GreenspanTremonti generated Great Depression

Finally a highly likely answer to the initial faq in this de(e)p-re(ce)ssion blog, since when it started 3 and 1\2 years ago: hard recession or long depression? The latter.

 

3 years after Lehman Bros. today

How it happened that we were thrown into the 2010s Great OECD Depression?

#GreatOECDepression

Chance and serendipity in history. Here is, in an Italian version, a brief about how the 3rd GD in the History of Capitalsms (the plural is MANDATORY!) was produced by a clever, furbo Alan Greenspan and such a beast as Giulio “Voltremont” 3monti.

From my yesterday’s  twitter hashtag, we’ll label the 2010s  as #GreatOECDepression, in order to focus upon its main novelty, the peculiar global duality.

DAL SUBPRIME AL CROLLO EST-EUROPEO ED AL DEBITO SOVRANO ATLANTICO. LE VIE DEL SIGNORE ALLA OECD GREAT DEPRESSION.

Il SUBCOMANDANTE subcrime mette sotto stress estremo, e talora  stravolge e rimette  in discussione DALLE LORO FONDAMENTA,  i Capitalismi post-Fordisti tarocchi di matrice Reagan – Greenspaniana (di striscio Clintoniana, se lui contava q.cosa).

Nonostante i sapienti trucchi di quest’ultimo, e la decisiva complementarietà col sotto-consumo BRICS,  sistemi insostenibili basicamente per erosione della figura e della esistenza bio-politica stessa de  ceti medi circa la maggioranza della popolazione, il borghese-massa (Mario TRONTI), e la sua capacità autonoma di C e S senza indebitarsi in modo perverso e\o progressivo.

Ciò avviene nella civilizzazione Nord Atlantica, diciamo per contesto sottoposta anche (ma assai più blandamente) ad una del tutto normale,  ENTROPICA e fisiologica erosione sociale secolare, dopo le onde di sviluppo lungo un 1\2 millennio, che trassero spunto anche dai rimescolamenti dell’ecologico Columbus Exchange (dal pomodoro alla Pizza Margherita)

Ma venamo a  noi ora:

Meccanismi di generaz. della #GreatOECDepression: 

1 0nda 1, subcrime 2007-10 (US UK Ic\reland Spain): da blocco inter-bancario luglio 2007 x demoltiplicatori-acc. e varie crisi simultanee, sino alla recessione globale differenziata 2009 e ripresa borse 2010 nell’aspettativa di un ciclo standard.

2 0nda est-europea 2, 2009-11  (CEE, Central East Eu.: crisi monet. e fin.) si riprende dopo decisivo IMF-bailout (altrimenti saltavano subito le esposte Austria, Italia ed Unicredit, Svezia con impatti successivi) e Hayekiane cure da cavallo (drastici tagli redditi, svalutazioni e strette fiscali).

3 0nda SovDebt 3, 2010-15? (contagio da PIIGS a €; il “compagno spread”) precipita riforma rimbalza. € al panettone, ma + difficile colomba 2012. 3 anni dopo l’0nda 1, funziona un po’ come 1931 su 1929: è Grande Depressione, ma stavolta NON GLOBALE. 0ECD.

4  #GreatOECDepression 2007 – 2020? Il riarmo tra i blocchi populisti contrapposti iniziò nel … (speriamo che ce la caviamo).


Emma, don Gianni, Giulio and Silvio

Mr Profumo’s  high risk profile is still there (un delirio di onnipotenza da manager-dinosauri del millennio passato: speriamo che la crisi ne spazzi via un bel po’ – a questo serve!).

Although, meanwhile, the Bretton Woods  institutions have spent some hundred billion $ to stop the  CEE domino & save Center – East CBs, the private ones and their Western owners (like  Unicredit). The tragi-comic is that, while they stick to XX Century ultra-neolib (bullshit, or Great Narration if u like it),  the ex-Socialist countries  have been saved only by …

Internationalist Financial Socialism: the 6th  Socialist International, more or less.

AHAHAH! I.e., the XXI Century form of a Communist “spectre of Marx” (Derrida).

They didn’t deserve all that, with our money, stability pursuing and hard work, the bastards: should have tasted the mud of what is pure capitalism at grapes-of-wrath times. Such idiots, still thought-prisoners of their slave socialist past (better IMF to pay shrinks to all of them: value for money), paranoic  ultra-“lib” (sorry to use such a nice name & HIGH thought tradition, Einaudi – Hayek etc.,  for their ideological credos denying even the existence\nature of a global REAL crisis,  and of course not begging pardon for a crazy management of their unsustainable fast growth):

CEE leaders  didn’t deserve a penny, for their thoughts.

