Thursday, July 17, 2008

Mid-Summer Odds and Ends

I've been doing some reading and I don't think that I'm going to lick the corn dwarfism problem that I am seeing in my garden. It appears that the culprit is a virus that also lives in Johnsongrass, an invasive species from Europe that has spread world-wide now. Given that there is lots of Johnsongrass near where I live and that I cannot possibly eradicate it alone, I'm going to investigate other grains next year.

Given that this is the southern US, I am preparing a second planting of many things. The cucumbers did ok this year but have largely died off early. I am not sure if it was the heat or soil issues yet. The squash did its usual thing - bloom hard and hardy for several weeks then die off regardless of what I did. I may try to plant a second squash crop too. The strawberries are doing well enough, with the exception that my family hasn't seen any. The birds and squirrels keep snapping them up before they are really ripe enough. Of course if the squirrels keep that up, they may be what's for dinner instead.

I notice that the financial wizards continue to rig the markets ever more blantantly in favor of their own core group. The latest round of protections for Fannie Mae and Freddie Mac includes select financial institutions. You can consider that these are the "bad guys" of the world scene since they made billions shorting other companies but now have begged the SEC to place them beyond such responses. That list includes:

  1. BNP Paribas Securities Corp
  2. Bank of America Corp
  3. Barclays PLC
  4. Citigroup Inc
  5. Credit Suisse Group
  6. Daiwa Securities Group Inc
  7. Deutsche Bank Group AG
  8. Allianz SE
  9. Goldman Sachs Group Inc
  10. Royal Bank ADS
  11. HSBC Holdings Plc ADS
  12. JPMorgan Chase & Co
  13. Lehman Brothers Holdings Inc
  14. Merrill Lynch & Co Inc
  15. Mizuho Financial Group Inc
  16. Morgan Stanley
  17. UBS AG
  18. Freddie Mac
  19. Fannie Mae
As Mike Shedlock notes, it's also interesting who is not on this list. Since this list was supposed to protect financial companies from shorts, why not protect those financial companies getting shorted the hardest, like this list:

  1. Washington Mutual
  2. Wachovia
  3. Corus Bank
  4. Bank United
  5. National City Corporation
Those guys are getting clobbered by shorts but they are not protected! Wonder why? Because they are not part of the global elite. These companies are being sacrificed while the elite get to keep their ill-gotten gains and continue raping the planet for more ill-gotten gains, all at the expense of the rest of us. Lovely game, isn't it? The only winning move for you is not to play, to paraphrase WOPPER, the War Games computer.

I also note that, despite constant claims of imminent collapse, that the global economy is still hanging on. Now, I will be the first to say that given the numbers I have seen that fast economic collapse actually makes the most sense to me. But it's not occurring despite what I and many others think. I saw this before, in the 1979-1982 recession. People kept expecting financial armageddon and it never really arrived, at least in the form of a singular event. I also suspect that many of us equate 1929 with the Great Depression but the Depression actually took several years to get into full swing (just like this one appears to be trying to do). So one thing I would warn of is to be prepared for a longer, more extended fall than you might have expected. And it's probably going to be slower too.

Now having said that, I think the markets have settled into another trading range. This range looks to be approximately 10,800 to 12,000 on the DOW. It may last from several days to several months. The last trading range lasted from March until very recently. Some of the earlier ranges lasted far shorter. But given the gloomy financial picture, another move downward will come and if it holds true to form, we can probably expect a lower bound around 9,800 or 9,900 and a new upper bound around 11,000. However, just because other forces appear to be at work, I am going to guess that the next downward move won't really start until close to the end of the Olympics or shortly thereafter. But that's purely a guess. We just have to wait and see what triggers then next downward wave.

As for what is happening in the world, there are rumors that the major banks have all colluded to stop all mortgage renegotiations, effective somewhere around Monday, July 14. I have been unable to confirm this rumor so take it with a gigantic grain of salt but I have heard it. However, the word is out that the new mode of operation is "foreclose on anything you can" and that all the major banks are working together on this. Note that IndyMac bank, recently seized by the Feds, is still renegotiating, since that is one action that the government has urged anyway, over and over again.

