Friday's employment

I havent yet heard of major job losses, have you? If the employment report is good, the dolar could continue its ascent, and that put pressure on margins. Dollar weakness fits with the euro topping out this past week, oil getting wobbly, and gold leading down. Marginas have been helped though weak dollar translation. ....but the us could be the better market to be in, the dax and euro markets failed to confirm new month highs. I hope this isnt a case of america sneezes and the rest of the world catches a cold. The market on the other hand could think the worst of the recession is behind us after the biggest bubble in history 2000??? Open ramblings here...

The major job losses will come. Be patient. Rome wasn't destroyed in a day. I said last year and I say it again, this is going to be a protracted, painful drop. It's not going to devolve quickly, it's not going to bottom quickly, it's not going to recover quickly. "The biggest bubble in history 2000" was much more contained than this situation. In the end this will be much bigger and much more invasive.

Edited by milbank, 26 April 2008 - 07:28 PM.

In the end this will be much bigger and much more invasive.

Why?

In the end this will be much bigger and much more invasive.

Why?

Just the collapse of MBCP is going to cost investment banks between a quarter to maybe more than half a trillion.

I will touch on one recent example of what is going on and to the scale of it as a poster child for what is happening in the world of commercial credit and debt.
This yap about short sellers bringing down Bear Stearns by it's CEO is not the real story. The real story is the collapse of Carlysle Capital the week before to the tune of 16 BIllion dollars. This hedge fund had borrowed $30 for every $1 it had. Most of the lending to them was by Bear. This is not an isolated incident only except for the fact that Bear couldn't handle the loss of that much liquidity which begat the short selling and lack of lending of other banks to Bear. I use the Bear situation as an example because it encapsulates the general attitude towards debt, lending and spending from the lowliest Sub-prime borrower, the lender who gave them the money and the hedge fund who invested in the lender via funds it borrowed from the ibanks, not to mention the investment products sold to these hedge funds with money borrowed from the ibanks based on the mortgages the ibank bought and packaged by the lender depended on the subprime, no money down borrower who bought ten of these houses with no money down. This chain of default ignites more defaultad infinitem on a financial scale expanse more massive than the bankruptcies of the 2000 collapse.

You then add in the rise of commodity prices, scarcity of food stuffs due to demand and lousy crop yields along with a massively depreciated dollar and inflation igniting rate drops by the Fed begetting higher prices more debt on an already tapped out consumer begetting more bankruptcy.

The explanation is simpler; I am not sure the economy will be able to grow out of the deflation in the real estate with the current inflation in the commodity prices. The debt is not important as long as the economy can continue to grow faster than the erosion caused by the debt, or inflation, but this time could be different since the mountain of new debt needed to fix the situation could be bigger than the economy can sustain an aggressive real growth at the moment... The anecdote here is the US economy has proven people wrong over and over in the past 5 years with the similar statements to these, so I don't think anyone really believes how bad the situation is or whether the debt machinery is broken or whether the Fed might fail to contain the situation in the banking... So, I think there is still a lot of complacency, it will become evident once SPX moves above 1400 which will most likely stop this advance...

It's a good thing I was tired when Scott asked me why or I would have made a post two to three times longer than the post I did.