"A Generalized Meltdown of Financial Institutions"

[donsu]

http://counterpunch.com/whitney11242007.html

(some choice paragraphs from a long article)


Reality has finally caught up to the stock market. The American consumer is underwater, the banks are buried in dept, and the housing market is in terminal distress. The Dow is now below its 200-Day Moving Average -- the first big "sell" signal. Anything below 12,500 could trigger program-trading and crash the market. The increased volatility suggests that we are watching a "real time" meltdown.

-snip-

"'This' is a severe warning sign,' said Hans Redeker, currency chief at BNP Paribas. 'Asia ignored the credit crunch in August but now we're seeing the poison beginning to paralyze the whole global economy.'" (Credit 'Heart attack' engulfs China and Korea" Ambrose Evans Pritchard,UK Telegraph,)

The credit storm that began in the United States with subprime mortgages has spread to markets across the globe. In fact, the train has already crashed. What we're seeing now is the boxcars piling up on top of each other.

-snip-

Another sign that the markets have reached a "tipping point" appeared in a Reuters article on Wednesday; "Interbank Covered Bond Trading Halted on Volatility":

-snip-

Reuters: "Due to general market conditions and the specific mechanics of the inter-dealer market making it even seems possible that inter-dealer market making will not be resumed this year."

That's bad. The mechanism for converting covered bonds into cash has broken down.

-snip-

It's unrealistic to thinks that Schwarzenegger can stop the tidal wave of foreclosures that are sweeping across the state. An estimated 3 million homeowners will lose their homes nationwide.

-snip-

Looks like Chicken Little might have gotten it right this time; "The sky IS falling."
----------------------

[enid602]

1. boxcars?

"What we're seeing now is the boxcars piling up on top of each other." No, those are just elephants mating.

[flashl]

2. A house of cards that allows

recycled shipping containers and tool sheds as homes for "others" while professing a housing boom will fall sooner or later.

[pa28]

3. And the market is only down 10% from it's all time high.

The Fed's rate cuts seem like a crutch that just extends the inevitable and they can't go on forever. As soon as one cut gets priced in the market prices in another on the assumption rates will go down again. Maybe there is an expert here who can correct me but this pattern does not seem sustainable.

Sorry to be a downer but I just can't ditch the notion there is much more downward travel in store before the markets properly reflect real conditions.

[kickysnana]

4. Dollar down over 30% since 2001 so refigure your "high".to reflect reality. n/t

[pa28]

5. It's an unusual situation.

Up until now the conventional wisdom would say a sinking dollar is beneficial for the stock market because it allows American corporations to be more competitive in overseas markets.

Inflation is the normal yardstick economists use to make an adjustment like that over time. The inflation adjusted high from 8 years ago is around 14,000.

:hi:

[kineneb]

6. and for more gloom: Nouriel Roubini

http://www.rgemonitor.com/blog/roubini/228668

gonna' get uuugly out there...