But so goes globalisation – what make a difference from begga’ yo’ neibo’ (Keynes’ bestia nera) in the former GreatDep, is that there  is little room for it now, at GreatDep 2 times.

IMF comes to save  East Europe to save Mr Profumo, Italy’s  monster public debt and the € zone stability. By the way, LEX (below)  is right: private debt/GDP ratio is somehow half in Italy compared to the US. What he doesn’t say is that Italy’s sickness has a name: Tremontite.  Only  Italy spends 0 for fiscal stimuli (as if we were …Austrians, no Risorgimento!): Giulio had the courage and determination (I believe he likely ended his fast power career here, because of that) to choose to re-equilibrate what matters most to Berlin, Bruxelles, Frankfurt and London markets, i.e. the public debt/GDP ratio, at a very low GDP level, instead of pushing the GDP earlier, in 2007-2008, in order to allow now for more fiscal manoeuvre (less taxes  and\or  more infrastructures, what China, the US etc. are doing, to match the powerful monetary policies that have succesfully controlled, “un-powered” the stagdeflation cumulative spiral until now).

Yesterday Emma Marcegaglia, speaking in the name of all  the Italian entrepreneurs, expressed all their frank, growth-professional dissent from Tremontite  Malthusanism, but too much A BASSA VOCE to have any impact whatsoever: no blackmail, no electoral boycott (like: we’ll all vote Casini). There is another illness at work here, Berlusconite; Emma has not yet a full power on her  syndicated patrons, even if the Cavaliere consensus  has never been  so low among the Italian bourgeoisie & industrialists  – now beginning to call for a true right and centre-left, out of this stallmate depriving Italy of a guide at harsh times,  while FIAT goes to its worldwar and can manage with  its own  Foreign Affairs, but the small businessmen  ecologies? They are just lost & abandoned to themseleves – i.e. the  ones who were  the Cav. fans until now – but not any more: for elementary,  Darwin-Schumpeterian survival reasons. It’s a POLITCAL divide, from the unmanaged crisis about to decimate the SMEs.

There is an empty space, at the centre  of Italy’s political arena, for a new political force representative of the middle classes, the high bourgeoisie and repressed  high tech animal spirits!!! La DC? A new entry (Montezemolo)?

You measure here ALL the tragic,  historical failure of Berlusconi who WAS really, as he knew  (was told, by  don Gianni) and told,  l’Unto del Signore called for this middle cass re-assembling Mission. But  he miserably failed it: 100%, for a number of reasons. His era already belongs to the past; a mere cohincidence: the death of the great political teologist and teological political scientist, don Gianni (a sublime figure for his teaching and thought, widely appreciated by a transversal audience; and a nitzschean Superman indeed, in his  indomable adventurist impetus:  from “anti-Pope” Card. Siri, to Craxi and the Cavaliere). Unforgettable don  Gianni Baget Bozzo! Riposa in Pace.

LEX
Italy’s economy

Published: May 14 2009 09:17 | Last updated: May 14 2009 20:49

Italy is still sick. Its economy has suffered a series of recessions over the past decade. Yet its labour market remains inflexible and deeply uncompetitive; since 2000, Italian labour costs have risen by 45 per cent. Productivity has also stagnated, while rising annually on average by 1 per cent in the eurozone. As a result, Italian exports – from capital goods to shoes – have suffered particularly badly in this slump. Yet Italy also lacks many features of the credit boom that have ravaged other countries. While government debt is scarily high, at more than 100 per cent of output, household and corporate debt is low. Nor has there been much of a housing boom.

This halfway happy result is reflected in the relative good health of Italy’s two biggest banks, UniCredit and Intesa Sanpaolo. Neither has yet taken government money. Both are funded by large deposit bases. Both are among Europe’s most efficient lenders. And both are still reporting healthy profits. That, though, is where the similarities end. Almost 90 per cent of Intesa’s business is in Italy. UniCredit, by contrast, has sought to escape domestic economic stasis by taking more than half its business abroad. This aggressive foreign expansion, especially into central Europe, has lately taken Unicredit’s share price on a wild ride. (…)

And, from May 11 ft on Poland postponing euro entry –http://www.ft.com/cms/s/0/e4bf38a8-3e52-11de-9a6c-00144feabdc0.html – Marchionne / Profumo 6-0, 6-0, 6-0.

In one example of mixed signals, Fiat’s factory in southern Poland is churning out small cars for the west European market, and is not planning production cuts.

