The End.

[StrongTurd]

Interesting analogy. I like.

Having said that, I cannot help but feel that the market is significantly overreacting. The pace at which things are going South at the moment just does not gel with current energy prices and the massive sums of money that the central banks are pumping into the economy. In fact, this crash is currently unfolding significantly faster than during GD1 in the '30s. Sure, I do believe that we're screwed, but this sort of thing should take years, if not decades to unwind; not months. I would not be surprised if we see a (temporary) upswing in the near future.

 

[StrongTurd]

AIG projected losses: $60 BILLION

American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.

Link.

The total sum pumped into AIG since September 2008 approximates the GDP of South Africa!

 

[Lord Anubis]

GDP down 1.8%

 

[StrongTurd]

GDP down 1.8%

Considering the fact that our population is growing at about 2.5% p.a. EXCLUDING the millions of illegal immigrants we continue to welcome inside our borders, then we need a 2.5% GDP growth just to stay in one place. For it to shrink by 1.8% means that easily a couple of hundred thousand jobs were eroded out of the economy.

Similar to most countries in the world, SA's manufacturing industry has almost imploded in recent months. This must have contributed significantly to the negative GDP growth:

The killjoy in South Africa's economy at present is the manufacturing sector, which has just reached its worst level since 1960.

According to data released on Tuesday, South Africa's manufacturing sector is not only in a recession, it is dropping at rates last seen before television had even been introduced into the country.

Manager of GDP at Statistics South Africa, Kedibone Mokone, confirmed that manufacturing was at a worst level since 1960.

According to Tuesday's data, manufacturing dropped a mammoth -21.8% quarter-on-quarter (q/q) seasonally adjusted annualised from the -9.4% in the third quarter and contributed -3.5 percentage points to the total q/q drop of -1.8%. Two consecutive quarters of negative growth is a recession.

 

[StrongTurd]

On a US-based forum that I frequent, there's a thread called "Your local economy" where members post anecdotal stories of what effect GD2 is having on their local economies. This thread is already 20 pages long but when reading these stories one realises how bad things are getting. Here's a couple of extracts from just the last 2 pages:

From Oz:

My thoughts are with all of you guys suffering in the US due to the greed of a few.

Australia is not far behind you though.

Lots of house for sale signs in Perth. The mining boom we had is over, with large mines like BHP Ravensthorpe closing altogether. We are no longer riding on the economic growth of China who used to sell our raw materials to the US and the World as manufactured goods.

I'm working from home today (Fortunate, but fellow workers resent me for it) as I can't afford to travel to work on what I am being paid. Rent is skyrocketing in Perth, so after Rent, one bill, child support - I am broke.

From a teacher in Georgia, USA:

I think my husband's job is secure for the next school year, but then what? Who the heck knows how things will be this time in 2010. So our "worse case plan" is to sell the house & move back to FL with my parents. (the house is 1/2 paid off) I'm also a teacher (staying home w/ kids) so it's not like I could go out and get a job. From teacher message boards that I have been watching, there are NO jobs anywhere for teachers.

Carpenter in St. Louis, Mo:

I just spoke to my Uncle, who is a union carpenter here in St. Louis. He said he and all his friends are laid off. He said there are 30,000 local union workers laid off and nothing on the horizon either. The building has completely stopped here. We had a huge boom here, but it has ended. I just gave him my doom analysis and he completely agreed. When we were hanging up, he said, " well thanks for cheering me up, lol. ".

Guy working for IBM:

IBM is firing around the country. The count's over 4,000 now since last week, according to estimates I've read.

The really quirky thing they're doing is trying to get some of the engineers who were whacked to relocate to sites in India, China, Poland, South America, etc, and be paid at the prevailing wages there. A very odd form of offshoring -- they get to keep their American expertise, just pay them at low offshore rates or pay.

Personally, I can't imagine they'll get too many willing to do it.

Vegas:

The Big Casino's here in Vegas are starting the cut backs,, Station Casino's have told there crediters and banks to lower there loan amounts and monthly payments or they are going into Bankrupcty to wipe them clean, they are the largest local Casino owners here in Vegas,, Also Wynn resorts have lowered salary workers pay and cut back hourly pay hours and all Casino's have a hiring freeze,, Also talks that other Casino's are going to lower wages and hours and if this don't work than the Big Layoffs will start to happen maybe by summer if it don't turn around soon.

