Investment

» Inya Ivkovic - The WSJ - "Some Colleges Are Jeopardized by Tight Credit"

» Inya Ivkovic - The WSJ - "Credit Crisis Pounds U.K. Economy"

» Normxxx - RiskOfSystemicFinancialMeltdown?

http://normxxx.blogspot.com/2008/02/risk...

-- posted by Normxxx

» pink101 - F.I.R.E.

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Anyone here familiar with the F.I.R.E. concept?
.

-- posted by pink101

» Inya Ivkovic - The WSJ - "Credit Card Pinch Reigns Spending"

» Normxxx - F.I.R.E.

If you mean F.I.R.E. (Finance, Insurance, and Real Estate), then

See The Rise Of The Financiers
- it's NYC's biggest industry

- degree programs

- US FIRE Trade Business IT Expenditures by Category, 2005-2010

- FIRE Sector Booms!

and, etc.

-- posted by Normxxx

» permabear - The WSJ - "Credit Card Pinch Reigns Spending"

Credit cards defaults and commercial real estate may be the next two big shoes to fall in the larger credit crisis. The credit crunch is a major economic event, that is only in its early stages. I don't buy the soothsayers who keep on saying this is going to be a mild recession and the look for the great rebound in the second half. These soothsayers have been wrong about these credit problems from day one when they first said housing prices could never fall nationally. The folks who have gotten this story right from day one on the bears. And the bears will continue to be right when we say these problems are much deeper and longlasting than anything the U.S. has faced in a long long time.

-- posted by permabear

» permabear - F.I.R.E.

Investment banking, the rich and powerful heros of Wall Street will soon become the Enron and Worldcoms of tomorrow. These folks were blinded by greed and have done more to harm the economy than Enron did by a multitude of hundreds if not thousands.

-- posted by permabear

» Jas_Jain - Re: F.I.R.E.

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Perma: "Investment banking, the rich and powerful heroes of Wall Street will soon become the Enron and Worldcoms of tomorrow. These folks were blinded by greed and have done more to harm the economy than Enron did by a multitude of hundreds if not thousands."

What part of these people are born-and-bred Crooks don't people get? I must have been crazy when I christened them Bankrupters and Fraudsters of New York City (BFNYC) years ago? All these problems were fully predictable.

These people, including insurance guys, rating agencies, etc., are raised in "a culture of fraud." NYC is a cesspool of Conflicts of Interests as these people go to the same bat mitzvah celebrations, the same parties, the same clubs, the same synagogues, temples, churches, and their kids, future born-and-bred Crooks, go to the same schools.

You see what I am getting at? America is a nation of born-and-bred dopes "managed" by born-and-bred Crooks. Only a dope suffering from blind faith and blind hope thinks that something can be done to make things better. Whatever the Feds are doing now can only make things worse, but politically impotent American People can do nothing to stop them.

All roads lead to the same conclusion about the American system, American People, and the future of thereof.

Jas

-- posted by Jas_Jain

» Jas_Jain - Great Read -- This Credit Crisis Has a Long Way to Run

Monday, February 11, 2008

This Credit Crisis Has a Long Way to Run
Interview with Jeremy Grantham, Chief Investment Strategist, GMO

By SANDRA WARD

ONE OF THE GRANDEST OF THINKERS AND MOST ELOQUENT of oracles, Jeremy Grantham has long been the voice of reason in an industry prone to excesses and embellishment. By taking the long view, blending quantitative strategies and technical analysis with sound and experienced judgment, Grantham, chairman of Boston-based GMO, consistently uncovers with his team the best values among a wide range of global asset classes.

The payoff is outstanding performance and risk management. In return, clients have entrusted the firm with about $150 billion. As the man who warned early of a worldwide bubble forming, we turned to him as that bubble has started bursting.

Barron's: You, along with George Soros, have called this the worst financial crisis we've had in the post-war era.

Grantham: This is much more global than, say, the savings-and-loan crisis was. The world is obviously much more globalized than at any time since the late 19th century and much more interrelated in almost every way, certainly financially. To have the leading economy and the reserve currency having a major-league credit crisis would by itself make it more important than earlier ones.

Secondly, this occurred at a time of what I believe is the first global bubble in pretty well all asset prices, so there is a much greater degree of broad-based vulnerability. Then it is a question of degree, and how carried away the sloppy lending was: It was very carried away. Not just in the design of needlessly complicated instruments, but in the enthusiasm -- recklessness one might say -- with which they were sold.

Can these bubbles burst if the Fed is easing the way they are?

Well, this is an amazing little tidbit. People think the Federal Reserve can stop a bear market because they can throw money at it and lower interest rates. It is even more certain we can collectively stop a bear market if some fiscal stimulus is thrown in. To which I say, 'Oh, you mean like 2000 and 2002?' -- when they threw what I call the greatest stimulus in American history, an unparalleled series of interest-rate cuts, cumulating in two, almost three, years of negative real returns, real interest rates coupled with a really substantial tax cut, which would never have happened without 9/11.

The combination would have gotten the dead to walk, and it stopped the bear market eventually. But the Standard & Poor's 500 was down 50% and the Nasdaq -- which was all anyone talked about back then -- went down 78%. And a puny five to six years later, people are saying there is not going to be a bear market because the Fed is going to lower rates and because the government is going to have a stimulus package. But we have just been there, done that, and we had a nice bear market.

...

Incidentally, it was late in '06 when [Fed Chairman Benjamin] Bernanke said he thought the high prices of homes in the U.S. merely reflected a strong U.S. economy. Was he not looking at the data? Did he not measure long-term house prices? Had he not seen how they ebbed and flowed as a multiple of family income, which they do here and in the U.K. and everywhere else? And with it being so obviously a bubble, how could he have said that?

He was taking his cue from Alan Greenspan, who said we should all be taking out adjustable-rate mortgages.

Greenspan and Bernanke have taken a hands-off approach for two consecutive great bubbles, first in TMT -- telecommunications, media and technology -- and second, in housing. A hands-off approach is a polite way of saying they facilitated this. And what is the point of a 125-basis-point rate reduction, other than to provide reinforcement for the people who borrow short and lend long? From bankers who have committed every crime you could possibly accuse a banker of, to hedge funds who borrow short, leverage, and invest long in the stock market -- that's who really benefits from the interest-rate reduction. The economy, broadly defined, does not.

I have an exhibit that shows the 30 years prior to 1982 when the debt-to-gross domestic product ratio was completely flat at 1.2 times. Total debt is defined as government debt, personal debt, corporate debt and financial debt. Then in the 25 years after 1982, the flat line goes up at a 45 degrees angle from 1.2 times to 3.1 times GDP. Massive. In the first 30 years, when debt is flat, annual GDP growth is its usual battleship, growing at 3.5% and hardly twitching. After the massive increase in debt, GDP, far from accelerating, grew at 3%. So debt in the aggregate does not drive the economy. The economy is driven by education, man-hours worked, capital investment and technology. It is not driven by what I owe you and you owe me.

...

-- posted by Jas_Jain