In other news, global oil exports continue to decline, even though it appears we may have a new all-liquids peak date but the new value is only a tiny bit higher than the old value. (Crude and condensate remains on the same plateau it has been on for 4 years. The new liquids are NGLs, tar sands, biofuels, etc.)

Pressures continue to build around food and fertilizers. Rolling blackouts and brownouts are affecting more and more of the planet. Ammunition shortages continue but are not completely critical yet. Machine tools remain available but prices are climbing and may skyrocket as soaring steel costs percolate through the economy.

The summer drags on and the slow motion collapse continues. The blessing of a slow motion collapse is that it gives those seeking to prepare yet a bit more time. Now I need to get back to my garden and my tools. I can only hope that your focus is on you and those you care for immediately around you.


fallout11 said...

Good to see you posting again, Greyzone, and a solid post at that. Thank you.

As a fellow southerner, I will say that the heat zapped your squash, in the old days it was not uncommon to grow it only during late summer-early fall 2nd planting cycle. Cukes often do well only to die off during June, hope they gave you some beforehand. Your strawberry experiences mirror my own, but at least the plants are spreading for next year.

The blueberry and raspberry bushes I planted this spring died, while the blueberry bushed from years past continue to wither and join them. Guess it's just too hot here now, but others in the area have enormous ones 10-20 years old.

Ammunition is getting ridiculous in terms of cost, 50 cents a round now being common for common calibers (.45, .357, .556 etc), $1/round not uncommon for unusual or old calibers .308, 8mm Mauser, .30-06, 7.5x55, etc).
Consumer price inflation is rampant, a quick trip to Walmart will confirm. I've also started seeing empty shelf space and lots of 'facing' (existing products spread thin to cover wholes) while the clerks talk about fewer trucks arriving and less goods being delivered.
Shipping times for many mail/internet orders are getting longer, and Mountain House cannery has suspended all orders and sales until 2010. They're now 78 weeks behind on shipping.

fallout11 said...

Grey, great topic, and again, great post. Really got me thinking.
A bit more from me on the economy/banking/mortgage issue you brought up.

The housing crisis is only about thirty percent over. It does not take a rocket scientist to figure out that a nation with a negative savings rate is not about to meet traditional requirements of 20% down for mortgages on homes which are still stuck with a median national price of $206,700 (as of May 2008 per the Ministry of Propaganda) and real inflation running well above 11% (thank you You see, when a family sees gasoline, heating oil, utilities, medical insurance, property insurance, property taxes, food, clothing and Fluffy the wonder poodle’s medication all going up in price while real median net wages (not income, not the government distorted figures) are declining and you are going to have a hard time finding families, singles or people living under bridges saving up enough extra cash or aluminum cans to finance a down payment, much less the annoyance of having a realtor convince you that a home is an “investment” that you can make a profit on in less than a decade.

Despite the popular belief that the US Dollar has “bottomed” it is in the same decisive consolidation phase that the metals and many other commodities have been.
Since April of 2007 where the first rally to the 200 day moving average there have been six such failed rallies. Each time it triggered a new, sharper decline immediately following, and yet still remains below the 200 day moving average. It will soon be worth even less.

The choices for stupidity and Benron are pretty simple: Pour more money on to the fire or watch bank after bank, stock after stock, company after company and consumer after consumer go belly up. Oh and since it is an election year, look for one more huge fiscal stimulus package to be dumped on America all in the name of saving “Santa” and making sure the children have plenty of ChiCom lead laden toys to eat this Christmas so they can get autism or grow a third eye in their foreheads so they can get prescribed and suck down government funded prescriptions to keep the pharmaceutical industry contributing to their campaigns.

Ain’t being a debtor nation just great? Welcome to the Banana Republic of the United States.