Subcrime-2 is paneuropean. Attila returns!

http://grapes-of-wrath.ilcannocchiale.it/post/2189528.html

We have this blogpost IN ITALIAN, where we reifly argue why and how a  Paneuropean Subcrime-2 is already on the move, and no one else can stop it, TOO LATE. A number of quite interesting consequences, in a von Hayek Angel sense:

an Angel comes to make you pay your wrongdoings, and also those of the Prime and Finance Ministers, or CEO that came before and believed in so called “neo-liberal” (where liberty has no room) bullshits and irresponsibility,  or “bonanzas” and bubbles.

Austria and Sweden, in the West, will be killed by the Eastern Tsunami; they earned mountains of extra-profits, “bonanza” from the transition to capitalism in their neighbour countries. Now they’ll lose everything, and much more than that.

UniCredit is already a re-nationalised Bank (a Guinness: its Credito Italiano component, will have been rescued in both Great Depressions: 1934 and 2009). Aready,  in the market expectations,  otherwise its Friday closure would not have been  but epsilon.

– Let us bet, on InTrade and elsewere, about the parity  € = $ before … (I wan’t tell you my bet date, but I already gave you here A LOT of info, and based ON FUNDAMENTALS; better: ON DYNAMIC ATTRACTORS; as for the date, monitor InTrade, ’cause I move some small capitals on those future markets, and I might make critical mass…).

INCIPIT of the last grapes-of-wrath post:

Svelato il Mistero di Scilla e Cariddi: perché non si fa il Ponte, e  non è solo colpa di Profumo.

ARIDATECE LA CASSA DI RISPARMIO DI VR-VI-BL-AN !!!!

1- TEMA.

Erano partiti, i Grandi Banchieri Oligopolisti di Austria, Italia e Svezia in testa, alla conquista dei confini est dell’Impero Europeo. Si sono fatti concorrenza oligopolistica della peggior specie  a botte di credito facile: E  FU SUBCRIME-2, quello tutto pan-europeo. Effetto Frontiera Far East Europe.
Noi lo sapevamo da anni come andava a finire, sia all’Est che nelle Banche Vetero-Fordiste e Ribollite dell’Ovest (quelle che hanno legato a quel sasso che rotola  il loro Destino), e:
1) l’incoscienza di Mr. Profumo ci ha sempre fatto tanta tenerezza (una volta ho provato  anche a dirglielo, eravamo in Assindustria a Vicenza, ma lui non mi ha capito ed ha tirato dritto);
2) l’allegria con cui TUTTA l’Europa sta precipitando nel burrone, insieme sapendolo e senza  saperlo, è molto Pirandelliana. La Merkel sta per essere sbalzata di sella solo perché c’è la crisi (il VERO motivo per cui Mc Cain non ha fermato Obama) e si comporta di conseguenza (decidendo le cose  pro domo sua). Non c’è un solo uomo politico in tutta Europa, che pensi all’Europa. NON UNO SOLO: se ora affonda, ed era comunque inevitabile date le premesse, se lo merita.
Come facevamo a saperlo?  Elementare, Engels. Da una traccia d’indagine nei racconti ironici  e divertiti di Marx, specie nelle corrispondenze con Engels sul Tribune (più vive dei suoi Ricardismi teorici, che spesso sbagliano premesse e conclusioni): di  volta in volta, Frontiere  alimentano i cicli espansivi.

Ed il sistema  più instabile che fu mai creato, funambolizza così la sua lunga durata.

2B optimistic: this is the beginning of the end

BREAKING NEWS

March 2, 2009

wsj
The Dow Jones Industrial Average dropped by 300 points to end below the 6800 mark for the first time in nearly 12 years, as a broad-based selloff seized the markets, sending shares lower in every sector. The S&P 500 briefly dropped below 700 for the first time since October 1996 before ending just at that level amid across-the-board declines, including drops of more than 6% in basic materials, energy, financial and industrial sectors. The Nasdaq Composite Index fell 4%.

For more information, see: http://online.wsj.com/article/SB123599406229708501.html?mod=djemalertMARKET

I REVEAL THE TRUTH:

ANGELA IS THE ANGEL

Yesterday, sent by the Aparecida no one is keen to listen to anymore,  the Angelo della Vendetta started  cutting some heads and share values, but it was only the beginnig of  the end. The necessary “Visible Foot” freeing markets from lame ducks (the von Hayek – and  – Schumpeter, neo Austrian Foot) has just started kicking off, and will have a couple of years of hard work ahead. The ecomomic “curtain wall” has not yet come down: then the neoAustrain Angel will have no pity, not even for her country of origin (Austria); it will be CEE (Central East Europe) Tsunami soon, and little will stay alive in Western Europe, after her mission.

