Imminent and severe market correction

Glen48 said:

From Patrick.net:
Credit Card Desperate To Get Paid

Hey Patrick - I just got a letter from a credit card bank that I have had a card
with for five years, never been late once, offering me a $783 credit if I pay
them $1,174 within 15 days! This just so happens to calculate to my full
balance. So In other words, they will take 60 cents on the dollar from to clear
what I owe them - even though I've never, ever missed a single payment!

Things are getting scary - but you can bet they're getting paid off instantly
(40% guaranteed ROI in one day, plus savings in interest!) - The best part is I
had them slated to be paid (in full) next month because they just canceled my
card and raised my rate to 30% for no apparent reason other than they are
probably about to go under...

Just thought I would share that with your people. Insane.

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GM: 'Substantial doubt' about continuing

By Ben Rooney, CNNMoney.com staff writer
March 5, 2009: 6:51 AM ET

NEW YORK (CNNMoney.com) -- General Motors Corp. said Thursday that it hopes to get additional loans from the government and that there is "substantial doubt" about the automaker's ability to remain a "going concern."

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Remember, once we begin the inevitable unwind of AIG and Citigroup (NYSE:C), the beginning of the end of CDS and the derivative nightmare on Wall Street will have begun.

More, the US government cannot fund the operating losses of Fannie, Freddie, AIG and C. We do not have the money. Between now and the end of March, IOHO, the markets are going to force a resolution of AIG and C. We may never even see the much discussed stress tests promised for April by Secretary Geithner.

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davo8 said:

Anyone here follow the IRA? That is Institutional Risk Analytics. The latest article is plain scary.
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp



Translation: inside 30 days AIG and/or Citi go bust and the CDS detonation begins.

Now that's what I call SHTF on Wall Street time! :fan

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The last quarter’s GDP figures, showing that Australia’s GDP contracted by 0.5% in the last quarter, ended the “phony war” debate over whether we’re in recession. The previous quarter’s 0.1% was so close to zero that it’s semantics to question whether we’ve seen six months of negative growth or not: we are in a recession.

Now that we’ve had our Dunkirk moment, it’s time to consider what policy should be, given that avoiding a recession is no longer an option.

A first step there is seeing why we recovered from previous recessions, and asking whether we can pull off the same trick again this time.

My answers are that our escape route from previous downturns was to renew the private lending engine, and that this is a trick that is one recession past its use-by date.

The 1990s recession saw private debt to GDP ratio top out at 85% in late 1990, and then fall to 76% by early 1994. From then it took off once more, with households taking over the borrowing binge mantle from business, which actually reduced its debt level from 56% of GDP to 40% in mid-1995. The household debt binge, which began in 1991 in the depths of Keating’ recession, took the household debt to GDP ratio from 30% to a peak of 99%, from which it is now falling.

Meanwhile, business borrowing likewise began a China and Private Equity fuelled blowout in mid-2004, rising rapidly from 46% of GDP to 66%–a new record–by early 2008. The combined debt total reached 165% of GDP in March 2008, and it has since fallen to 160%.

So what are the odds of encouraging businesses or household to start borrowing again, from their now record levels of debt?

Not good, I would think. Instead, they will be de-leveraging, not just for the duration of a standard recession but perhaps for a decade or more, to bring debt levels back to something like 1960-70 levels of 25-50% of GDP. Deleveraging has only just begun, and it has a long, long way to go.

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MR. said:

The debt/credit un-wind we had to have.

Finally, now that it is here, I don't want to go through it........

From Steve Keen's Debtwatch.
http://www.debtdeflation.com/blogs/



Debt shouldn't exist. Companies should only raise funds from investors cash, houses paid for by the family groups. If you don't save you don't get. Wouldn't the whole system be stable........!

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the Labor Department reports on February nonfarm payrolls. Economists surveyed by MarketWatch expect payrolls to fall by 650,000, the worst job loss in nearly 60 years. They expect the unemployment rate to rise to 8% from 7.6%

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[size=+2]US bank deposit guarantee could go broke[/size]

Agence France-Presse
March 06, 2009 07:46am


THE US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC's plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.

Ms Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.

"Without these assessments, the deposit insurance fund could become insolvent this year,'' Bair wrote.

The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of "a large number'' of bank failures through 2010.

"Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,'' she wrote.

The FDIC last Friday announced it would impose a temporary emergency fee on lenders and raise its regular assessments to shore up the rapidly depleting deposit insurance fund that insures individual customer deposits up to $US250,000.

A week ago the FDIC reported a sharp depletion of the deposit insurance fund in the fourth quarter due to actual and anticipated bank failures, to 19 billion dollars from 34.6 billion in the third quarter.

The FDIC said it had set aside an additional $US22 billion for estimated losses on failures anticipated in 2009.

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MrBurns said:

A run on the banks over there ?

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Uncle Festivus said:

Has been for some time?

I think this sums it up nicely, although even today's prices show a good premium for what are essentially insolvent companies? (What's that annoying green price bucking the trend?)

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Glen48 said:

JPMORGAN CHASE NEXT? This morning, Moody’s slashed its outlook to negative. Ditto for Wells Fargo.
To me, JPMorgan Chase is the most worrisome of all. After all ”” it is America’s largest bank with a market value that’s greater than Wells Fargo, Bank of America and Citigroup combined!

Remember: JPMorgan Chase & Co. holds $91.3 trillion in derivatives ”” a notional value that’s 40.6 times its total assets ”” including $9.2 trillion credit default swaps, hands-down the riskiest form of derivatives.

Worse, the U.S. Comptroller of the Currency warns that JPMorgan Chase Bank is also exposed to extremely large credit risk with its derivatives trading partners: For each dollar of capital, the bank has credit exposure of $4.00 ”” nearly twice the average exposure of Bank of America and Citibank.

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sinner said:

What this article fails to mention is that yes JP has exposure but they will probably profit from bankruptcy of its trading partners (CDS).

Regardless, why the "last standing" bank in US is allowed to have a credit and derivatives exposure to the tune of almost ten times the US national GDP, remains a glaringly unanswered question.

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Bushman said:

If GE and GM go, we are rooted! Make no mistake about it.

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Aussiejeff said:

Here ya go. This should restore bwanker's confidence in financial markets.

http://www.news.com.au/business/story/0,23636,25146492-14334,00.html

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