Vegas has the 2nd highest foreclosures in America now just down from 1st place, if the Big Layoffs happen this summer we will move back to 1st place and things will really start to get ugly.

My current largest cleaning contract is with a $200 million condo highrise that has only sold 10 percent units and the sells office staff has left the building because they are starving to death with no sells.

Many other large projects 1/2 built have stopped and Ceasars Casino that just finished a $150 million highrise hotel tower is now going to sit vacant because lack of business and gamblers, thats going to look good on there books and stocks.

We are also starting to see more new vacant strip malls like never before and one large mall is now 1/3 vacant and growing.

1/2 of are RV dealers have shut there doors and many Car dealers are in Banckruptcy.

If any of you were thinking of heading to Vegas to look for work don't waste your time we are now over 9% unemployed and growing.

Electrician in the Midwest:

Husband works as a commercial electrician and things are slow as cold molasses. Getting a full 40 a week is less than a once a month occurrence, and many planned jobs are falling through. Local colleges have canceled remodels and updates. Many businesses have found the money they planned to use to build has dried up. Lots of construction workers are hanging on by the skin of their teeth & many more are praying to get any work at all.

Indiana:

Off to Home Depot for material to fix up our bathroom, and saw about 6 customers in the whole store. Okay, it's Saturday night. But, at 7 pm all the fast food places were deserted, too. Kroger big box grocery had about 2 dozen cars, and all the stores in a strip mall were empty.

Compared to the traffic and crowded stores a year ago, this was spooky quiet. We ate at an Arbee's and were the ONLY customers.

Trucking company in Nashville, Tn:

Today the CEO of Shippers transportation ( Nashville Tn based) closed the doors and walked to his car closing a 250 truck company.

I had a friend who knew the comptroller and we asked a few questions.

All trucks are parked on the yard waiting repossession or already turned in.

All trailers the same.

All freight delivered.

All drivers home and all paychecks paid. ( they did not bounce).

A sad but class act end for an auto parts hauler caught in the economic down turn.

One comment, in the late 70s and the 80s when companies like Brown transfer and McLean's went under it was nothing unusual to have hundreds of drivers stranded in the middle of trips by shut off fuel cards while everyones last pay check bounced.

I salute Shippers for the class act of closing the right way.

I can go on and on but you get the idea.

 

[StrongTurd]

I forgot to post this one, which I found rather good:

Here in good ole High Point NC today I will layoff 3 more employees that have been loyal good friends for the past 6 years. Down to myself, and my wife. Too many of my customers cannot get financing to either complete work we have started or to begin work committed. My business does just under 1M and I had a back log of projects that are in excess of that starting in December 08. We should have completed half of that work as of today, but only 30K of that work has come in.

Went to our bank to see what I could do to keep it all going and watched the EVP of the bank have what appeared to be a breakdown. Said he felt like "the sprinkles on an ice cream cone that would not fall off", then stood up from behind his desk and said " I can't get the sprinkles off" started rubbing his body all over trying to get it off. Scary as hell folks, he then went on a 2 hour rant about all the massive problems (he handles many businesses in the area). Started showing me all the local people that have lost everything and then the others that soon would. Guys, this IS my tipping point, I was convinced we are in the TSHTF senerio anyway, but after this meeting I know it is very close to the end of the party. The banker said over 60% of the people that received notes through the bank cannot hang on much longer(businesses only, not counting residential which he said was WORSE) and the only way I could get money even with a decent P&L would be a bridge loan...based on a signed PO from my customers, then the kicker was I need to hire a factoring company to invoice the job and have the bank paid in full with the proceeds. He said the banks want zero risk and will NEVER loan money as before again. This guy has been in banking close to 30 years. If I could head to the hills with my family now, I would do so...

...and:

we run a family sand gravel and ready-mix operation in fall river ma.

the operation is nearly coming apart at the seams no one is buying concrete, and our quarry has produced more aggregate and sand then we can use for this year the construction market just disappeared...........

While these random posts are in no way a scientifically representative sample of society, it would appear that there remains little doubt that GD2 is now in full swing.

 

[RandomDesign]

there remains little doubt that GD2 is now in full swing.

wrong! It's barely begun, we're still in the opening act.
And with a global food crisis looming, it looks like the next scene should involve a lot more unhappy, hungry people.