On the other coast of the Atlantic, there is no reason for DJIA, now that 7000 is over, to land asymptotically or not towards 6000: still, the Western Actives would B by far over-valued, at 6000 (down from top 11,000).

a) DJIA passed yesterday, in a quantum jump below 6800 (My God!) the 7000 PSYCHOLOGICAL threshold of “depression”, i.e.  Wall Street finally cut the Gordian Node (FAQ: is this a deep recession or a depression? The latter. Now we know:

the answer, my friend,

is blowing in the East European wind.

For no apparent reason, in Wall Street: just ordinary administration – adjusting the e’s in the p/e ratios, to what one can reasonably guess for next Autumn, when all things that might have gone wrong, will have (Murphy’s Law, a secularised divulgation version of Greek Tragedy’s Destiny).

b) European, namely Italian banks are just disappearing, day after day from markets. This is no violation, as most people say (banks capitalisation below book value?), on the contrary: A STRICT APPLICATION OF THE FUNDAMENTALS. Such;

giant, monopolistic, hyper-speculative, anti-social, caparbiously authoritarian and highly inefficient with their personnel, vandalised by ignorant managers, enemies of the Territory where they just steal surplus value (no help to innovation, to anything) banks

should have never been born, as they did UNDER THE CRAZY, ANTI- ECONOMIC, MONOPOLISITIC CONCENTRATION WAVE of the New Economy, version 1 and 2, in the last two ABEs, Artificial Bubble Economies, 1993-2007.

Mr Profumo (legally and apparently the UniCredit CEO, still) is already at the job office to look for another place: but

FAQ – Who will hire such a crazy man, that ruined  in just one only stupid Ego trip three  healthy  banks full of Tradition (Cassa di Risparmio di Verona- Vicenza – Belluno- Ancona, Credito Italiano, and Banca di Roma)???

ANSWER: We want them back, our 3 banks, and we’ll get them before Summer. The Angel is working for Justice to triumph, on this Earth.

I knew in advance, but I did not want to disseminate pessimism: last week rally on Italian Banks was artificial, home made and effimero. A literal Tsunami is charging its batteries very speedy, then it will lead to the “SUBCRIME no.2 – The European version” Vendetta dell’Angelo Sterminatore (who appears to have occupied the soul of Angela Merkel, dictating her what she must do, in such a way as Destiny requires):

– 1. a default of the majority of the 10 CEE States unprotected by the Eurozone;

– 2. a national economy collapse, and consequent quasi-default or default of  the Austrian State (only by the immediate, direct consequences of CEE toxic credits, by applying a multiplier 2 to Dansk Bank scenario 3: Austria will lose 22% of its neutral GNP, this year; as we say below, with a multipler 3 it makes -33%; then self-reinforcing dynamics will carry on further the Visible Foot job);

-3.  the forthcoming closure, and “week-end X nationalisation” of the majority of large Continental European Banks (British Island ones are already kaputt: RBS is a Gordon Brown’s property, Barclays is 90% down in capitalization. from £90 to 8; Switzerland is  in search of diversifying out of Credit, which after all, ex post was not its natural Vocation; after weekend “X”, there will be an ephemeral rally on Swiss Banks, the  only private ones left, but it will not last long). More in:

– Dansk Bank Research last report, and continuous, daily information flow in their precious site, an Observatory on  € subcrime: http://www-2.danskebank.com/danskeresearch

– and the interactive graphic ft representation of Dansk Bank’s € subcrime scenarios.

REFERENCES: go to last week’s euro_exposure_to_cee_230209 Dansk Bank Research impact study, put into a graph by the Financial Times. Please note:

a) Dansk Bank worst scenario (alike the Asian crisis 1997) will B the best one soon;

b) this report just estimates Banks’ sofferenze, i.e. the 1st round of money-real transmission mechanisms, and repeated positive feedback interactions (ping-pong like). The full impact is, as usual, larger by an order of magnitude, so that the Austrian GDP, e.g., (-11% according to the Report) might approximately and optimistically (multiply x 3) lose no less than 1/3 this year, as a CEE Subcrime full impact consequence. Being so close to Austrian borders as we are, is no health.

Who’s afraid of Timothy Woolf

FACTS

WALL STREET: Sen.Dodd talks of Bank Nationalisation while markets are open: BoA and Citi (>50%  State owned) precipitate. Pension funds relocate from Banks to high tech, in search of dividends.

ITALY

TODAY, AS YOU KNOW:  – 5,8% MIB MILANO, worst in Europe.

