Monday, March 02, 2009
Hoping for failure
Bizarre as it may seem, I respect Lee Stranahan for saying that he "wanted the Iraq war to fail." I do not agree with him, but I admire his valiant and frankly surprising effort at intellectual honesty. That is an ever more rare trait in our public discourse. Sometimes I wonder whether we have lost the capacity for it.
CWCID: Glenn Reynolds.
16 Comments:
By 
, at
Mon Mar 02, 01:40:00 PM:
I know this post doesn't fit the topic, but I felt compelled to write this.
Obama as Nero
I'm fit to be tied. It seems obvious that priority #1 ought to be fixing our financial system -- not stimulus, certainly not cap and trade. Earlier today AIG announced a $60B loss for the year and is taking another $30B in government money. Market is down sharply.
Here's the disconnect: American Express announced last week that it made $2.7B in 2008 ... It's p/e is less than 5x. Bank of America said it made $4.0B in 2008 ... It's p/e is 5.37x. JP Morgan Chase just reconfirmed that first-quarter 2009 is "roughly in line with analyst expectations."
Right now we only have four financials that are truly troubled: AIG, Citi, Fannie and Freddie. The government now owns three of these, and has a de facto controlling position in Citi. Unless our other financial companies are lying, or we slide into another Great Depression ... there are no other financials in need of nationalization.
Right now is a perfect time for the government to instill confidence in our financial system, as banks have completed year-end audits, presumably with regulators looking over their shoulders. No one -- including management -- has an incentive to mislead on these results.
Instead, Obama is talking these banks down. I have no idea what the plan is for Fannie and Freddie, nor how we plan to replace what used to be the multi-trillion dollar consumer securitization market. We don't need the overhang of waiting on "stress tests. "
Until we get this righted, GM won't sell many cars ... raising capital gains rates will be moot ... we may have a lot fewer people making $250,000.
Link
By 
J, at
Mon Mar 02, 02:54:00 PM:
"I predicted that the DJIA would bottom at 6800 in March of 2009,"
TH, let us hope that your prediction turns out to be prescient. On the first day of trading in March, we very well may reach your predicted low. Unfortunately, my gut tells me that this is nowhere near the bottom.
By , at
Mon Mar 02, 02:58:00 PM:
Jared beat me to it. It is March and it looks like the DOW has come very close 6800. Also, another good comment from Link.
By , at
Mon Mar 02, 03:38:00 PM:
I'm not really seeing the courage. It's hardly a revelation that liberals wanted the US to fail in Iraq. And that more and more of them are now pulling for the same result in Afghanistan. What would take some real courage is for those same people to admit that agitating for failure in Iraq probably lead to more troop deaths than we might have experienced otherwise. How quickly might the war have been over if the country had pulled together to see it through? The blood of many is on their hands.
By , at
Mon Mar 02, 04:15:00 PM:
As a side note, remember this phrase, "...I'm not Bobby Jindal so I don't believe in magic."
In future we'll hear often that Jindal is a Hindu fetishist and probably comes from a long line of 'fakirs'.
By , at
Mon Mar 02, 04:22:00 PM:
Why, he's a modern man for all seasons. We should all celebrate the valiant man who so bravely calls for the failure of his country.
By Christopher Chambers, at
Mon Mar 02, 05:03:00 PM:
I think Christopher Buckley and Peggy Noonan's statements...and in Rupert Murdoch's pillow talk with his wife...pretty nicely refute the underlying "playground, well- he-said- this- so that fat gasbag can say that at CPAC shtick." ;-)
The White House gleeful over this, trust me. The more Rush bellows and bleats and takes center stage, the better. And where's Mike Tyson's ex brother in law in all of this? Likely creating hip hop ads that wil pull the young people of this nation away from Obama's evil quasi black clutches. LOL.
Lord have mercy. There's still to help us build and rebuild, rather than spit and attack.
By the way, I thought black was supposed to be slimming? For the life of me I didn't see that in Rush's outfit...
By Eowyn, at
Mon Mar 02, 05:47:00 PM:
Sorry, TH. The Dow closed UNDER 6800 today.
Man, I wish you'd been right.
By Christopher Chambers, at
Mon Mar 02, 07:15:00 PM:
The conservative clown show continues: Mike Tyson's ex Brother in law now forced to "apologize" to Rush calling him a mere entertainer. Even my wingnut, hair like "Race Bannon" from Jonny Quest Air Force major of a neighbor admitted he was embarassed (and that he is a closet Keynesian).
http://www.politico.com/news/stories/0309/19517.html
The Dow's 7000. OK. Maybe it needs to be there?
(clown show lite: DL Hughley has a political TV show. Stewart and Colbert...and David Alan Grier...have nothing to worry about) lol
By Viking Kaj, at
Mon Mar 02, 07:47:00 PM:
Link,
The problem with most financial stocks these days is figuring out how to value their assets (loans and securitized debt obligations). With asset values falling, and no end in sight, most of the major US banks are either already, or soon will be, insolvent on a mark to market basis (present fair market value of thier assets).
Unfortunately this means they could earn a profit last year, based on the first 3 quarters, and still go under this year. (As they say in the fine print, past performance is no predicter of future returns). In other words, their current PE ratio is not an effective measure of the intrinsic value of the company.