I guess we as South Africans can chuckle as the rest of the world treads down the path of crime, disease and unemployment we know so well, but it's really the Zims who'll get the last laugh as we tread their path and everyone eventually follows us.

 

[Generix]

Interesting analogy. I like.

Having said that, I cannot help but feel that the market is significantly overreacting. The pace at which things are going South at the moment just does not gel with current energy prices and the massive sums of money that the central banks are pumping into the economy. In fact, this crash is currently unfolding significantly faster than during GD1 in the '30s. Sure, I do believe that we're screwed, but this sort of thing should take years, if not decades to unwind; not months. I would not be surprised if we see a (temporary) upswing in the near future.

I fear the market is underreacting. The massive sums being pumped into economies are not productive money - it is used to prop up mechanisms to encourage more debt, which was unsustainable to begin with. IMO the reason the unravelling is so fast is due to 1. globalisation - very difficult to contain contagion if there is no way to isolate the patient, and 2. the global financial model where, even now, the perceived answer to all our woes is to just get banks to 'lend' again, with absolutely no emphasis on enabling people to 'earn' more so that they can spend real money. Sheesh, even the bail-outs in the world's large economies are funded by imaginary money.

If we do see an upswing, it will be very short-lived - the last desperate gamble of the speculator class before the edifice crumbles.

This just in:
http://www.fin24.com/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-25_2477355

SA reeling from global crisis

The feed-through of the global crisis into the local real economy is worse than expected, RMB currency strategists said on Friday.

They were commenting on the trade data released earlier by the SA Revenue Service showing that trade deficit widened to R17.4bn last month from R1.6bn in December. /../

RMB said the trade deficit partly reflected a seasonal pattern, "but even adjusting for this effect the deficit is the largest ever recorded by a meaningful margin".

According to RMB, exports suffered "a major collapse", declining 25% month-on-month in January alone.

"In dollar terms exports are now down almost 50% from their pre-crisis level ... Rapid declines are being seen in many countries but the decline in South Africa is far worse than most!"

This not only reflected a decline in export volumes but also in export prices associated with the collapse in commodity prices, RMB said.

The data has two implications.

The first was that the trade outlook is worse than the market had thought and this was rand negative.

"The market has been right to push dollar/rand back above 10," RMB said.

The second implication was that as the impact of the global crisis on SA's economy was worse than expected, economic growth expectations might have to be revised downwards.

Are you guys planting vegetables yet?

 

[StrongTurd]

@ Generix: Yeah, you make a good point. In fact, I was just reading an article about the same thing, a few extracts from which I quote below:

President Obama has "threatened" to spend north of $1 trillion in "stimulus", but in fact the nation doesn't have that $1 trillion. You cannot go further into debt to avoid the consequence that arises from excessive debt in the first place! If President Obama does not realize this fact and change course before he (and Congress) spend this money the odds of that 50% contraction go up precipitously; the $1 trillion expenditure alone will "back load" yet another 5% onto the GDP contraction that must come. This is an act of pure lunacy and yet it appears to be precisely what our government intends to do.

You cannot solve an addiction problem with more of whatever the addict is hooked on, whether it be booze, crack, meth - or debt.

Our monetary system is debt based. The more "liquidity" they pump (and even the more money they "print") the more debt is taken on. Again - have you ever seen an addict cured by giving them more of their favored drug? Is there any possibility that this "medicine" can actually work? Simply put: NO.

Here's some predictions for 2009 made by this same author. As you'll notice when you read the rest of the article, his predictions for 2008 were almost spot on:

The economy will not recover in 2009.

Deflation, not inflation, will become evident well beyond housing.

The Fed's attempt to "pump liquidity" will be shown to be an abject failure.

GDP will post a 12-month negative number and there is a decent shot that we will actually see an official depression print before the end of 2009, defined as a 10% decline peak-to-trough.

The Stock Market has not bottomed although you may think it has for a few months.

Precious metals will not be a safe haven.

The Dollar will not collapse.

The pound or euro - and perhaps both - will likely be where the FX dislocation initiates if it occurs.

The US Consumer will go from a negative savings rate to a seriously-positive one.

Commercial Real Estate will effectively collapse and most commercial Real Estate REITs will be either insolvent or limping on life support.

