Comments on: The Goldilocks Markets, Revisited http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html Mon, 23 Nov 2009 00:29:23 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6399 Anonymous Sat, 05 Apr 2008 02:35:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6399 Average purchase prices increased at the second-sharpest rate in the survey <br/>history in March, as highlighted by the Global Manufacturing Input Prices <br/>Index rising sharply to 75.9, from 70.9 in February. Cost inflation accelerated <br/>across the majority of the national manufacturing sectors for which March <br/>PMI data were available. The sharpest rates of increase were recorded for <br/>the US and China, with inflation hitting a near two-and-a-half year high Average purchase prices increased at the second-sharpest rate in the survey
history in March, as highlighted by the Global Manufacturing Input Prices
Index rising sharply to 75.9, from 70.9 in February. Cost inflation accelerated
across the majority of the national manufacturing sectors for which March
PMI data were available. The sharpest rates of increase were recorded for
the US and China, with inflation hitting a near two-and-a-half year high

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6386 Anonymous Fri, 04 Apr 2008 20:02:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6386 "can banks really cut their leverage levels effectively and calmly via furtive asset sales or ringfencing? Or are we heading for more stop-start turmoil?"<br/><br/>I am leery of the banking system. I am tending to believe their grand scheme (7 yrs in the making)has backfired and they are desperate. <br/><br/>A tin foilist might believe the banks set off the credit bubble in anticipation of diverting social security tax receipts into their greedy hands. The plan was always to collect the fees, skip town, and let the toxic garbage blow up. By the time the S**t hit the fan, the government would open wide, swallow and recap it, just like George and Dick promised. Same with Poppy's Carlyle group. <br/><br/>The American people barely reversed the disaster when Snow failed and Paulson was sent in to get the SS. Every now and then it still comes up. Wall street was counting on a fiscal bailout which the Fed can't deliver directly. <br/><br/>The financial industry needs to be restructured and regulated, not just de-levered. Same with the crooked government. Here's hoping. “can banks really cut their leverage levels effectively and calmly via furtive asset sales or ringfencing? Or are we heading for more stop-start turmoil?”

I am leery of the banking system. I am tending to believe their grand scheme (7 yrs in the making)has backfired and they are desperate.

A tin foilist might believe the banks set off the credit bubble in anticipation of diverting social security tax receipts into their greedy hands. The plan was always to collect the fees, skip town, and let the toxic garbage blow up. By the time the S**t hit the fan, the government would open wide, swallow and recap it, just like George and Dick promised. Same with Poppy’s Carlyle group.

The American people barely reversed the disaster when Snow failed and Paulson was sent in to get the SS. Every now and then it still comes up. Wall street was counting on a fiscal bailout which the Fed can’t deliver directly.

The financial industry needs to be restructured and regulated, not just de-levered. Same with the crooked government. Here’s hoping.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6384 Anonymous Fri, 04 Apr 2008 19:30:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6384 When are the media going to hold Bernanke's feet to the fire on foreign central bank dollar recycling? <br/><br/>Nobody seems to ever bother asking the head of US monetary policy about this. Don't ask, don't tell. When are the media going to hold Bernanke’s feet to the fire on foreign central bank dollar recycling?

Nobody seems to ever bother asking the head of US monetary policy about this. Don’t ask, don’t tell.