If the stock market is an indicator of the appropriate price levels then we are now at 1997 prices. If real estate drops to 1997 prices, and banks are forced to value the assets on their books at the market price, all of the sharholders equity will be wiped out.
For example, BofA is trading at a market cap of $ 18 billion and change today, whereas they are carrying shareholder equity of $ 146 billion on their balance sheet. That is a serious disconnect, and it shows that the financial markets are placing a much diffent value on BofA's assets than that allowed by FASB.
This is why there is such a tussle going on over the accounting standards employed to value the banks' assets. Depending on what value you assign to those loans and securities, shareholder equity in most major US banks may already be wiped out. HSBC announced today that they are quitting the US consumer market, firing 6000 people, because of poorly performing loans. Right now the banks are arguing to keep the vaulation high, because the alternative is that the federal regulators have to move in and take over the banks.
Socialism indeed.
By Dawnfire82, at
Mon Mar 02, 07:56:00 PM:
The Dow wasn't at 7000 at any point today, CC. Was 6,763.29 at closing.
S&P 500 is at 700; loss of 50 points since opening on Friday.
I was in a meeting with my uber-boss last week on Wednesday, when the S&P double dipped at 750. He said that, historically, if the market touched its previous floor (set in Nov. 2008 at 750) but did not break it, then there would be a normal recovery. When it danced around on Friday and sank just a bit, he predicted that Monday would be the time for a rally, if there was going to be one. Instead, it continued to sink another 30 points, 50 below the previous floor.
In a separate conversation, one of the VPs said that a $3.6 trillion budget at a time like this was 'totally fucking insane.'
I don't do economics, (it's all sorcery to me) but they seemed convinced that all this would be very bad news for the prospect of a simple recession recovery.
By the way... if most of the banks of the developed world are doing poorly (and some, esp. in Europe, are looking at bankruptcy), where the hell do we get the money for this gigantic deficit?
By , at
Mon Mar 02, 09:01:00 PM:
Viking Kaj.
I still have this fundamental issue: in theory, couldn't you buy in everything that's mortgage-related and still be left with just a one -- or at most two -- trillion dollar problem. If so, why can't the government work to that end. I understand that banks are still at risk for losses on other sectors.
Mark-to-market is pernicious here ... the only buyers want to low-ball so they can earn 30% or more, unlevered. You get much different pricing if you apply the government's cost of funds.
I met a high level Merrill exec recently -- a crony with no reason to lie to me -- who said they're over-reserved by a lot, in his view.
If banks just had year-end audits, what's the purpose of a "stress test." It's creating uncertainty, and could prove diabolical in its implementation. When they were hauled before Congress, some of the CEOs talked about how they had modelled for a very severe recession -- big drops in real estate ... even double digit unemployment ... whis isn't that enough stress.
Unless the stress test is to model for the chaos Obama & Co are creating. Upcoming deficits will have to be financed domestically. Watch for rates to rise, and private investment get squeezed. Unless we have our federal reserve banks put it all on their balance sheets ... which is printing money ... watch for inflation to kick in.
Link
By davod, at
Mon Mar 02, 09:13:00 PM:
After 9/11 there was some chatter of manipulation of the stock market before and after the attacks. No furher information was released.
September 2008, 500 billion an hour was being withdrawn and the government stopped the trading because they estimated 5 trillion would have been removed by the end of the day. No information about who was withdrawing the funds.
Now Tigerhawk asks who is getting the money being funnelled trough AIG.
Good Question - will we ever find out.
By Viking Kaj, at
Mon Mar 02, 09:47:00 PM:
Link,
1-2 Trillion may, or may not be the figure. If things continue to go south, that number could get a lot worse in a hurry. Also, securitization of the debt instruments makes it difficult to take over just the troubled assets without unwinding the whole security qnd repackaging these, something the government so far has been unwilling to do. So we get band aids.
If this was a regional crisis like the 1980's S&L, or a 3d World with the IMF situation the answer would be easy. Government needs to step in and nationalize the banks, clean things up, and refloat the banks. For obvious reasons, that alternative is unpalatable for the people in DC, since it means some very big donors will loose a lot of money. Think Yakuza in the Tokyo real estate debacle of the 1990's.
For the time being they will try to patch things up. Also, spending a lot of money on pet causes and donors is part of the Chicago Way, which I know you are familiar with. Unfortunately, I think your Nero analogy may be apt. I hope you like fiddle music, because we are going to get a lot of it.
By , at
Tue Mar 03, 12:49:00 AM:
This has got to be the most scattered comment section on Tigerhawk, ever!
Anyway, yeah so Lee was being honest.
Now if we can just get some of them to admit that not supporting a war in which American soldiers are getting killed is a little different than not supporting an economic plan, we might start making some progress.
By Chris, at
Tue Mar 03, 07:33:00 AM:
I could respect him if he only wanted it to fail until the troops were engaged. After the decision was made, and ratified by Congress, then you're either supporting the troops by supporting their mission or you're hoping that they fail, which means that they die in a losing cause. That's not courage, that's a moral vacuum, holding ideology more sacred than human life, the lives of your countrymen and neighbors.
