Ugly Out There!

The Shanghai Index fell 2.6% overnight.

Italian bonds are blowing out. If sustained, this is bigger deal than the stock market swoon across Europe: CAC down 1.45%, FTSE down 1.1%, Dax off .4%. A lot of Libyan shares apparently in Italy and Libyan interests own over 7% of Unicredit, the biggest bank in Italy. Ouch.

The euro is off but not horribly so considering all the bad news even before Libya raised the stakes. 1.36 at this hour.

The yen has strengthened (but the yen and Japanese stocks, which were off 1.7%, usually trade in opposite directions).

Brent has backed slightly from its spike to $108, gold and silver have recovered a bit after falling in a dollar rally.

US nerves clearly rattled. S&P futures off over 17 points (it was over 19 a little while ago) and Dow futures off over 100 points.

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      1. Walker/Palin 2012!

        According to the tenets of Vodou, a dead person can be revived by a bokor, or sorcerer, but a financial zombie needs a bernak

          1. No work, no pay

            a bernank and a geitmaster working together can raise a kraken, with the use of a salted iPod.

    1. traderjoe

      Everyday’s a buying opportunity for the Ben Bernake. A straight up levitation in the face of widening PIIGS bond spreads, riots, political strife at home, falling home prices, stagnant employment, etc., etc.

      He’ll find out soon enough that the same bubble can’t be blown over and over again…but he just does his masters’ bidding…

  1. Hugh

    This reminds me of the countdown to the meltdown in 2008. We knew the economy was a house of cards. The only question was was it going to be this one or that one which would cause it all to collapse?

    It was Tunisia, then Egypt, Jordan, Yemen, Bahrain, and Algeria. Now it’s Libya with Iran and the Gulf states simmering in the background. Then there are Malaki’s missing billions in Iraq. Pakistan is as unstable as ever. Central Asia is filled with Moslem states and corrupt dictatorships. The failed war in Afghanistan still limps along. China is caught between the Scylla and Charybdis of the potential fallout of its bubbles on the one hand and political unrest on the other.

    In Europe, nothing has been resolved. The contradictions at the heart of the euro remain. The eurobanks are still overextended, unreformed, and grossly insolvent. The PIIGS continue to stagger from crisis to crisis. The only difference is that Belgium has been added to the list. Austerity in the UK and its unreformed banking sector are grinding the country down. And then, of course, there is all of Eastern Europe. They’re still sinking. It’s just nobody bothers to look their way much.

    Then there is the US with its completely corrupt political system and its massive wealth inequalities. The country is falling apart literally before our eyes. The banks here like those in Europe are deeply insolvent,kept alive only by government bailouts and an official sanction allowing them to cook their books. The whole housing sector and mortgage industry are one vast steaming pile of fraud heaped on fraud. The states are hitting the wall even as I write. 50 million have no health insurance. Almost everyone else is only one job loss away from losing theirs. 40 million on food stamps. 29 million disemployed. Millions who have lost or face losing their homes. A physical infrastructure that government at every level has not bothered to maintain. Few have pensions, most have seen their retirement savings blown up by the stock market crash and the collapse of the housing bubble, and government and the political parties continue to take aim at Social Security.

    Everywhere I look kleptocracy reigns. The rich have stolen all the fat from world’s economy. Now they are cannibalizing its muscle and bone. This can’t last and will end badly. The world economy is on the edge. Which event will send it over the cliff? It is getting pushed from so many directions. Which one will be the definitive one? As for Tunisia, Egypt, Libya, we should watch them well. They are our future.

    1. spigzone

      “Which one will be the definitive one?”

      I know which is the CERTAIN one, Peak Oil becoming Declining Oil. That happens sometime this year. I suppose that could also be considered the definitive one even though some other specific event triggers the collapse.

  2. DH

    Ugly? No, I just read this:

    “Gains in stocks, less unemployment and a cut in payroll taxes that is boosting paychecks may help Americans weather the highest gasoline prices in more than two years. At the same time, a housing market that shows little sign of stabilizing as foreclosures mount remains a hurdle.

    “People are just feeling better because there are more jobs out there,” said Ellen Zentner, a senior macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “It’s unfortunate that we don’t have the housing market helping us in this recovery.”

    ==> Also, gas prices are way down and people are feeling really good about the recovery, it’s almost like we didn’t have a recession or oil spill, or a housing bubble. People seem really happy about the tsunami of cash out there! Go baby go!

    1. Pixy Dust

      I disagree that gas prices are way down. I think they’re approaching the record levels of several years ago.

  3. Paul Repstock

    My guess is that will see a late sell-off in the US. I think the oil situation must be under control. (Fish face has the army in the oil fields while ‘daddy’ brutalizes the civilians with police and mercs. Note that junior was reasuring the oil producers and the big oil has only evacuated part of it’s personel.) I’m also guesing that Iran and Saudi are underlockdown, otherwise oil would be going up, not down??