]]> By: S http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6366 S Fri, 04 Apr 2008 14:48:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6366 I am baffled by arguments suggesting the continued rapid accumulation of dollar reserves is in any way remotely positive for the US. It falls into the category of ‘eureka’ we will just inflating debt away. Unless there is a coming wage spiral or the global wage arbitrage is off, again zero impact. It is after all that "trade" which has perpetuated the imbalance. Printing money, then exporting the depreciating asset to the FCB/Sovs who then repatriate via treasury/GSE debt is a sad commentary on both the state of the US economy, its prospects and the future of the US consumer. It used to be that Americans abhorred subsidies, but esprit de corp seems to have come of age in the sixties and perhaps this is its logical end. Dollar export does nothing for the average Joe, who already got his plasma TV dividend, whose real asset values have decoupled from interest rate cuts; that is unless we are talking about the unnatural levitation of the equity markets, which perhaps is pricing nominally. Then again not falling is still losing purchasing power. I am sure the incremental 50K manufacturing and construction workers who lost their job this month might quibble with a policy that substitutes fiat paper export for their manufacturing job. Oh wait that is the fiancé based economy, I forgot. Somehow, the dollar still holds a monopoly, but manufacturing losses are probably a good proxy for the slow bleeding dollar, lagged of course. The US needs to be taken to the confessional (woodshed to be more blunt) with the penance being sound money repeated for a decade. Perpetuating the lie about wealth and asset values is simply horizon pushing – nothing more. I am baffled by arguments suggesting the continued rapid accumulation of dollar reserves is in any way remotely positive for the US. It falls into the category of ‘eureka’ we will just inflating debt away. Unless there is a coming wage spiral or the global wage arbitrage is off, again zero impact. It is after all that “trade” which has perpetuated the imbalance. Printing money, then exporting the depreciating asset to the FCB/Sovs who then repatriate via treasury/GSE debt is a sad commentary on both the state of the US economy, its prospects and the future of the US consumer. It used to be that Americans abhorred subsidies, but esprit de corp seems to have come of age in the sixties and perhaps this is its logical end. Dollar export does nothing for the average Joe, who already got his plasma TV dividend, whose real asset values have decoupled from interest rate cuts; that is unless we are talking about the unnatural levitation of the equity markets, which perhaps is pricing nominally. Then again not falling is still losing purchasing power. I am sure the incremental 50K manufacturing and construction workers who lost their job this month might quibble with a policy that substitutes fiat paper export for their manufacturing job. Oh wait that is the fiancé based economy, I forgot. Somehow, the dollar still holds a monopoly, but manufacturing losses are probably a good proxy for the slow bleeding dollar, lagged of course. The US needs to be taken to the confessional (woodshed to be more blunt) with the penance being sound money repeated for a decade. Perpetuating the lie about wealth and asset values is simply horizon pushing – nothing more.

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6359 Richard Kline Fri, 04 Apr 2008 12:49:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6359 In considering whether we are in some semi-stable macrofinancial equilibrium where Goldilocks can stay upright for a time, the issue is what is the mid-term trendline? What things are _better_ now than they were two weeks ago, two months ago, six months ago? I can only think of four off the top of my head, and they are comparatively minor: a) new home construction inventories have finally started to fall back even while unsold inventories continue to grow for other reasons, b) high grain prices have made US grain exports handsomely profitable helping the current accound deficit, c) BenBer's eyepoppping 300 bp drop has kept subprime and other resets from biting hard enough to kill the banking system so far, and d) the public authorities are now acting as if they do indeed see themselves managing a major financial instability. That group doesn't spell 'floor' or 'rebound' to me.<br/><br/>We have had several periodic calms over the last nine months. The level of the problem has been substantially _greater_ after each one as the backlog of problems continues to build pressure. <br/><br/>On the other side of the ledger, here are several things which seem reasonably probable or even well-evidenced:<br/><br/>---subprime mortgatge writedowns are not done<br/>---leveraged pier loan writedowns are not done; in some cases they're barely begun<br/>---commercial re losses haven't really even begun to show up though from the standpoint of overcapacity alone one can anticipate that these will be major in many markets<br/>---what is at least a recession has barely begun to bite on unemployment, and has yet to seriously impact equity prices, though this is _certain_ to happen<br/>---foreign private capital continues to flee the country en mass<br/>---Japanese bankers, looking at the ongoing massacre of the yen carry trade, are cutting the US off at the loan window, period<br/>---China has its own equity bubble collapse and quite serious political instabilities [not speaking to the morality of the issues involved] which will keep the attention of their policy makers focused on their own needs first and foremost<br/>---major foreign concerns are beginning to resist being paid in dollars<br/>---the Fed has already commited well over half of its balance sheet to keep the banking system from imploding before the real wipeouts have even arrived<br/>---the Fed funds rate is so low that we flirt with the zero bound where further shifts are of no utility, again before the Big Problems have even weighed in<br/><br/>That list is not exhaustive; feel free to add your own. <br/><br/>On Goldilocks and where she stands: To me, she's been slipped a rophie by the media and is spreadeagled horizontal on the ping-pong table as all her pursuers gather nigh. We know what comes next . . . and it won't be pretty. In considering whether we are in some semi-stable macrofinancial equilibrium where Goldilocks can stay upright for a time, the issue is what is the mid-term trendline? What things are _better_ now than they were two weeks ago, two months ago, six months ago? I can only think of four off the top of my head, and they are comparatively minor: a) new home construction inventories have finally started to fall back even while unsold inventories continue to grow for other reasons, b) high grain prices have made US grain exports handsomely profitable helping the current accound deficit, c) BenBer’s eyepoppping 300 bp drop has kept subprime and other resets from biting hard enough to kill the banking system so far, and d) the public authorities are now acting as if they do indeed see themselves managing a major financial instability. That group doesn’t spell ‘floor’ or ‘rebound’ to me.