Along with the above, expect 10% of all retail stores to close, and that number could go as high as 20%. That's not going to be fun; there will be hundreds of malls that wind up literally shuttered across America.
Several states will get in serious financial trouble and outright default of one or more is possible in 2009. California leads this parade.

Mortgages are not done. The story last year was "Subprime." This year's will be "ALT-A", "Option ARMs" and so-called "Prime".

The calls for "more lending" to consumers and businesses will go exactly nowhere.

General Motors and Chrysler will fail to meet their targets and it will be labor that sinks the deal.

Protectionism and currency manipulation will rear their ugly heads in 2009, originating not here but in Asia as their economies go straight into the toilet.
Commodities will appear to be headed for a new bull market but this will turn out to be a false hope as demand continues to collapse.

Sovereign debt defaults will number at least three with many other nations on "watch" for same; we had one last year (Iceland.)

China will have its first large-scale rumbling of civil unrest as a consequence of collapsing export demand and thus employment.

Foreign uptake of Treasuries will be choked off - by necessity. It won't be because they want to screw the US

"The City" (London to be precise, Britain generally) will be recognized as getting it "worse than we are" (in America.) This will be the first of many validations of my thesis "we're screwed, they're gang-raped."

Things will get "revolting" in a number of nations. Not here in America. Yet. If we're lucky the American Sheep will wake up and stage some of that peaceful protest stuff I outlined above. If we're not so fortunate 2010 could be really bad.

That veggie garden might yet prove to hold far more value than simply providing stress relief.

 

[Buddha]

f.u.c.k :-/

 

[Lord Anubis]

I think the next big collapse we can expect is the whole East Rand (specifically all those 1000 or so small manufacturing workshops)

 

[StrongTurd]

What's Dead (Short Answer: All Of It)

Another shocker of a prophecy:

Just so you have a short list of what's at stake if Washington DC doesn't change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can't believe, and they're showing it as an imminent event - like perhaps today imminent.)

All pension funds, private and public, are done. If you are receiving one, you won't be. If you think you will in the future, you won't be. PBGC will fail as well. Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.
All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can't earn anything off investments, and if you have a claim in process at the time it happens, it won't get paid. The probability of you getting "boned" on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.

The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they're doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.

Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to....
Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.

Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what's left of it, or an IRA, consider it locked up in Treasuries; it's not yours any more. Count on this happening - it is essentially a certainty.

Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to....
The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won't be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.
The good news is that this process will clear The Bezzle out of the system.

The bad news is that you won't have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.

It really is that bleak folks, and it all goes back to Washington DC being unwilling to lock up the crooks, putting the market in the role it has always played - that of truth-finder, no matter how destructive that process is.

 

[StrongTurd]

Here's an interesting response that I found to the previous post that pretty much echoes my sentiment:

Markets in free fall again today. More horrific news.

I am finally begining to accept we could be close to losing this whole thing. I thought they would keep it together for a few years with their smoke and mirrors and duct tape, but now I feel we may have just weeks/months before it becomes clear the whole thing is beyond hope and a total collapse of the whole financial system occurs. The whole is clearly utterly broken and nothing anyone seems to be doing is having any positive effect. All we have seen so far could well be just the beginning of this mess.

 

[StrongTurd]

Citigroup falls below $1

Nice little graph on this link showing how CG's share price crashed in the last 2 years.

Citigroup, once considered one of the nation's mightiest financial institutions, logged another dismal milestone Thursday, as shares of the beleaguered bank slipped below $1 a share.

The move, which may have seemed unthinkable just months ago, came as the broader market fell once again toward new 12-year lows due to worries about the health of the banking sector and the broader economy.

After falling as low as 97 cents a share midday, Citigroup (C, Fortune 500) pared some losses and was trading at about $1.01 in the late afternoon, down 11% from Wednesday's close. It marks the lowest level for the bank's stock since Citicorp and Travelers Group merged in 1998 to create Citigroup.

 

[-toady-]

Here's an interesting response that I found to the previous post that pretty much echoes my sentiment:

Markets in free fall again today. More horrific news.

>I am finally begining to accept we could be close to losing this whole thing. I thought they would keep it together for a few years with their smoke and mirrors and duct tape, but now I feel we may have just weeks/months before it becomes clear the whole thing is beyond hope and a total collapse of the whole financial system occurs. The whole is clearly utterly broken and nothing anyone seems to be doing is having any positive effect. All we have seen so far could well be just the beginning of this mess.<

...bolt-eyed!