So as of this point, let’s review the ongoing beating we are all taking:

1. There will be no housing bailout by the “investors” as the banksters are demanding some absurd down payments. I mean how dare they return to the “traditional” role of forcing the buyer to have a vested interest in the properties just like the “good old days” most of us grew up with.

2. The housing price decline will not meet the median income of the average American family because the investors who own the paper will not let the banksters nor anyone else mark the prices to market. Incidentally, that is your rumor of renegotiation of mortgages being halted, Greyzone, it is not just the bankers themselves. It also not a rumor, it really is happening (or at least I've heard the same from many).
If the original mortgage was written for $350,000 on Mr. and Mrs. Joe Blow’s recently foreclosed home, the banks do not want to take the hit to their assets or capital reserves by marking the price down to the current asking price in the various markets of $250,000. Add in the owners of the paper be they JPM, GS, or Wi-Wi Wi in Beijing demanding to be made whole again on their MBS and the insurance holders of that bond laughing and crying while playing drinking games, and you see we are in a gridlock of death financially.

3. The dollar has found a new resistance level and will have one heck of a hard time getting above the 73 to 74 range any time again in our lifetime unless there is a move to raise interest rates to a level unseen since 1981 and the willingness to reign in the Congressional desire to finance pet projects and their retirements on our backs. Since we know that will not happen, look for option “B” where the dollar proceeds, hopefully orderly, down to the 62ish range to freak out the economic pollyannas and flying monkey spin economists of the world.

4. Market interference will continue at the regulatory level where eventually even commenting on the individual stocks, bonds or derivative creations could result in civil or criminal penalties as the First Amendment is reserved only for those who have a 1% controlling interest in Goldman Sachs or a membership as a shareholder in the Federal Reserve.

5. Stocks are still in a bear market. We shall see rallies, we shall see declines. But the bottom line is until we test the 10,000-10,680 range, we are not anywhere near an intermediate bottom much less a long term one. If you want to see a bottom, well, here:
Despite the desire of every man, woman and child to believe that Indymac was it and we’ll never see another one in our lifetime, I present to you a chart. I know, charts suck and do not explain everything but this one does.
See the S&P Bank Index (BIX) chart over the last 5 years for a really scary picture of where they're heading.

Money is leaving our shores. Why would anyone overseas invest in a net asset which is declining in value? Why would anyone who has more functioning brain cells than a cow even fantasize about business in the U.S. growing and more investment being put into the system the banksters control? There is nothing, absolutely NOTHING, that the government or private industry can do to increase credit growth and expansion without the consumer participating.

Greyzone said...

My own guess mirrors your own. The credit collapse only appears to be about 20%-33% over by my look at things. My base figure for months has been an expected $1.3 trillion in losses, so the roughly $400 billion to date is about a third of that. But lately I am seeing sources I respect suggest total losses to banks will be closer to $2 trillion than $1.3 trillion.

I mark the onset of the credit crunch to the visible Bear Stearns hedge fund collapses in July 2007. There were other events before that but July 2007 was when the world became "aware" of the problem generally, even if they still don't get it specifically.

Given that we took 12 months to write off $400 billion of an estimated $1.3-$2 trillion in losses, that would suggest 2-4 more years of slow motion economic collapse before we even hit the floor.

After we hit the floor how long we stay there depends on many things. And all this assumes that other events don't interfere and speed up the fall.

And I don't really see any long term way out of this but I can imagine a short term attempt to sell war as a way out, depending on who the-powers-that-be choose as their scapegoat.

Oh, and to add to social volatility, I've read reports of a massive US/UK/Fr naval exercise being held in the North Atlantic this month for practicing against a "rogue" Middle Eastern state that has come into possession of nuclear weapons. Countering this and also countering the NATO "missile defense" shield that has Russia all shook up, Russia is proposing to place long range nuclear bombers in Cuba.

So we have big players moving chess men on the board and thinking they can win. Unfortunately, I happen to agree with the old War Games movie" "The only winning move is not to play."