Wednesday, October 15, 2008

Ugliness everywhere

$125 billion at 5%. Who cares?

So Treasury gives these banks money at a 5% rate. I suppose they think they were doing these banks a favor, to give them much needed capital to help cover up their staggering losses. So today, mortgage rates go up 75 basis points.

And why shouldn't they? Can't they get money from the Fed's alphabet soup programs at 2%? Just because Goldman and GE had to pay 10% to Buffett for money; isn't it time for the Fed to just open up the spicket? Do banks want to give a mortgage now, when home prices have further to fall? Lower the rates to the banks, and them lower them to the consumer. Get your funds rate down to 50 basis points now. And screw waiting for your next meeting!

Isn't this our money? Doesn't the taxpayer foot the bills? So what's with this moral hazard argument? Lehman brothers wiped out shareholders, and also wiped out those who had money with the firm. And now there's still $60 billion stuck somewhere in hedge fund land,-frozen with margin calls due. Bernanke, in his speech mentioned FRE, FNM, LEH and AIG who were all wiped out. Here's what he said, "I would like to stress once again that the taxpayers' interests were very much in our minds and those of the Congress when these programs were designed."

Wiping out shareholders caused a tremendous loss of confidence in the system. Well if these shareholders were wiped out--why can't other shareholders be wiped out also? Today he also mentioned, that he was a student of financial crises. We don't need a student we need a leader. A student, would mention inflation four times, and not deflation once. Commodity prices are crashing, yet Bernanke said they now "appear to be decelerating." Appears? Appears to be decelerating? Commodity prices have crashed. Out stock market has crashed. Short term rates have crashed. And Bernanke still mentions inflation and says that inflation appears to be declerating? Has he ever figured out the casual relationship between the stock market falling during every speech he gives? Maybe he thinks that appearance is deceiving!

The Baltic dry index has collapsed over 80% from it's highs; and today the railroads got slammed. If you work in shipping and receiving at any large firm, you can find truckers to move anything, at rates cheaper than last week, and cheaper than the week before. Deflation has taken it's pernicious hold on transportation.

Anyone want to bet that coal shipments have slowed? Is there financing available for dry bulk ships? Why should they finance them? There is tremendous overcapacity. Massive deflation in shipping.

Look at Pepsi. They got crushed yesterday. Down 7, and down 3 today. They missed numbers, but Coke made their's. Does anybody care? Coke also sells bottled water, and vitamin water. The consumer will just turn on his tap. International business saved Coke, while North American volume was down 2%. The consumer is trading down everywhere. They traded down from Starbucks to Dunkin Donuts to McDonald's coffee, to the free coffee at work. Now they're drinking water from the tap. But Bernanke still mentions inflation while the consumer is stuck in deflation!

It's so ugly it makes me want to buy!

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