Wednesday, October 01, 2008

Right From The Start

Continuing on the subject of who got the current crisis right and who got it wrong, take a look at this magazine cover featuring an anxious Uncle Sam. The issue date is April 7, 2008. Around that same time, mainstream financial commentary, both print and broadcast, was trumpeting "great buying opportunities" and "stocks for the long run."

From April 7 to the close of trading this past Monday, the Dow Jones fell 2,247 points.

I don't point this out to pat myself on the back (I wrote one of that issue's cover articles, with Nicholas von Hoffman writing the other). I'm merely noting that this primarily political magazine somehow had the editorial foresight to nail the economic issues that now dominate national discourse well in advance, while its larger, investment-oriented newsstand competitors mostly led their readers over a cliff. For more of that foresight, be sure to read this post and click through to the "Crash Course."

Along with its prewar position on Iraq, TAC is building an impressive record of prescience on the major issues of our time.


Blogger S Goya said...

"Led over a cliff" That's because certain stakeholders had something to gain. Every ongoing debacle continues because someone is profiting from the dysfunction. The Big Bank Bust of 2008 is a metaphor for an institution joined at the hip with the economy--education.

Far-sighted people criticized the housing situation years and years ago, but while there was money to be made, mortgage brokers and real estate agents downplayed concerns.

There are those who profit from the failings of the American education system. It is time we identify and expose them. What will it take for Americans to become as outraged over education as they are about the almighty dollar?

There is a serious lack of mainstream interest of a resource more precious than dollars---our children and our future.

10/01/2008 9:39 AM  
Anonymous Anonymous said...

March 2008

The Dark Side of the Moon

"Conclusion: The debt markets are so out of whack that we are now at a point where credit risk is being rewarded more than equity risk, something that should never happen in a world where equity investors own only the residual rights to earnings. This cannot last for very long: either spreads will tighten rapidly, equity prices will fall rapidly, or both. (Or, chortle, earnings will grow more rapidly.) Stay tuned."

I was watching the news last night, and the anchors actually looked embarrassed and squirmed in their sits. They seemed so uncomfortable talking about economics that impact our lives. The exact stuff they should have been reporting all along. But they happily reported murders and entertainment news.

There are always a few gems out there, but hardly in the main stream media.

When the war drums were beating for the Iraq war, for me, it was Time and Mother Jones. I went to bookstore and flipped through a number of magazines and chose these two for their indepth reporting, quality, and different views.

I stopped reading financial news magazines in the 90's. Cancelled all subscriptions. They are no better than the Enquirer. I still read Professional Journals that are peer reviewed, unfortunately they cost a fortune.

10/01/2008 10:57 AM  
Blogger oyster said...

I assume most here saw this Chi Trib article from two weeks ago, but just in case you missed it, here's an excerpt:

Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

The problem with that approach is that the value of the dollar plunged against foreign currencies, causing crude oil prices to skyrocket because oil is pegged to the dollar. It affected food prices, gasoline and family budgets.
"We have lost control," said Hale, quoting Bernanke. "We cannot stabilize the dollar. We cannot control commodity prices."

10/01/2008 11:19 AM  
Anonymous Anonymous said...

I am a part time real estate attorney. Most of my clients were first time purchaser's with average to below average credit. Realtors, start by telling the Purchaser I have a lawyer, home inspector and mortgage bank to help you. Buyer's don't know the realtor works for the seller alone. This " buyers realtor is bull". The Realtor makes sure their friends are appraisers and the property is valued right. ( Mortgage Brokers also do this). To make more money and distort the " ability to carry a mortgage" they tell them to get two loans a primary loan (80% of the sales price to avoid PMI, with only ( 3-5% DOWN and than rather than tell them the cost of a 30 year mortgage they tell keep your payments low with a 5 year adjustable ballon product. Consumers think prices will go up I can re-fiance in the future at a lower rate. Than they have them take out a home equity loan for another 20% , here the consumer gets crushed and the loan is damn near VISA credit card rates.
When warned of the dangers of such products the purchaser says " my realtor is nice, prices keep going up if I don't buy now I will be a loser". The realtors make it one stop shopping and fleece the consumer.
Closely examine your local realtor, they are associated with elected officials ( siblings, spouses, friends). This bailout is to keep the gravy flowing. People were not treated as " neighbors" but as marks and the politicians are down with this dollar flow. The bailout is only to keep the party going.

10/01/2008 12:34 PM  
Anonymous Anonymous said...

Krugman was talking about it in August of 2005: That Hissing Sound

And, "The Coming Crash In the Housing Market" was published in 2003.

They interviewed some folks on Nightline, and a guy said he bought his huge, over-priced home in the bubble with the intension of living in it for a year, selling it for a million more than he paid for it, and retire. Ho hum.

10/01/2008 2:00 PM  
Blogger DB said...

I'm quite liberal but took a trial subscription to TAC on the basis of what I've read at Cunning Realist, and I've been impressed with the magazine as well. In the past I had often thought that I should read "conservative viewpoints" but what passed for conservative was so stupid; TAC is a welcome exception and alternative.

10/01/2008 3:17 PM  
Anonymous goldhorder said...

hahaha...nowholdon...good stuff.