STUCTURALLY WEAK, in perspective,  the 2 leading Italian banks (of course in a frame of subCrime and structural crash of the entire Globalisation architecture; but  NOT SO “innocent” Angels. Even “Last Angel” JP Morgan … see below).

INTREPPRETATIVE FRAMEWORK: TODAY’s PIAZZA AFFARI SOCIAL  PSYCHOLOGY

RE-RATING OR LEAP-FROGGING?

1) in all today’s markets, and very neatly in Milan, the so called RE-RATING PRINCIPLE HAS BEEN APPLIED. Although in a rather strange way in Milan, namely in the key last hour,  half-hour and  final (SELECTIVE) sales rush of the market — revealing a bit of wh’appens in the exchanges secret trades and UNOBSERVABLES (single transactions). UniCredit was leading the fall, OK? But, in the last  1/2 hour Intesa SP was loosing  all of a sudden another 6% point, Banco Popolare 4, UniCredit UNBIELIEVABLY stopped falling. On such  a proportion, this is  no RE-RATING at all (as il Sole 24  ore financial correspondent was saying at radio 24, on the contrary: but it is not so easy to give the whole picture in real time: at that moment, I also thought the same way). I’d  better call this: LEAP-FROGGING in a downward pent. NO OTHER ANSWER: someone, either 1 operator at a VLS, very large scale, or more likely 2-3-4 of them at average-to-large scales, were buying at closure prices (€ 0.89). We’ll comment this in a while: so interesting. I didn’t buy, although it’s MY bank.

COOL DON’T PANIC

2) Let us say: in the unprecedented last hour of Piazza Affari (A CONCENTRATED SHRINKING OF ALL  THE BLACK OCTOBER 2008, and just in Milan), some operators were in panic, some were applying RE-RATING (a sort of arbitrage, and hierarchy among leading firms in an industry). Just a few, perhaps a handful were manoeuvring against the main current, as only the most clever and resourceful fishes do – AND THIS HAS STOPPED the UniCredt decline in THAT key hour.

MIRACOLO A MILANO (de Sica).

Who bought UniCredit after 4.oo pm GMT (5 in Italy)? I won’t tell you,  except under torture.

INTERPRETATIONS

TOXIC PRODUCTS IN ITALY  DON’T SPEAK YANKEE OR OXBRIDGE: SPRECHEN ZE DEUTCH?

The Italian Duopoly  (1 bank in many respects),

at repair from any market contendibility (i.e. roughly translating our friend and fine wine connaisseur Baumol’s dis-equations: POTENTIAL competition, since Aristotle was never allowed to make it REAL), control the whole Classic Media, and penetrated deep into the Social Media blogo- and  ludo-spheres. Truth (they’ll never tell you) is

they are by far over-rated, still:

– I don’t analyse here Banco Popolare, except to say: I have a sincere esteem  of his CEO, Mr Fratta Pasini; in Verona there is an important sense of civicness, “coming out” with decision  in the last few weeks and even  more strong in today’s hectic day. For a disastrous process of hyper-concentration and that Surrealistic Theater called “globalisation” by its PRs, we have lost 1/2 banks; better than Naples that lost its only one (worst: the only left large job supplier in the city centre, an infinite  gift to Gomorra from politicians). The population of Verona is with the heart, sincerely on the side of “our” bank (no populism but local culture, the labour and work of a cooperative bank); in a very large majority of the spieaking public opinion, we believe 1) we have the right man, 2) managerial animal spirits are one of the rarest “commodities”; 3) and, to close such an improper sillogism,  we want him to stay there: exactly because a 2nd concentration would be lethal for the quality of  the civic tissue of the city, and CORRECTLY interpreted as a 2nd, historically even more intolerable EXPROPRIATION (David Harvey). Attention, because Verona  insurged with no hope against Napoleon: there are hidden anarchist resources in these quiet communities!! We will pay due scholarly attention to  Pop another time: this Social War will be so long; in the next few days it’ll be Fort Apache every day. Verona as a city,  i.e. a collective “in the good sense” (the one song by Simone Weil in the poem Venise  sauvée, for our sorella maggiore), firmly doesn’t want any Waterloo for Pop. By reasons of ethic-epistheme coherence, this doesn’t imply anyhow Pop is any “Angel” at all, even less that “our” Mr Fratta Pasini Angelically avoided all the traps on his path. On the contrary: i) if you compare him with Mr Profumo below, we love even more Mr Fratta Pasini for his humanity and finiteness: ii) as prof. Roubini’s intransigence taught us, a real picture of the situation is strictly necessary, in order to geo-position correctly  the Pop “barricades” against the Tsunami;  iii) not only some populist “stracciarsi le vesti“, or invoking  (again? nooo!) the closing of all financial markets everywhere, don’t deserve a reply here. Worst: for their stupidity,  they’re Trojan horses, weakening the city’s barricades or trincee, as I am arguing in the local press, with all the  passion and love for “Verona sauvée” which circulate in my blood (genius loci).