    Remember that nearly all the news we are getting from the Med is about 12 hrs delayed.

    1. S.D. Jeffries

      A solution to all these problems – at least those of the U.S. variety – is just an idea away. And Niall Ferguson, in the new issue of Newsweek, has volunteered that brilliant idea: ultimate privatization. “The U.S. needs to do exactly what it would if it were a severely indebted company: sell off assets to balance its books.” He suggests land (the government owns 30% of the land surface of the country); transportation holdings (including seaways, highways and Amtrak); office buildings, and other infrastructure.

      Brilliant! Why has no one else proposed such a common-sense solution?! In Ferguson’s view, everyone would be better off if there were no commons left to keep up.

      1. Paul Repstock

        I’m stunned that such an idea might come from Mr. Fergusen.

        And whom might purchase such assets?? Corporations?? And then implant a micro chip into all the two legged cattle and sell them more worries about health care costs or social services..:)

        I truly hope you were being sarcastic.

      2. Slade Smith

        Horrible idea, and unnecessary. Why have a fire sale on assets, when you can borrow at 2%-3%?

        Those California highways that Ferguson wants to sell off? We drive on them by and large for free– a point he neglected to mention when he brought up a few isolated cases of existing toll roads that were sold off. Does he really think it make sense to put up tollbooths on all the state highways in the state? Come on, Mr. Ferguson! Traffic is bad enough as it is in California. (and are potholes really a big issue in California?)

        As far as selling off lands, I do not mind the idea of some land sales. But putting government lands on the market wholesale would just further exacerbate a situation where we have a glut of available supply in the real estate market. Also, the true public national treasures extend a lot further than Yellowstone and Yosemite, which Ferguson just cavalierly threw out there as examples of what we would keep, and I worry about where folks who don’t have an appreciation or understanding of the true value of these public natural areas might draw the line.

        I consider our whole national parks system, national monuments, national forests, etc., and much government land surrounding these explicitly protected ares to be national public treasures. As it is, we already sell off timber rights, oil and gas rights, and water rights in many of these lands, and I am often troubled by the environmental damage that I see when I am spending time on these lands. But I recognize that there have to be compromises made: the government needs revenue, and we need fuel, lumber, and water, so I understand the damage and simply ask that extraction activities be regulated so that damage is kept to a minimum.

      3. emca

        Yeh, we can sell the White House for quick cash and then Private Parts Investments can charge all those dimwit German and Japanese tourists $300 per head to visit it.

        1. Lidia

          I think they want to sell the White House to the Koch Brothers and make Obama rent it back from them on his own dime.

      4. Ivan Karamazov

        Oh boy, privatization! It’ll be almost like Russia under Yeltsin. All we’d need at that point is for the ops arm of the CIA to lay off two-thirds of its employees, with no pension or healthcare. Then all the ex-spooks go into organized crime – and it’d be exactly the same!

        Happy days are here again…

        1. sid_finster

          That would be great news.

          It just won’t be such great news for those of us out there who will not get the opportunity to grab valuable assets at fire-sale prices, or those who aren’t in charge of the sales.

          Other than that, good job!

    1. Paul Repstock

      Slade; it is the rest of the world that is ugly! The markets indexes are only a poor reflection of ourselves.

      Besides, there is plenty of loose money to support the mkts for a few days if the banks and the government choose to do that. The indexes are really just another form of propaganda…see ‘how good’ or alternatively ‘how bad’, things are.

      If it were not for Fed money the indexes would not have doubled.

      1. Slade Smith

        Okay, how about this then: I don’t know if I would exactly say that the rest of the world is “ugly” when I see middle eastern dictators being overthrown, either ;-)

        My view is that there is merely a lot of stuff going on right now– a mix of good and bad news, and even some of the bad news is merely a hangover from excesses that are being corrected, albeit slowly. Compare the U.S. situation to five years ago– Katrina, an out of control insurgency in Iraq, a true and imminent financial and economic crisis on the horizon due to a bona fide bubble in the housing market– and I think we are inarguably in a better position now than then.

    2. Yves Smith Post author

      The rise has been on very thin volume dominate by HFT. The selloffs are on high volumes. You don’t have to be a technician to get the significance.

        1. Paul Repstock

          Look at the recently ‘Hyped’, corn, wheat, cotton???

          Yves is right about the volumes though. I was surprised that the sell volume didn’t show this afternoon..I guess there is still some pros[pect of bigger troubles.

  4. Psychoanalystus

    I don’t know about the rest of you here, but I am getting burnt out by this economic crisis. It just isn’t as much fun as it used to be 2 years ago (when I was contributing as Vinny). Even revolutions in the Middle East don’t seem to impress me anymore. Anybody else feeling this way?

    As such I wonder if these neo-liberals have taken into account this “crisis fatigue” syndrome.


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