9/15/8 Special Weekly Report - Game Over!

Brought to you by Karl Denninger

By now most of you watching and holding your breath this weekend already know the bomb has been dropped and it's nuclear!

NOTE: This commentary & the video in it may contain (slightly) offensive language.

GAME OVER

I'm here to tell you that there is no resolution, no fix, and we now face a stark choice between most of American Finance being sucked into the vortex, and everything, including you, being sucked into the vortex.

Yes, those are some stark - and harsh - words.

They're also true.

There are a lot of things going on right now, and if you haven't been watching, you may be waking up scratching your head today asking "How? How did this happen? What is coming next? Who is to blame?".

As a consequence every one of these firms that has tried to "hide the sausage" is ultimately going to die. They have made the critical mistake of trying to play games instead of selling off their portfolio of trash last summer when it was still possible, and now are going to have to eat it - with disastrous results. It is highly probable that three years from now none of these firms will have survived in their present form.

Speaking of hiding the sausage, let's talk about AIG and WaMu.

I hope this is enough to entice you to read the entire link and watch the video. There is big trouble this morning and it won't end today. We started the weekend with one major financial institution in big trouble and by the open today we have a snowball so big it's difficult to comphrehend.

You have to understand that all the big guns, the guys that were suppossed to be protecting us, not only knew this was coming a long time ago, but were flat out lying about it. We just kept being told it was contained, the banking system is sound, the sub-prime crisis was under control, don't worry, just take a pill we've got it under control. Meanwhile it was all already in the toilet, and the regulation was already at the City sewer plant.

But it doesn't end there.

The Truth: Its all a house of cards.

EVEN THE FDIC:

"We were wrong. As a former FDIC chairman, Bill Isaac, points out here, the FDIC Insurance Fund is an accounting fiction. It takes in premiums from banks, then turns those premiums over to the Treasury, which adds the money to the government's general coffers for "spending . . . on missiles, school lunches, water projects, and the like."

The insurance premiums aren't really premiums at all, therefore. They're a tax by another name."

Betcha you didn't know that.

Our big backstop is a panacea folks. Is it time to panic? I can only say this. We are living in unprecedented times, a world that never existed before for various reasons. A financial mess that was never suppossed to be allowed to ever happen, but the back up plans are failing fast.

Oh, and for the record, there are people to blame, but so far none are being taken to task. Also, this is not a partisan issue, so let's not even go there, especially because both sides have had a BIG hand in this the whole time.

Brought to you with permission of market-ticker.denninger.net

And to those who felt last weeks report was the biggest thing on the board but no one was noticing.....

Flag and Star this one folks, cause this blows away Freddie/Fannie and people need to notice. Not like they won't know something is happening when they hit the streets today, but they need to find out the what why and wherefore.

(Sorry it looks like I am tooting my own horn here, but this is just too important for people to miss.)

The effects on the US future opening of Wall Street seem to echo the worry, 370+ points down for the DOW at the moment, will there be a quick spike as investors try to grab bargains or will the exodus drive it below 11,000 at days end?

Looks like a troubling day in store for Wall Street.

Anyone seeing any light?

That's great it starts with an earthquake birds and snakes and airplanes and Lenny Bruce is not afraid....

The common man will feel the pinch after this Christmas.

If Christmas retail sales are bad, if retailers who count on Christmas to make a profit do not, then we will begin to see massive layoffs in the retail sectors which in turn will cause the rest of the service based economy to crumble.

Most, if not almost all of the persons I speak to are blissfully unaware of any economic meltdown.

The thing that most see is the price of gas, this is where the common person lives........the "ripple" effect will hit the common soon in the form of lost wages, food price hikes and no jobs.

It seems that people on the street are angry concerning these "very smart, educated, CEO's etc when interviewed by CNBC.

I hope that somehow, somebody can sort this mess out and soften the fall.

Well, this is the worst point drop since THE 9/11.

It looked to me like they thought they had it contained till the last hour, now we have to see how many more wake up after a market close like this.

[edit on 9/15/2008 by Relentless]

Since the housing/mortgage crisis is such an integral part of what is going on at the moment, here's a detailed analysis of Bank exposure to this mess.

It's kind of complicated, but you might want to see where your bank falls on the list.

Banks by Loan Exposure

The higher on the list the worse shape they are in, and notice how many are above banks we know have serious problems right now.





[edit on 9/15/2008 by Relentless]

Well, what can I say. I've been following the author of the guy in the FSME's OP for over a year now. He along with a few others not really in MSM financial press or analysists have been consistently concerned and right. Roubini, Merideth Whitney, Mike "mish" Shedlock, and a couple of others have been pretty much more or less right about how bad the situation is/was.

The massive bubble of BS blown over the last 8 years is coming undone. And the fallout isn't over yet. Notice that neither campaign has made any real statement about what they plan to do about it. With the mess in the markets the next admin is going to have to deal with, makes you wonder why anyone would want it right now.

Well it may be past time for preparing for Global Meltdown into the "Dealing with it phase".

And finally, a recap of today's sentiments.....

&destination=&symb=DJIA]Just How Bad Is It?

Just a few snippets....

The Dow Jones Industrial Average ($INDU) dropped 504.48 points, or 4.4%, to end at 10,917.51. The blue chips posted their worst point decline since Sept. 17, 2001 and worst percentage drop since July 19, 2002.

