Worldwide Financial Collapse -- US Will Nationalize Largest Banks

[Ninong]

Partial Nationalization of Largest Banks

This is something the Bush administration has been considering since last week. They will take control of "an ownership interest in" the largest national banks and perhaps a few large regional banks in an effort to reverse the current financial collapse.

You can read all about it here. No matter what they call it, it amounts to nationalization of the banking system. That's how bad things have gotten.

The British government is pumping hundreds of billions of pounds into their banking system today in an effort to stave off complete collapse.


The Stock Market Is Crashing Today

Dow closed down 679 points (7.33%) at 8,579. It was 14,280 last fall. The Dow Jones Industrial Average is now down 40%.

The S&P500 is down 7.62% today and it is now down 42.25% since last fall. The NASDAQ is down 42.50% since last fall.

There is blood in the street today. Again. Here.

[Ninong]

Ford Motor Company: $2.08/share.

Ford closed today at $2.08, down from $9.00 a year ago and $30.00 when Bush took office.

General Motors: $4.76/share.

GM closed at $4.76, down from $43.20 a year ago and $90.00 when Bush took office. GM hasn't traded this low since 1950, during the Truman administration.

GM has a market cap of just over $2 billion. VW is worth more than 60 times as much as GM.

GM is on the verge of bankruptcy.

The government recently approved a $26 billion loan package to help save the US auto industry but it may be too little too late.

Should we save GM or should they be allowed to fail? Some of their newer facilities may be worth taking over but nobody is going to take over their older plants. The Germans and the Japanese have been very careful to locate their US assembly plants in the South were there are virtually no unions.

Both Ford and GM have enormous unfunded pension obligations. The government has allowed them to get away with that for decades. When the government takes over the pension plans of a bankrupt company (such as the airlines that go BK over and over again), the payouts are reduced.

Bush will be remembered as the worst president in American history and the president who presided over the collapse of the American financial system and the death of the American auto industry.

[Poseidon]

You could almost hear a PIN drop in sections of the plant where I work today. The really STUPID part is that we are still making parts for trucks that are not selling, and the plant made a decision to replace the coveralls that the skilled trades wear. Last week we had a meeting about trying to save as much cash as possible, and they even went so far as to say we need to SCRAP steel cabinets that are not being used, because the plant NEEDS the money from the scrap yard!

I am VERY concerned, "my" plant is over 50 years old!

[Ninong]

Asian Markets Crashing

Japan's Nikkei 225 index is down about 11% so far today (Friday). Combined with the more than 9% it lost yesterday, it is down 20% in two days, so far -- their markets are still open. It has lost 55% of its value since this time last year.

The Dow Jones Industrial Average has lost 40% and both the S&P500 and the NASDAQ have lost more than 42% in the past year. The US stock market has lost more than $9 trillion in the past year.

The DJIA is down 22% just since the beginning of October! This can only be described as a crash. We didn't fall this fast when the markets crashed in October 1929.

There is no doubt that the markets are now oversold but no one knows when the downward momentum will stop. It took years following the October 1929 (October is a VERY unlucky month for the stock market) crash for the markets to bottom out. They finally did after the Dow had fallen by 90%. If today had been the end of the year, 2008 would be the worst year for the Dow since the 1930's.

No one (certainly not me) is predicting a 90% drop in the Dow. I figured we would bottom out after a 30% fall but I don't think anyone expected things to go to hell this fast. The European and Asian markets have fallen more than we have. The Chinese market has dropped more than two-thirds of its value in the past year. It was 6100 a year ago and it's 1950 today. The Russian market has now fallen about 80% since May.

A lot of money has gone to money heaven.

P.S. -- President Bush is scheduled to "address the nation" at 10:25 a.m. ET tomorrow (Friday). He is expected to tell us not to worry, he has everything under control. He will probably tell us to go shopping again.

[Cas]

The death of Reaganomics. Good riddence.

[Ninong]

The death of Reaganomics. Good riddence.

I guess they were correct about one thing. It has certainly "trickled down" on the average person.

[Ninong]

The $700 Billion Bailout Plan

Will it work? I don't know. The markets certainly don't think so. Is it too little, too late? Hmmm...

The Treasury has already spent $123 billion on AIG alone and AIG wasn't part of the $700 billion bailout plan because it was actually nationalized (we now own 79.9% of AIG). That was just for the first $85 billion. The new money is another loan on top of the original $85 billion but we don't get any increased ownership rights.