 

[StrongTurd]

1 in 5 home loans in Florida delinquent

20 Percent! That is a BIG number!

Florida's mortgage crisis worsened significantly in the last three months of 2008, with a stunning one in five home loans one month or more past due, the highest delinquency rate among the 50 states, an industry group reported Thursday.

Of those, 8.95 percent were in foreclosure -- representing 320,315 homes. Nationally, 12 percent of loans were past due, with 3.3 percent of those in foreclosure, representing 1.9 million properties.

Link.

 

[BBSA]

.

We have nothing to fear, but fear itself.

 

[Alan]

This thread should come with free SSRIs

 

[Lord Anubis]

Financial Armaggedon...date..anyone else wanna guess?...1 October 2009?

 

[StrongTurd]

Financial Armaggedon...date..anyone else wanna guess?...1 October 2009?

Before I reply, I've encountered another indicator of exactly how bad things are. It is called the Baltic Dry Index (BDI) and is an indicator of worldwide shipping volumes and as such is a highly accurate indicator of international economic activity.

Obviously there are no prizes for guessing that this index has dropped in the last six months or so. The eye-popping thing is the actual magnitude by which it has dropped. So how much would you guess it has gone down by? 15 percent? 30 percent? Nope. Try 94 PERCENT! If this index is to be believed then it means that international shipping has effectively come to a halt.

Here's some background on the abysmal drop in the BDI:

I've been discussing the Baltic Dry Index (BDI) with everyone I can for months now. I started following it in June of 2008. It's not a traded index so no one profits from the index itself, which makes it virtually manipulation proof. It is what it is and that doesn't bode well for any of us.

OK, we have 26 shipping routes around the world that the BDI looks at. Shipping stocks are slaves to the BDI. Capesize Ships (over 100,000 tons) make up only 10% of the World Fleet but move 62% of Dry Bulk Traffic (at a given time Australia has 35/40, China 20, Brazil 40-50, S. Africa 1-7). Panamax Ships (60,000-80,000 tons) make up 19% of the world fleet and move 20% of the Dry Bulk Traffic (at a given time Australia has 40-60, China 20-35, Brazil 3-12, S Africa 0-1). There is a third and fourth ship size but they are quite small and they aren't moving either.

If we can use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day.

If the BDI is wrong it will be an historic first. The BDI is used by bankers, financial experts, brokers, traders and everyone in high-end finance to assess the global financial condition and the availability of products worldwide.

The BDI has dropped 94% in a short few weeks which means raw materials, grains, ores, steel, iron, cement and all imported products for food manufacturing and product manufacturing even though we actually do very little of that here in the US. We do make bread and other products that require grains, like cereals. We import clothing, gasoline, various fuels and, well, just about everything these days and the BDI says global shipping has shut down.

It is hard to believe that there the vast majority of people out there have got no idea that we are utterly screwed. I've said this before but I believe that for most people the first clue will come when the local ATM fails to spew out any money or when the friendly corner Spar runs out of white bread.

To come back to your date of 1 October: I'm not going to hazard a guess. There are just too many variables involved for me to predict with any certainty when the wheels will finally fall off. Deep down I'm still holding out hope that Mr. Obama and his massive bailouts will be blessed with a miracle and that they manage to fix a huge debt crisis by borrowing another huge sum of nonexistent money. The odds are extremely slim though, IMHO.

There are currently two things that stand out for me that, if they happened, will be the final straw. Firstly, there's the Eastern European debt bubble, which still has to burst. If a recently leaked secret EU report is to be believed, then the EU banks are leveraged to a massive 44% of their market capitalisation in bad loans to Eastern European countries and this thing might pop at any time. It would devastate the European economy and would drag the rest of the world down with it in short order.

Secondly, it would seem that American farmers are currently finding it almost impossible to obtain production capital from the banks (the banks have stopped lending, remember). I would assume that this situation will also apply to other large agricultural countries like Oz and Brazil. If this does not get addressed as a matter of extreme urgency, then we might well run into a massive food shortage at the end of the Northern hemisphere's upcoming summer growing season. In that case, your date of 1 October might well prove to be quite accurate.

Interesting times, these are...