Note, there is a big difference now in point drops vs. percentages on the drop now, for instance the percentage pales against the 1987 Black Monday, for the moment.....

"More questions were left unanswered after the weekend; how does this Lehman bankruptcy affect the rest of the industry? We don't have answers for all the tricky questions that come up when somebody has $613 billion in debt and no market capitalization," commented Hogan.

Can we even comprehend this? Lehman closed their doors $613 BILLION in debt! "We don't have answers"??????? Basically nobody knows where this will lead.

Economic data had the Fed reporting U.S. industrial output fell 1.1% in August, the largest drop since Hurricane Katrina three years ago, and far worse than the 0.3% predicted by analysts. Read Economic Report.

Separately, the New York Federal Reserve Bank reported manufacturing activity in the region declined earlier in the month, with the Empire State index falling to negative 7.4 in September from 2.8 in August.

Lots of good stuff in that article with links to more details on all of it.

Starred and flagged. Great post and links. As soon as gas skyrocketed I knew there was worse to come. The price has tripled in eight years. I have no sympathy for any publically traded corporations that go down after having been repeatedly lied to in company press reports. I watched the video and read most of that link and I am in agreement as far as what I read. A lot of people are going to fall very hard. I think I am low enough that I can safely jump from here.

This really made me think:

"spending . . . on missiles, school lunches, water projects, and the like."

The in bolden makes me think of REX84, basicly the government spending money on a bunch of prison camps for us indentured servants of debt.
The are many prison like camps owned by different water companies close to there water industrial buildings, that are considered "water projects".

THings are looking bad, oh well, good thing I don't have any credit debt at least.

-Jimmy

[doublepost]

[edit on 15-9-2008 by jimmyjackblack]

With the recent failures of Freddie Mac/Fannie Mae/LEH collapse of Merrill Lynch and coming failures of Washington Mutual and AIG how do you think the market would deal with an attack on say Iran?

Greenspan caused all this and now we are back to square one the day after 9/11 except now we are worse off than before. The Fed does this just so they can gobble everything up cheap. Bank of America is the last great hope for the U.S. and the final target of the fed and their crooks.

If the fed comes out and tries to lower interest rates again there needs to be a lynching in D.C. Lets all hope that the market rebounds tomorrow off of some smart moves because if it tumbles more then it may slide fast. To many countries are now looking at us with evil eyes because they think that this is our fault when its the Fed with its European owners who are to blame.

Welcome to the biblical one world economy. Russia just learned that lesson the hard way, Soon the real hot war will start for the worlds resources if the world economy gets any worse because I think thats the only thing holding them back. When they feel there is not much more to lose then it will get very ugly.

The Nikkei is down 600 points already and it still early trading. Tomorrow is sure to be an interesting day..

MSNBC is being told that AIG will need to show 200 billion to not file bankruptcy now. They are now saying that tomorrow is going to be financial Armageddon. Not knowing what tomorrow will bring I had to make a quick run to the bank and get out some emergency money.

They are talking like this is the big one that everyone has feared.

I can't watch the video and don't really know the connection between AIG and WaMu, could someone please explain that for those of us who are out of the loop?

Thanks for this report! Well said, and scary. Not pulling any punches, huh?

I didn't entirely understand about why housing prices can't be more than 3x average income, without the market becoming unmaintainable. Is this a rule of thumb, or a calculation tied to interest rates? What about localized demand and future demand/growth predictions? Do they make the housing market inherently 'crash-prone'?

Originally posted by Sky watcher
Greenspan caused all this and now we are back to square one the day after 9/11 except now we are worse off than before. The Fed does this just so they can gobble everything up cheap. Bank of America is the last great hope for the U.S. and the final target of the fed and their crooks.

If the fed comes out and tries to lower interest rates again there needs to be a lynching in D.C. Lets all hope that the market rebounds tomorrow off of some smart moves because if it tumbles more then it may slide fast. To many countries are now looking at us with evil eyes because they think that this is our fault when its the Fed with its European owners who are to blame.

Welcome to the biblical one world economy. Russia just learned that lesson the hard way, Soon the real hot war will start for the worlds resources if the world economy gets any worse because I think thats the only thing holding them back. When they feel there is not much more to lose then it will get very ugly.

This is why the depression is inevitable. You're right. Just cutting interest rates only metes more crack to the addict, and now very visibly at the expense of our dollar.

But raising rates at this point -- and maybe even keeping them steady -- will only cause capital to shrink from the system, rippling across all markets with declining growth, more layoffs, etc. As bumbling as Bernanke has been, he's right about one thing: The first great depression was spurred on by central banks' refusal to cut interest rates, followed by tax increases on Americans.

The botton line lessons learned in all of this is that downturns are healthy needs in normal economic cycles. We have a generation of Fed leaders who believe interest rates could perpetually be engineered to avoid recessions. Instead they create a situation where we rob Peter to pay Paul -- retarding natural declines in activity so the weak may be culled from the herd and the economy can be retooled to be stronger. Recessions are painful, but inevitable. Making capital cheap does deaden the pain, but only temporarily as we are now seeing.

reply to post by behindthescenes


I read an article this morning which stated that if the FED drops the rate by 1/2 percent, then we should head for the hills. Being a novice, I don't fully understand the implications of that - Does anyone have thoughts on the FED meeting today - what is likely to happen and what is the likely outcome?