Then I heard Hank Paulson say that it will take at least six weeks before the Treasury even starts buying paper. SIX WEEKS! Do these guys have any idea how fast things are moving right now?

Then yesterday he talked about taking ownership stakes (partial nationalization) in the largest banks. Now I learn that that plan will take weeks to implement. What's going on with these guys?

Banks are failing all over the world right now. Governments all over the world are being forced to take over their nation's largest banks.

I think the Treasury is moving too slowly. There are scarier things out there that could bite us in the ass if we don't fix this problem fast. Very fast.

[Ninong]

US Stock Market Set to Plunge Again Friday

It's not looking good for the stock market tomorrow. US futures are down about 4% in overseas trading right now. Japan just had the second biggest one-day drop in history Friday. The government of Indonesia has extended it's two-day trading halt. The government of Iceland seized that nation's largest bank and suspended equity trading. The Russian stock exchanges have delayed opening. Governments around the world are taking over banks to prevent them from going under.

So far this week alone, the world stock exchanges have dropped $4 trillion. The US stock market is down more than $9 trillion in the past year. The way it looks right now, we could easily be down more than 50% in the next two or three days. Things look that bad worldwide. A lot of people are panicking and getting out of the market. Warren Buffett is the only one buying.

I think the stock market has passed the point of predicting a deep recession and is now predicting a worldwide depression. President Obama is going to have his hands full trying to turn things around next year. We could easily be facing 10% unemployment within the next few months. Hundreds of thousands of jobs are being lost in the financial industry. It's not just the employees of firms like Lehman Brothers who are losing their jobs. When BofA acquires Merrill Lynch and Wells Fargo acquires Wachovia, tens of thousands of jobs will be lost in the merger. Even companies that don't fail will be laying off employees because of the shrunken economy.

And somebody has to decide what to do about the US auto industry. GM is about to fail. Do we decide that we can't afford to allow that to happen? Or do we let the free market run its course?

Neither campaign is being completely honest right now about the prospects for next year. They're both trying to keep up a good front but the situation is much worse than they are letting on. We will run a huge budget deficit next year. Probably more than this year's $500 billion. McCain's promise to balance the budget by the end of his first term is a fairy tale.

We still have more troops in Iraq than we had before the surge, in spite of the lie Sarah Palin keeps telling. She's repeating something McCain used to include in his stock stump speech. We have NOT drawn down forces in Iraq to pre-surge levels. Even if Barack starts withdrawing troops from Iraq in March, it's still not going to have much effect on the budget because we will have to immediately increase the troop strength in Afghanistan.

And there is always the possibility of another 9/11-type attack, which would really cause the markets to plunge.

[Ninong]

Stock Market Going Bananas, Down 800 Points In First 10 Minutes

As expected, the stock market plunged at the open. The Dow was down 797 points (9.2%) within the first few minutes of trading, then it went up 900 points from there to be up 100 points from yesterday's close. Then it started going down again giving back all of that bounce and then some.

The Dow closed yesterday at 8568. It plunged to 7882. Then it bounced to 8687. Then it dropped from there to less than 8100. Right now it's 8150, which is a loss of 5% from yesterday's close.

The European stock markets are all down 8-9% so far today.

Russia has decided to just not open at all:

MOSCOW (AP) - Russian stock exchanges postponed trading Oct. 10 after massive selloffs on Wall Street and Asian markets.

Representatives of the MICEX and RTS exchanges said they suspended regular trading until further notice under orders from financial regulators. Limited trading and repo auctions were allowed.

Russia's government will start buying stocks of domestic companies next week to help support prices, Prime Minister Vladimir Putin said.

[Ninong]

General Motors: $4.76/share.

GM closed at $4.76, down from $43.20 a year ago and $90.00 when Bush took office. GM hasn't traded this low since 1950, during the Truman administration.

GM has a market cap of just over $2 billion. VW is worth more than 60 times as much as GM.

GM is on the verge of bankruptcy.

GM Fell To $4.00 This Morning

Shares of General Motors plunged to $4.00 within the first five minutes of trading this morning -- it's lowest level since the 1940's. It has since recovered and is trading right now at $4.85. That's because the company insists that they are not considering filing bankruptcy. (They all say that.)

“Bankruptcy would not be in the interests of our employees, stockholders, suppliers or customers, and we believe speculation about a possible filing is exaggerated and unconstructive,” GM said.

GM announced that their CFO (chief financial officer) is retiring and being replaced with one of their hotshots who turned around their European operations.

