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FormerlyDownSouthJukin'BobNowFromCS, the long bond yields have risen due to investors unloading their long bonds. Bond traders know that a TON of new Treasury supply is gonna hafta be coming down the pipeline soon (The annual budget deficit is expected to top $2 trillion, which has gotta be a US record, right?). So many Treasury issues are gonna be hittin' the market that yields are sure to rise significantly. Better to sell your long bonds now and buy back into the market when they are much, much cheaper. Bond trading rules: If you think yields will drop, start buying. If you thing yields will rise, start selling.
BTW, anyone know what residential real estate prices in Boulder are doing in recent months?
Sockeye...sounds interesting, but what do you mean by being the second mouse to the cheese? Please elaborate. This could have differnet meanings, and I don't want to assume that my interpretation is the same as yours. Thanks!
The carnage on Wall Street this past week has been a sight to behold. With the federal government now poising to take an ownership stake in US banks, the true desperation of our economic situation is at hand. For those who think that I may be somehow giddy about this, I am not. My retirement accounts, etc. have been decimated just like everyone else's. Will my future pension be spared? Fair question. The delusion that some continue to cling to that this is merely a Wall Street phenomenon that will not cascade down to the common American is so silly as to be laughable.
Here is the sad fact: What we are seeing here is the value of a huge basket of American "assets" being re-valued back to what they are really worth--instead of the funny-money values permitted by excess speculation, excess debt, and just plain fraud in some cases. That sounds a hell of a lot like 1929, doesn't it? Unfortunately, this time around, the results are likely to be much more damaging to the average American. Why? First, because most average middle-class Americans are heavily invested into this bubble--either directly (houses, real estate, stock, etc.) or indirectly (through IRA's, 401K's, pension funds, etc.) than was the case in 1929. Second, because way too much of what Americans have "invested" in is non-productive crap like fancy houses, cars, second homes, vacations, etc. Sorry to keep beating that dead horse, but I still don't think the folly of that has sunk in yet for Joe Six-pack--or his yuppie cousins.
What is the typical asset portfolio of the typical middle-class American? A house, retirement accounts and pensions, automobiles (usually 2 or more), and a bunch of furniture and electronic stuff. All of it is--or shortly will be--worth half or less of what it was just a year ago; some of it may not be sell-able at any price. Given that this "average Joe" is probably also carrying a huge debt load--mortgage (or two), credit card and other unsecured debt leaving his net worth and/or savings rate hovering near zero even before the crisis started--it's pretty obvious that a good chunk of the American middle class is, as I write this, essentially "upside down" financially. That means functionally bankrupt. Across the nation, and in Colorado specifically, a good chunk of that middle class is also working a job in a field either dependent on easy credit (autos, construction, etc.) or soon-to-be-non-existent discretionary income (tourism, a lot of retail, etc.). So, they also face the prospect that their job may disappear right at the time that they will need it the most.
I have been predicting the coming of this economic debacle for going on two years on this forum--I have been telling my friends this wreck was coming for nearly a decade now. I must admit, though, even I am stunned at its extent--and it is by no means over yet. There are no safe havens left. We are all going to be a lot materially poorer, and it will take at least a generation before the US regains its prior level of material wealth--if it ever does, which, personally, I now find doubtful. The massive intervention of the government now going on in the private markets is tantamount to the old Viet Nam era adage, "We had to bomb the village to save it."
Quote:
Oh, and while the king was looking down,
The jester stole his thorny crown.
The courtroom was adjourned;
No verdict was returned.
And while lennon read a book of marx,
The quartet practiced in the park,
And we sang dirges in the dark
The day the music died.
We were singing,
"bye-bye, miss american pie."
Drove my chevy to the levee,
But the levee was dry.
Them good old boys were drinkin’ whiskey and rye
And singin’, "this’ll be the day that I die.
"this’ll be the day that I die." . . .
And in the streets: the children screamed,
The lovers cried, and the poets dreamed.
But not a word was spoken;
The church bells all were broken.
And the three men I admire most:
The father, son, and the holy ghost,
They caught the last train for the coast
The day the music died.
And they were singing,
"bye-bye, miss american pie."
Drove my chevy to the levee,
But the levee was dry.
And them good old boys were drinkin’ whiskey and rye
Singin’, "this’ll be the day that I die.
"this’ll be the day that I die."
Don McClean, "American Pie"
Last edited by jazzlover; 10-11-2008 at 10:41 AM..
The fallout from this will, at the very least, I think force some changes to occur to the entire functional basis of our economy that are long overdue. Forget Bush and his economic policies, which the left-wing media are so adamantly blaming for this situation in its entirety. The shift from a production-based economy to a consumer-based one, which became so completely dependent upon leveraging and easy access to credit, was what started us down the road to nowhere, and that started a long time before Bush took office. Look up the Community Reinvestment Act, or learn some history about the policies of Clinton and HUD head Andrew Cuomo back in the '90's. The government's vision back then was that everyone was entitled to a house and a certain standard of living, regardless of whether they'd earned it or could afford it, and the forced deregulation of the banking and credit industries that followed started this whole mess.
What I think is incredibly frustrating is that the goverment's "plan" to turn the situation around is based on resupplying the banks with capital, so that they'll start lending to each other again and unfreeze the credit market. Great idea, geniuses. Isn't heavy dependence on credit in order to keep people spending and keep the economy going how we got into this fiasco in the first place? If they're successful in doing this, and convince the world's banks to start issuing a whole bunch of new loans that won't be paid back, they're just setting up an even bigger crash down the road. It's idiotic.
When you're consuming and importing such a huge amount more than what you're producing/exporting, that's a road that leads to disaster in the end, no matter how you cut it. What we need is for the government to recognize that there is a fundamental problem with the entire functional basis of the economy, take its hands off, let this shake itself out, let the correction happen, and with any luck, the economy will contract much of its consumption-dependent foundation and move to a more production-centric model, the way it looked 50 years ago. That's the only way we'll really get on solid footing again. Anything else is just running in place, delaying the inevitable.
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Well, what a week it has been . . .