10/01/2008 3:35 PM  
Blogger Charlene said...

I am with db, except I considered myself to be more of a conservative, although I have liberal tendencies. TAC appears to be a quality magazine. It's not right wing talking points designed to kiss Republican ass. It's consistent thought from a specific viewpoint. I think I am going to enjoy the subscription and keep it.

As for the bubble... what a shame. There are some good bubble blogs out there that eviscerate NAR and other real estate cheerleaders who kept propping this farce up and driving up the prices.

10/01/2008 4:18 PM  
Anonymous Anonymous said...

I'll throw in with db and charlene, although I'd put myself in the generally liberal camp.

I certainly don't agree with everything at TAC, but at least the things I disagree with are presented rationally. And I do find myself agreeing with a surprising amount of stuff. As contrasted with what CR calls the "titular right", which I think is totally intellectually bankrupt.

- Whammer

10/01/2008 5:01 PM  
Anonymous Anonymous said...

Been subscribing to TAC since it started up.

10/01/2008 5:34 PM  
Anonymous goldhorder said...
the money quote...

The Bush administration has already vanished a trillion (and counting) into the black hole of the Iraq war. Then there is the infamous trillion (and counting) that seems to have disappeared from the Defense Department under former Comptroller of Defense, Dov Zakheim, between 2001–2004 (Zakheim is now back in the Bush administration as a wartime contracts commissioner).

Why should this trillion be any different? Especially when we know Goldman Sachs is not only a big government contractor, it also defrauded the municipalities it sold bonds to?

10/01/2008 7:18 PM  
Anonymous Anonymous said...

Recently an insurance company nearly wind up....

A bank is nearly bankrupt......

Who fault?

The top management of the Public listed company ( belong to "public" ) salary should be tied a portion of it to the shares price ( IPO or ave 5 years ).... so when the shares price drop, it don't just penalise the investors, but those who don't take care of the company.....If this rule is pass on, without any need of further regulation, all industries ( as long as it is public listed ) will be self regulated......

Sign a petition to your favourite president candidate, congress member again and ask for their views to comment on this, and what regulations they are going to raise for implementation.....If you agree on my point, please share with many people as possible....

10/02/2008 10:28 AM  
Blogger Brandon said...

I read that the government is going to try and solve this problem on their own. I also read the way they are going to try and do it. It seems very foolish to me. What do you think?

10/03/2008 9:34 AM  
Anonymous Anonymous said...

If people would just look at the trend, when it comes to money, the last people you can trust are brokers and bankers. And the financial media, well never.

This was a favorite SNL skit, Global Century Investments. It was performed after the 2000 crash.


Peter Burke (broker): I'm really the wrong guy to ask. I got completely out of stocks in late '99, and I haven't followed the market since.

Investor #5: You got out of the market three years ago?

Peter Burke: Yes. You see.. around that time, we at Global Century became convinced that stocks were headed for a crash, and that bonds were the safer bet. And, we were right. My own bond portfolio is up nearly 30%.

Investor #5: But, if you were moving out of stocks and into bonds three years ago, why were your brokers telling people like me to do the exact opposite.

Peter Burke: Well, obviously, if you think, as we did, that stocks are heading down, and you want to unload them before a crash, you have to convince somebody out there to buy them. That's just common sense. [ a hand is raised ] Yes?

My favorite movie about Wall Street isn't "Wall Street" but "Boiler Room".

10/03/2008 3:53 PM  
Anonymous rapier said...

Sorry, but The American Conservative still missed the major issue of our time. The major issue(s) of all times. Who has power and how do they get and keep it?

The US Treasury is now bankrupt. That was always the plan and this is the moment where what is called conservatism has won it's final victory. The American Republic itself has always been it's enemy and it took 150 years but it was co opted and then defeated.

That victory was within conservatism's grasp in the 1930s but a madman, Hitler, went astray and misused the great new tools of control, modern communications and the modern business corporation, and used them for nationalistic purposes and war. Huge amounts of wealth were destroyed and power was diffused.

Now the state, the great supposed enemy of conservatives, has been taken over by said conservatives. The purse seized, the laws an option of convenience.

The conservatism of The American Conservative isn't conservative at all. It's liberal in the classic sense. The conservatives who now hold all power and wealth, the same thing actually which is the point, have won. Most won't see it that way. For awhile.

10/05/2008 9:53 AM  
Anonymous Anonymous said...

Economic Honor Roll

Nouriel Roubini
Nassim Nicholas Taleb
Warren Buffett
Byron Dorgan
Joseph Stiglitz
Paul Krugman

Doesn't list George Soros. I don't have proof, but I suspect someone like James Grant would have seen it coming.

Here's what Buffet said back in 2003:

"Derivatives are] financial weapons of mass destruction.[...]

Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years.[...]

Large amounts of risk have becomes concentrated in the hands of relatively few derivatives dealers ... which can trigger serious systematic problems."

10/13/2008 11:23 AM  
Anonymous Anonymous said...

Greenspan certainly didn't get it correct.

"Greenspan's from 2004: "Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.""

It seems, Greenspan since he chaired the Social Security Reform Committee under Reagan, has better terrible for the US long-term financial stability.

10/14/2008 1:14 PM  

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