Right now GM's capitalization (market value of its stock) is around $2.5 billion. They have about $20 billion in cash on hand but they have more than $35 billion in long-term debt. They are losing money at a rate of more than $1 billion a month. That's why nobody will be interested in taking over the entire company. The best GM can hope for is to sell off assets to keep going as long as possible. Unfortunately, the only assets people are interested in are the good ones.

GM is expected to announce new layoffs and additional plant closures as early as next week.

GM peaked at $94.00 during 2000, the last year of the Clinton administration. It was $43.20 a year ago but it has now fallen about 90% in the past year. Right now it's trading at prices not seen since the Truman administration.

[Ninong]

Stock Market Headed Down Again

Apparently President Bush's little pep talk didn't work. The market is plunging right now. The Dow is down 7% and the S&P500 is down 7.5%.

[zhenya]

If I was Warren Buffet I would buy all of the GM stocks and wait when it bounce back, and it will. So will the Ford stock.

However I am not Warren Buffet and most likely most of the American people are not as well, so we'll be broke for a while.

[Poseidon]

You know it figures Gene, GM, Ford stocks are cheap enough for me to buy, and I have nothing to buy them with.... Do you think they will trade for corals?

[Ninong]

If I was Warren Buffet I would buy all of the GM stocks and wait when it bounce back, and it will. So will the Ford stock.

Gene,

Ford is better off right now than General Motors. And if GM folds, Ford will be even better off.

Warren Buffett purchased $5 billion worth of General Electric preferred stock a couple of weeks ago but no GM stock. I think GM stock is too risky right now and probably will remain that way for a long time to come, assuming they're still in business. Their plan is to keep cutting back until whatever remains is competitive.

Buffett has a preference for companies that are dominant in their field or, if they are conglomerates like GE, then they have to be the 800-lb gorilla in the room. And he only buys companies that have good management. He's not interested in remaking the management after he buys in like some guys. Buffett owns 12% of Wells Fargo. He bought in a long time ago. Wells Fargo, in spite of being headquartered in San Francisco, does not have much of a problem with mortgage defaults right now. And they didn't get into the risky derivatives business. By comparison, Citigroup has written off $46 billion recently related to the mortgage meltdown.

General Motors has had serious management problems going back the last 40 years. They were completely blindsided in the 1970's when their big gas guzzlers were being threatened by smaller Japanese imports. And their relations with their union employees has always been adversarial. When they formed a joint venture with Toyota to operate their Fremont, California plant, they were shocked that the Japanese (real, honest to God Japanese from Tokyo) could so quickly win over American UAW workers. That's because everything the Japanese learned about the auto business they learned from an American back in the 1950's and '60's. The guy was a genius. I can't remember his name right now because I'm zonked on Percocet. (It's a long story.)

Anyway, the thrust of the method was that you built what the people wanted instead of building what you wanted and then "selling" it to the people. He also told the Japanese that you didn't have to have a facelift every year and a model change every other year, which used to be GM's battle plan. BMW has a major model change for each model every six or seven years, and BMW is the largest selling luxury car in Germany.

Anyway, GM has always worked on the assumption that if you produced a car as cheaply as possible (using crap), the people would buy it because "they were getting more for their money." And you worked on the assumption that they would trade in that car every four or five years. So you didn't have to worry if the stick-on ding strips along the sides started falling off after 18 to 24 months. They actually used cheap two-sided sticky plastic strips along the sides of their cars and these strips started falling off within two years. And the first plastic bumper surrounds (even on Cadillacs) discolored after about 36 months of exposure to the sun to the point were they didn't match the rest of the car at all.

Their union relations were horrible. You would be amazed how many cars were sabotaged just because the union workers hated the company. Gas tanks without the floats connected, loose screws in the dash, half-eaten tuna sandwiches in the door panels, roof struts with welds missing (before robotic welding).* I could go on forever but the point is that you didn't have any of that with cars like Volvo or Jaguar or BMW, other makes that I handled over a 35-year career. The crappy workmanship of all the American car manufacturers was legendary during the first 25 years that I was in the business. You would be amazed at some of the cheap crap they used on their cars. Stuff that would positively not last more than five or six years at most. Built-in obsolesence.

Anyway, it would take forever to detail all of GM's mistakes over the past 40 years or so.