– in 1 year Intesa SP  fell from € only to € , while its future is bleakening at the speed of light, and they apparently don’t know well where to start from. Today, it was UniCredit leading the re-rating game, but the East European dependence (making UniCredit a lame duck) is NOT the major issue (by the way, this is an answer to Sebastiano Barison, radio 24, wandering: “Why all this crash, if the majority of their sales is in Italy”. Correct answer: “The majority of the duopolists problems ARE in Italy, actually”). In sum:

You better wait some massive devaluation and recapitalisation, before any BUY.

– On the other side of the SAME COIN, a UniCredit awfully managed by SuperEgo Alessandro Profumowe’ll never forget  the sense of self-sufficiency  stemming from his icy eyes, and his open despise of reality, top clients, whatsoever, worlds. A living Murphy law:  if there was a possible strategic mistake, he went straight into it, without arrière pensées; he’s an Aristotelian top executive: if something is possible, he’ll make it happen. But he’s weak in 9 other items of an interview: human relations; knowledge decision support; macroeconomic environments intuition; medium-long run view; reduction of useless extracosts and hierarchies; scenarios interpretation; selectivity; team work; vision. I would rate him: 1/10.

UniCredit  is surprisingly down only at €o.89 (from € ). Profumo’s another case in such a long gallery, we thought  up forever, exp. after the micro-economic roots here of the “Japanese desease”: pursuing  max growth while blatantly ignoring corporate finance sustainability constraints, and fucking stakeholders’ interests. There is even such a well known, VERY OLD BUT STILL TAUGHT textbook lecture on the “Profumos”: the Marris model. Every graduate student from a decent school, who was taught Industrial Organisation (and not just Games, the real thing as well; Maths and History, as Baumol says) knows  perfectly the problem and  might remember its multiple solutions (a 2 equations nonlinear system, under a linear sustainability constraint).

Add the macro- and geo-economic frame: any dilettante (IFF consulted) would have just stopped “a gamba tesa” Mr Profumo 10 years ago, since at that time most of the Western Economies’ Actives had been by far over-rated for a decade, and you could not reasonably take so many risks together in just one firm; plus the country-specific and the E. European regional ones. The average expected success  Prob. was very close to 0 on an array of scenarios. And the hyperconcentration of the governance, the very bad  use if the fusion (CredIt, CdR) just for Imperially spreading incompetent Roman Bureaucrats  in the Conquered Province (incl. my beautiful Verona) is no excuse: it is part of the problem itself; if the owners accepted it as a solution of their principal\agent bargaining with Mr Profumo, and did not  monitor how the cintarct was executed, they just got what they were looking for. A crazy mono-strategy  (Rome against the Unni at the border of Russian steppe) whose potential failure, unbearable risk and wrong timing was very easily detectable, at just one external independent check, since many years ago.

In sum:

No reason to buy unless strategically, as in the Qaddafi case. In fact, Qaddafi and another M.East SWF are subscribing UniCredit convertible bonds at €3 (versus today’s 0.89 mkt value)

Mr Draghi, much cooler and a plomb than Min. Tremonti is (1st class clever, but badly affected by emotions-driven Prime Minister), is just saying, and he’s correct: devaluate all your toxic rubbish (see below how much “toxic” is a daily changing, metamorphic notion), then recapitalize ASAP.  Please don’t fool yourself (as  yo do fool ourselves: see we’re fed up with Marxism plea) with your “stabiity”: the sooner, the better. Sure, implementing such a strategy meets hard times.

This is why the major National (from December, no more global: see Brad Stetller on the US capital flows) Capitalisms recur to the 4th-5th best, or last solution of Nationalisations. But Italy has its own path-dependence: after Enrico Mattei, Craxi and De Michelis. The beloved Beniamino Andretta (as you already know in Italy, the political “father”  and  mentor of Mr Prodi) fought very hard in the 1980s coalition governments in order to save the public debt from the catastrophe (I remember Gianni De Michelis’ versions of such a War on Budget). Beniamino had all the knowledge and will to fight and  he did it, he gave hard times to the opposite political line (as from my personal, oral evidence), but no real power.

