Thursday, February 7, 2008

News is getting ugly

Cisco ushers in the recession in technology, Walmart sales are up 0.5%, the Bank of Engalnd cuts rates 1/4 point to 5.25% and is worried about inflation, and Bernanke said that a downgrade of the monolines could have "adverse effects" on banks and the economy. So MBI raises $750 million, and now the banks are safe?

The S&P has it's worst start in 70 years, and the NASDAQ's is already down 14%. And real estate is worse. In Florida you had more foreclosures last year than through the years 1980-1992 combined! The states, are seeing their budgets being crushed, with less revenue, combined with the slashing of property values. So now take the states out as a net positive in the employment statistics. That's gone.

Now the markets only have to look forward to another intermeeting rate cut from the Fed! The three legged stool with the Fed's assumptions is now just wood on the floor. They thought that sub-prime was "contained." One leg gone. That the economies around the world would hold up while the U.S. faltered. That they were "decoupled." The second leg gone. That employment would hold up. Splat! Firewood. And now the markets, have rightly lost faith in the Fed!

And now the ECB, which didn't cut rates, is like our Fed was in August. Trichet's head is not in the sand, it's in his ass! Inflation? It's deflation!

And when the deflation genie gets out of the bottle....well I'll just defer to Wilbor Ross' commentary on the AAA rating of the monolines, as it aptly applies to deflation also. He said "I think a triple-A rating is like virginity, it's very important to keep it, once you lost it it's very hard to get it back."

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