We have had several periodic calms over the last nine months. The level of the problem has been substantially _greater_ after each one as the backlog of problems continues to build pressure.

On the other side of the ledger, here are several things which seem reasonably probable or even well-evidenced:

—subprime mortgatge writedowns are not done
—leveraged pier loan writedowns are not done; in some cases they’re barely begun
—commercial re losses haven’t really even begun to show up though from the standpoint of overcapacity alone one can anticipate that these will be major in many markets
—what is at least a recession has barely begun to bite on unemployment, and has yet to seriously impact equity prices, though this is _certain_ to happen
—foreign private capital continues to flee the country en mass
—Japanese bankers, looking at the ongoing massacre of the yen carry trade, are cutting the US off at the loan window, period
—China has its own equity bubble collapse and quite serious political instabilities [not speaking to the morality of the issues involved] which will keep the attention of their policy makers focused on their own needs first and foremost
—major foreign concerns are beginning to resist being paid in dollars
—the Fed has already commited well over half of its balance sheet to keep the banking system from imploding before the real wipeouts have even arrived
—the Fed funds rate is so low that we flirt with the zero bound where further shifts are of no utility, again before the Big Problems have even weighed in

That list is not exhaustive; feel free to add your own.

On Goldilocks and where she stands: To me, she’s been slipped a rophie by the media and is spreadeagled horizontal on the ping-pong table as all her pursuers gather nigh. We know what comes next . . . and it won’t be pretty.

]]> By: jojo http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6353 jojo Fri, 04 Apr 2008 10:36:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6353 Yup, the Fed will push negative short-term real interest rates, in order to help the banks profit with a steep yield curve. I don't know if the fed will push nominal short-term interest rates below 1% though. The money market funds start losing money with rates below 1% nominal, and they have some political pull. Yup, the Fed will push negative short-term real interest rates, in order to help the banks profit with a steep yield curve. I don’t know if the fed will push nominal short-term interest rates below 1% though. The money market funds start losing money with rates below 1% nominal, and they have some political pull.

]]> By: "Cassandra" http://www.nakedcapitalism.com/2008/04/goldilock-markets-revisited.html#comment-6349 "Cassandra" Fri, 04 Apr 2008 08:40:00 +0000 http://www.nakedcapitalism.com/2008/04/the-goldilocks-markets-revisited/#comment-6349 The most plausible element of a Goldilocks scenrio here (if only temporary) is simply the continued accumulation of USD reserves by Asian Mercantile, EM and GCC central banks, at once delivering copious (unsterilized?) liquidity while keeping real USD interest rates tethered to the negative side of Zero. While this may just replace the credit and asset values destroyed from recent implosion and deleveraging, this may be sufficient to stay atop the ridgeline between inflation and deflation (for the while). Such Goldilocks would be decidedly more homely than the blonde cutie in fairy tales, as it would likely be profoundly stagflationary before morphing into something more evil. The most plausible element of a Goldilocks scenrio here (if only temporary) is simply the continued accumulation of USD reserves by Asian Mercantile, EM and GCC central banks, at once delivering copious (unsterilized?) liquidity while keeping real USD interest rates tethered to the negative side of Zero. While this may just replace the credit and asset values destroyed from recent implosion and deleveraging, this may be sufficient to stay atop the ridgeline between inflation and deflation (for the while). Such Goldilocks would be decidedly more homely than the blonde cutie in fairy tales, as it would likely be profoundly stagflationary before morphing into something more evil.

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