This is history by now, it is written in many books: Craxi could hamper Mr de Mita’s  impressive and farsighted “Revolution” of the DC, aming to move it from a European to an American political science and tradition paradigm of great coalition Party. He was repaid by the traditional DC caucuses (he had saved from Nichilism: the usual grey men like Andreotti, Forlani etc.) with an infinite State budget ceiling (the one Super Ego Profumo was convinced to have, but he never had, as any psychiatrist or cognitive psy woud have told him  before the end of the  1st meeting). The change occasion was postponed to “Mani Pulite” that generated Berlusconi’s business diversification (a much more cautious application of the Marris Model’s normative implications on such strategies; a friend of mine, a top executive of the privatised Dutch Post, told me at the epoch of the “diversification” that he could no more consider Fininvest in the set of potential allies, since the political risk was unmeasurable; in Eindhoven they teach Economics comme il faut).

In sum: Italy will not have, for some and perhaps many generations, the means to nationalize anything,  AND VERY LITTLE ROOM for any other counter-cyclical, industrial or social  policy. The chance stands for “MANY” above since:

a) the Late-comer First Industrialisation happended in Italy, under the  hyper-corrupted Giolitti Period (Early 20th C.), with a German financial system (the Mixed Banks going  bankrupt and natonalised in the early 1930s; CredIt was privatised  not so much before concentrating into UniCredit) and under a German I-O umbrella: these “filière” systemic links always grew upon time (in parallel with not so different political regimes, mutatis mutandis). Germany, our Elder Brother with some paternal rights, was not paying attention to the younger brother in the 1980s, but from now on will never allow for easing his\our public financial constraint. Unless  we  move to Africa.

b) The Italian political system did finally diverge from the 65-years  Nippon stagnation path. But not so much, e.g. in intergenerational policy terms. Unless the PD (dead today, but  this is good news for  potential change) challenges PDL’s  monopoly-and-monopsony, where will change come from? The State debt will keep forever around 100% of a very slow growth, often zero-growth GNP. In a sort of coupled hysteresis.

NOW: A PROVISIONAL, REAL TIME COMMENT TO THE POSSIBLE BEGINNING OF A BANK STOCK  CRASH TODAY, Feb.20. Not just banks: there are a few REASONS WHY WALL STREET’S DJIA MIGHT FALL FROM 7200 TO ABOUT 6000, IN LESS THAN ONE MONTH.

THIS TIME (2008 IS OVER), THERE IS NO SHORTSELLING, JUST LONGSELLING:

1. PENSION FUNDS MOVE WHERE DIVIDENDS ARE HIGHER: WHAT ELSE?THIS EXPLAIN THE DIVERGENCE TIDAY BETWEEN DJIA AND NASDAQ. In the sublime as always, but today really ON THE NEWS Sebastiano Barison’s broadcast (to which I owe 2/3 of this post’s concepts, under my rewriting and idiosyncrasies of course), we coukd listen to a top US exoerte, Mary NN, saying; No way for dividends from US banks. She said “I’d really like JP Morgan [!] to pay them, but they are in the same situation”. Some room only , exceot the zero-option, for a further reduction of already low dividends (Nietzsche and Severino are right; God is dead, and with Him all the Angels = there is no ethernal structure left on this earth. JP Morgan was the last one, still an Angel under the Fed’s protective Holy Spirit,  in mid-March last year …).

2. RE-RATING (DAILY RIGIDITY OF THE SHARE RATIOS ACROSS LEADERS OF THE SAME INDUSTRY);

3. CUMULATIVE FEEDBACKS: NOW, EXPECTED AND ANTICIPATED FROM MEAN TO WALL STREETS;

4. INCREASING UNCERTAINTY UPON KEY PARAMETERS; namely, referring to the various Timothies, if they have an idea (perhaps not): which governance and business models  in the State-owned majority of the much  less global Credit Industry? Sociology taught us: it’ll be a big fight. Yes, but: A) a fight for Governance Rules under which Meta-Rules of the game? B) How  can we repeat  the Lithany  that the late Schumoeter was so wrong, totally wrong? C) The anti – “Capitalism, Socialsm and Denicracy” VUKGTA, cane from vested inteersts: the Workers’ Movement bureaucracies had to dissen’minate the ideiigy of Biig Socialism as a volunatry conquest etc, etc, Bukkshut.

5. EUROPE REGIONAL FACTOR – As Prof. Nouriel Roubini is saying, there is an emerging Regional Factor – the comparative delay in  making effective the anti-Meltdown injections. An antidote for Italy is today’s Bruxelles approval of the “Tremonti Bonds”.