*Most of that stuff happened in the three or four weeks leading up to the September 14, 1970 strike, which lasted until late November. They sabotaged the cars they were building during the last few weeks before the strike, then they tried to destroy the cars they had built as they were being transported out of the plant on rail cars. They shotgunned the cars with birdshot from the woods and they poured acid on them as the trains passed under overpasses. That was back when the railroads' car transport cars were not enclosed on top and sides like they are now to prevent vandalism.

[SPasse]

Hi All,

The Fanny mae and Freddie Mac time lines. (AKA how they bought the Democratic Party)

http://www.youtube.com/watch?v=63siCHvuGFg

http://www.youtube.com/watch?v=yrfPMa3lONU

http://www.youtube.com/watch?v=9nU3fNh-PRk&feature=related

http://www.youtube.com/watch?v=usvG-s_Ssb0&feature=related

http://www.youtube.com/watch?v=ivmL-lXNy64

Regards,

Scott

[Ninong]

$25 Trillion Lost So Far This Year

As of the close of trading today, the world's stock exchanges have lost a combined total of $25 trillion this year. The US stock market has lost more than $9 trillion since last October. And that doesn't include the $6 trillion or so that we have lost in housing wealth.

The Dow Jones Industrial Average swung in a 1,000-point range today. Being down 700 points and up more than 300 points before closing down 128 points (1.5%) to close down 22 percent for the week -- the worst week in the history of the 30-stock average. The Dow had one bigger weekly retreat in its 112-year history, a 23 percent tumble in 1914 before the average was expanded to 30 stocks in 1928. Think about that for awhile. The U.S. stock market fell more this past week than any week during the Great Depression. It was truly a horrible week for markets around the world.

Global Rout

European and Asian benchmark indexes posted their worst weekly retreats on record as exchanges in Russia, Indonesia and Ukraine suspended trading in an effort to halt a global rout that has wiped out $25 trillion from global equities this year.

Developing country stocks also posted a record weekly plunge, with the MSCI Emerging Market Index losing 21 percent, led by a 20 percent slide in Brazil's benchmark index and a 16 percent retreat in India.

Eight-Day Streak

The S&P 500's eight-day losing streak is its longest since 1996. This week's declines pushed both the S&P 500 and Dow down more than 40 percent from their peaks last October.

[Ninong]

U.S. will buy stock in banks, Paulson says

Last time similar program was used was during the Great Depression

WASHINGTON - The federal government will buy stock in American banks for the first time since the Great Depression, Treasury Secretary Henry Paulson said Friday in the latest dramatic effort to reverse a global financial panic.

[...]

The latest Paulson plan follows Britain's move earlier in the the week to partially nationalize its troubled banks by pouring cash into them in return for equity stakes.

Paulson said the U.S. program would be designed to complement banks’ own efforts to raise fresh capital from private sources. The government’s stock purchases will be of nonvoting shares, so it will not have power to run the companies.

[Ninong]

Chrysler Not Considering Bankruptcy

That makes two of the big three that have issued statements in the past 24 hours that they are not considering bankruptcy. Chrysler and GM have been in merger discussions but they're not going anywhere.

Ford is shopping for a buyer for their 33% stake in Mazda. Selling their stake in Mazda might bring them $1.2 to $1.5 billion at the most. That's because Mazda, along with Toyota and all the other Japanese automakers, is down at least 50% from its price a year ago. As a matter of fact, the Nikkei 225 is now down about 50% from where it was a year ago. A billion bucks or so isn't going to make a lot of difference when you're losing $23 billion a year.

[Ninong]

G7 Inaction?

What the heck are they doing??? They haven't agreed on anything of substance so far. Unless they come up with something significant by tomorrow evening, Monday is going to be another bad day on the stock markets worldwide. U.S. markets are closed Monday.

If they don't do something FAST to fix the credit meltdown, we're looking at the possibility of another Great Depression, not just another garden variety recession.

The real estate market is still falling and it could get a lot worse before it gets worse. Alan "Mr. Bubbles" Greenspan said yesterday that the real estate market will start turning up during the first half of 2009. Since Greenspan has a history of being way off on virtually everything, we can expect the real estate market to NOT turn up in the first half of 2009.

[SPasse]

Hi All,

“If they don't do something FAST to fix the credit meltdown, we're looking at the possibility of another Great Depression, not just another garden variety recession.”

I know that my next statement is going to make the “End Times Prophecy” people go nuts but I think that a one world currency and a world banking/regulatory system is probably going to happen. The question is whether is comes before or after the onset of the depression…

Regards,

Scott