic acceleration in the US where the top 9 banks are partially State owned ($250 bn): Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America, Merrill Lynch (also becoming controlled by Mitsubishi), Citigroup, Wells Fargo, Bank of New York Mellon, and State Street. In Italy it was observed: What about the Made in Italy, if its environment, the districts and supply chains of SMEs, are about to disappear, since they receive no credit?  A much similar question (mutatis mutandis) is posed in the US (see below). 

wp

Dow Soars 11 Percent; Biggest Point Gain Ever
The U.S. government is dramatically escalating its response to the financial crisis by planning to invest $250 billion in the country’s banks, forcing nine of the largest to accept a Treasury stake in what amounts to a partial nationalization.

A REJOINDER ON POLICIES. 

From today’s update in Section 2 of our “AAA updates on subcrimes” page:

Wall Street and the global financial system are pro tempore nationalised in US and Europe.

The stock and credit markets historical BLACK WEEK  (6-10 Oct. 2008) has wiped out Paulson’s Plan B. Europe and the US hurried up to adopt Gordon’s Brown PLAN B – and the Labour Premier from a lame duck suddenly became the prophet of Financial Socialism, Hood Robin. As Lex (Brownian Motion in Europe. FT, Oct. 13) puts it

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

What about Mean Street, the middle, lower and under classes?

There is no alternative (against the persisting risks of the severe recession to degenerate into a 2010s depression) than a Robin Hood policy for the poor and the middle class. As the historian Howard Zinn puts it, arguing in advance for an Obama New Deal (Beyond the New Deal, The Nation, April 7 – oL March 20),
We might wonder why no Democratic Party contender for the presidency has invoked the memory of the New Deal and its unprecedented series of laws aimed at helping people in need. The New Deal was tentative, cautious, bold enough to shake the pillars of the system but not to replace them. It created many jobs but left 9 million unemployed. It built public housing but not nearly enough. It helped large commercial farmers but not tenant farmers. Excluded from its programs were the poorest of the poor, especially blacks. As farm laborers, migrants or domestic workers, they didn’t qualify for unemployment insurance, a minimum wage, Social Security or farm subsidies.
Still, in today’s climate of endless war and uncontrolled greed, drawing upon the heritage of the 1930s would be a huge step forward. Perhaps the momentum of such a project could carry the nation past the limits of FDR’s reforms, especially if there were a popular upsurge that demanded it.

wp

Low-Wage Workers
Low-wage workers have been hardest hit by the economic downturn, yet most remain hopeful about the future. 

 

PLAN B IN THE US

slate

Take On Me

By Daniel Politi

Posted Tuesday, Oct. 14, 2008, at 6:42 AM ET (our bold characters)

The U.S. government is officially switching gears. In news that almost all the papers banner across the front page, the Treasury Department will be announcing that the U.S. government plans to invest up to $250 billion in the nation’s banks in a move that will effectively translate into a partial nationalization of the financial institutions that take federal money. In addition, the government would provide insurance on all deposits in non-interest-bearing accounts and insure certain types of bank debt. The New York Times calls it the Treasury Department’s “boldest move yet” to deal with the financial crisis. The Wall Street Journal does the best job of summarizing that the move “intertwines the banking sector with the federal government for years to come and gives taxpayers a direct stake in the future of American finance, including any possible losses.” USA Today points out that Europe’s moves to prop up banks across the pond, “set the pattern for the U.S. plan” because if the Bush administration failed to act “in a similar fashion, investors might have moved money abroad to seek safety.”

The move represents a dramatic shift for Treasury Secretary Henry Paulson, who had previously opposed the idea of taking equity stakes in banks. The Los Angeles Times specifies that while the government still plans to go ahead with its plan to buy toxic securities, “the new strategy is likely to move that into a secondary position.” The new program will be divided into two parts. First, the government will devote $125 billion to buy a minority stake in nine of the nation’s top financial institutions and then make the other $125 billion available to thousands of banks and thrifts across the country. Executives from the nine big banks met with Paulson yesterday and while some weren’t happy with the plan, they all agreed to participate. The Washington Post says Paulson told the executives they needed to agree to it for the good of the American economy, illustrating that while “officially the program was voluntary, the banks had little choice in the matter.”

By pretty much forcing the nine big financial institutions to take government money, officials wanted to make sure there would be no stigma associated with receiving the funds, which would have made the entire plan useless. The WSJ and USAT have the full list of the nine banks that will now be partially owned by taxpayers: Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Merrill Lynch, Citigroup, Wells Fargo, Bank of New York Mellon, and State Street.

The amount of money each bank will get won’t be uniform—the WSJ has the specific numbers—but essentially the Treasury will buy up to $25 billion in preferred stock in each of the financial institutions. The stock each bank issues “will pay special dividends, at a 5 percent interest rate that will be increased to 9 percent after five years,” the NYT details. The government also added a provision that would allow taxpayers to benefit if the stock value of the financial institutions increases.

The NYT notes that while financial institutions that accept government money won’t be required to eliminate dividends or fire their chief executives, they will “be held to strict restrictions on compensation.” But the WSJ isn’t impressed and notes that the restrictions “are relatively weak compared with what congressional Democrats had wanted.” Key Democratic lawmakers emphasized yesterday that they fully expect the government to impose strict limits on compensation, signaling that a failure to do so could put in doubt whether Congress releases more of the $700 billion after Treasury officials burn through the first installment.

The LAT says that some in the banking industry “reacted with alarm” when details of the plan began appearing in news reports and they predicted the government would soon hear from hundreds of angry banks that were left out of the first phase of the program. “This worked in Sweden, where you have about 14 banks,” one “industry insider” said, adding that it’s little surprise that Paulson, a Wall Street insider, would choose to pump up big New York financial institutions first. “It’s like picking your kids,” he said. The WP notes that there is a risk the banks will use the government money “to bolster their balance sheets” instead of increasing lending, but regulators will apparently pressure the financial institutions not to let that happen.

(…) If there’s a clear winner in all this it’s the British government. Of course, that could all change if the rescue plans that are taking shape around the world fail. But as of now, Prime Minister Gordon Brown, went, in a matter of days, from lame duck to global leader as the plan he announced last week to inject billions into British banks was quickly taken up by European leaders and now the United States. “He’s the cat who got the cream,” a British historian tells the WP. “It was a gift from heaven for him to have this crisis in his field of expertise.”

For their part, investors are cheering. News that European leaders were planning to prop up banks, coupled with anticipation for a new U.S. program, sent stock prices soaring yesterday. The Dow Jones industrial average ended more than 900 points higher, the largest point gain in history, for an 11 percent gain, the biggest since 1933. As the WSJ highlights in its front page, history has shown that these quick gains can be short-lived, which is why no one was ready to say that yesterday marked a turning point in the ongoing crisis.

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.