6. NATIONAL NO-DECOUPLING or no-Nation decoupling (particularly in Credit: Brazilian Mean Streets have exhibited heroic decoupling forces in 2008, as  in a Myth, an Amazonica-Nordestina conta of strange, UNIQUE animals). ITALIAN BANKS DIDN’T “TALK ENGLISH” YES. BUT THEY DEUTSCH SPRACHE, and therefore they are full of original (doc) Toxic products (not just the unsellable Italease, a dead walking emanation of Banco Popolare). The counter-information industry (= all the Italian media, except only the one directly owned by the ensemble of all the non-credit Capital: il Sole 24 ore, the Confindustria newspaper – just with forgivable and BONA FIDE mistakes) told us for 18 months that the Italian credit  industry was living in  another planet. We could stand the Tsunamy by .. lending each other within borders, as Barison was mocking today, during the mini-Tsunami. It was  just to suck you your left savings.

7. THE TOXIC DERIVATIVES – Wh’happens here is that there are by now A FEW  GENERATIONS OF TOXIC artificial Beings, like in any Pandemia. After the “doc” subCrime 1st G, they are self-reproducing  in Labs (the Banks’ canteens, in the ususal metaphor about the canteen as a compensation room in between Surface Finance and –  legalised by Clintonians – underground Shadow Finance).

FOR OUR BACKGROUND, FRAME SCENARIOS: GO TO OUR RED!0 bulletin. AS for all the DIJA, to put it simply:

A) market operators are adjusting downward their expectations about the Autumn real economy effects of  the fastly built 4-plans (much more than $3 tr., perhaps 4 tr.?) architecture (Detroit, Paulsson no.3, stimulus and subCrime): Obama was effective, and  paid a minor price (namely a 40 mn cut in education) for getting the 3  GOP senators to vote the stimulus. But financial accelerators and all the rest of the REAL-MONETARY-REAL- etc. TRANMISSIIN SYSTEMS (not nec.  classic ones, with genuine, inherent unpredictability) are at work since midAugust 2007.

Hard to stop a snowball when it is an avalanche.

Then there is the issue whether  all this architecture is adequate. And: what is its paradigm – pay attention to Obama, he pays service t American Idls, but with his friend Cass :

Finally, THE issue – why FDR is far from a model:  either in his times (Amity Shlaes) or in our so different times (my deep convinction, on left libertarian philosophical grounds), or in both of them (my chance to ally with Shlaes); or none (an optimistic, backward-looking and Classic US Liberal thesis). NOTABENE  for sensitive souls – “backward-looking” is NO insult, since we know by now that Progress doesn’t “exist”, it’s just a Narration as another one (someone has to dare to tell it to the US Progressives, before they become the Last Mohicans). This is a straight Popperian issue  about whether, how fast and  how far contemporary cultures are a’changing, within the same regional Civilisation. The most respectable scholars told us they changed a lot, and that if there was a Promise Modernity maintained, it was the  effective mega-trend of Individualism. So, how can you come back with “Fordist” solutions or frames, NOW? I refer here also to Carlota Perez 2002, another way to say:  look forward.

B) experts have, on average: let us say, a bit equivocally, a “median expert” (of the few surviving ones, dynosaurs after the punctuated SubCrime equilibrium) has, for professional habit, talent and  intelligence,   much more deep-and-radical doubts than a median GOP Senator or a Wal Street guy. “We” believe (particularly Michele and I) that all such an Ambaradan might  do some  sound social justice if well managed, and eventually alleviate the short term, but (there is here a Gravity Law I’ll explain another day), ONLY TO MAKE THE MT EVEN WORST than “neutrally”. It has to do with 20 years of OverRated Actives in Western Capitalisms, ONLY sustained,  in increasing disequilibrium paths, by (not artificial, as Paul Krugman once dared to say: he was ALMOST right) Planned Hyper-Growth in East Asia Socialist countries (Jap, Kor, 4 Tigers, Chindia). This is rooted in completely, unprecedently  unsustainabe, by all means and criteria, SOURCE-OF-ALL DISEQUILIBRIA in the 2 PRIMARY MARKETS: LABOUR FORCE, AND  SERVICES drawn from irreproducible NATURAL objects (the Kalecki, and the Georgescu-Roegen contradictions). The gone-crazy Minsky cycle is a MASSIVE SIGNALLING about those 2 contradictions,  that for decades no one wanted, no one was keen to listen to, in a Surrealisitic pièce. But this time … surprise! Godot has arrived. When no one was still waiting.

Here comes the ETHICAL AND POLITICAL RESPONSIBILITY OF TODAY’S INTELLECTUAL: just too heavy! Unbearable! Let us not leave the whole of it to Nouriel Roubini as a Dom Quixote. Or the one Hero that had to sustain the Globe on his shoulders. Prof. Atlas Roubini, a good fella of Bocconi.

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.

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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