Monday, October 6, 2008

McSame Has Nothing To Lose Now

...because his honor and integrity are officially gone after having referred to his opponent as "Barack Hussein Obama" today in New Mexico and let accusations that Obama is a terrorist from an audience member stand unchallenged. They know they're done for. McSame has decided to punk out and cause as much sleaze damage as possible.

It's now Scorched Earth. We're overtly seeing McSame play the nastiest cards he can make up. Both he and Sarah Palin are 100% attack, all blood.

I expect Obama can flip this easily. McSame is now completely predictable because he's using the Rove playbook we've seen in the last two Presidential elections.

[UPDATE] Glad to see Howard Wolfson is calling it as he sees it: OVER.
Perpetually fretting Democrats will not want to accept it. The campaigns themselves can't afford to believe it. Many journalists know it but can't say it. And there will certainly be some twists and turns along the way. But take it to a well capitalized bank: Bill Ayers isn't going to save John McCain. The race is over.

Last Minute Save

Looks like the Dow is experiencing a last minute save, with late news of a French proposal of an emergency G8 meeting to resolve the crisis. That has sparked a massive Dow rally in the last minutes of the trading session to above 10,000 again. The Dow at one point was down to 9,525 today, but has rallied nearly 500 points in the final hour.

Clearly the markets are now pricing in a global rate cut. Will it be enough?

[UPDATE] Dow closed down only 370 when it was down by 800. The Market definitely wants this meeting and the expected coordinated global rate cut that it promises.

Another Day, Another State Asking For a Loan

And this time it's Massachusetts.
Massachusetts plans to sell $750 million in short-term notes this week, leading U.S. states and local governments seeking to revive debt sales after financial turmoil inhibited their ability to borrow since mid-September.

Massachusetts approached the U.S. Treasury about possible financing if it can't raise the money from private investors. California, which seeks to borrow $7 billion next week, has also communicated with federal authorities.

Sales of fixed-rate bonds fell to about $800 million each of the past two weeks, after averaging more than $6 billion weekly this year, based on data compiled by Bloomberg. The lack of new issuance contributed to three weeks of rising borrowing costs by making it harder to gauge market values, according to George Friedlander, municipal strategist at Citigroup Inc.

``With so few issues being placed successfully, traders and institutional buyers are backing off their bids to incorporate an extra premium, because they cannot pinpoint the worth of a given bond,'' Friedlander said in a weekly report from New York. ``The muni market tends to struggle when very limited successful new issue supply leads to weak `price discovery.'''

Massachusetts will take bids from investment banks seeking to underwrite a deal that would boost the state's cash flow until more tax revenue arrives this fiscal year. The offering, previously set for Oct. 2, will proceed tomorrow, said Francy Ronayne, spokeswoman for State Treasurer Timothy Cahill.

I was just listening to Tim Cahill on CNBC this afternoon. He says he wants Massachusetts to have the same access banks currently do to the Fed Discount Window "if necessary".

I expect that to happen. We're going to be bailing out states here within days.

[UPDATE] Dow now off well over 700 points.

Since We've Established UberBailout Has Failed Miserably what? I mean, we're pretty much out of options here short of an emergency Fed rate cut, and we're already down to 2%. Throwing money at the problem isn't working, because as I've said like seventeen times liquidity is not the problem, it's the symptom of the real problem, insolvency.

Dow's off 560 points as I write this at 1:45 PM or so. There is absolutely nothing that I'm seeing that will arrest the freefall of the stock markets and unlock the credit markets right now. The LIBOR, TED spreads, and Euribor are all through the roof. Banks are flat out terrified to lend to anybody right now, and that in turn is causing problems worldwide today.

The worst case scenarios are starting to play systemic financial collapse. Again, a coordinated global rate cut may be the only thing left to play, because right now we have a number of countries trying to do their own thing when the problem is global right now. The response needs to be both global and powerful.

Right now it's a confidence problem, and nobody has any confidence anything's going to work.

What form will the next bailout take? We can't keep losing 500 points a day on the Dow for long. Roubini's theory is that today's tankfest is strictly because the markets were expecting that Helicopter Ben and Hammerin' Hank would have gotten the point from Friday's post bailout losses and would take massive, globally coordinated action. They have not...and thus, a 5-6% loss in markets across the board.
Since the crisis of confidence and liquidity was becoming more virulent over the last few days and during the weekend in Europe one would have expected a radical response over the weekend along the lines suggested above by the Fed and other central banks. After all Bernanke stated on Friday that the Fed would do whatever was necessary to deal with the liquidity crisis.

Instead the Fed did nothing over the weekend (before the crucial opening of markets in Asia and Europe) and then announced steps this morning that don’t even start to address the liquidity problems of the financial system: paying interest on reserves of banks only allows the Fed to provide more liquidity to banks (and only banks) while automatically sterilizing the effects of that liquidity support on base money; while doubling the size of the TAF (that only banks have access to) does nothing to address the run on the liquid liabilities of non-bank and the corporate sector. Also the liquidity support of banks (short of a formal guarantee of deposits and/or a commitment to unconditionally support any bank subject to a run) is not enough to stop the concerns by uninsured depositors of banks.

So the Fed wasted an entire weekend announcing nothing and then announced this morning a set of modest steps that does nothing to address the ongoing silent run on banks and the non-silent run on the short term liabilities of non-banks and of the corporate sector. This at a time when the markets was expecting – given the Friday statement of Bernanke – such radical and urgent policy actions. So no wonder that Asian and European equity markets collapsed at their Monday opening and no wonder that US equity markets are down 5-6% today (as of mid-day). So the time to move is now or, better, it was yesterday or a week or a month ago. Any further delay may lead to an implosion of the financial system and serious damage to the corporate system tilting a severe economic recession in a much more grave economic depression.

And even an emergency 50bps or 100bps Fed Funds cut will not do: the Fed has already done 325bps in the last year and interbank spreads have kept on widening while short-term lending in the private sector (banks, non-banks and corporates) is now close to being shut down. Given the risk of insolvency of even the most safe counterparties in the financial and corporate system reducing policy rates will not affect interbank and credit spreads. The only way to stop this liquidity panic is a blanket guarantee of financial sector liabilities and direct public provision of liquidity to the parts of the financial system and the corporate system that are now at risk of a meltdown driven by a liquidity run on their short term liabilities. So it is time for the Fed to stop wasting time and start the actions that will make a difference. We are now at risk of a systemic financial meltdown of the financial system and the corporate sector too.

We are in a state of freefall right now. There is no bottom visible. The reckoning is happening right now.

We're close to the end.

McSameCare Still Sucks

The Kroog on McHealthPlan (emphasis mine):
The good news, such as it is, is that more people would buy individual insurance. Indeed, the total number of uninsured Americans might decline marginally under the McCain plan — although many more Americans would be without insurance than under the Obama plan.

But the people gaining insurance would be those who need it least: relatively healthy Americans with high incomes. Why? Because insurance companies want to cover only healthy people, and even among the healthy only those able to pay a lot in addition to their tax credit would be able to afford coverage (remember, it’s a $5,000 credit, but the average family policy actually costs more than $12,000).

Meanwhile, the people losing insurance would be those who need it most: lower-income workers who wouldn’t be able to afford individual insurance even with the tax credit, and Americans with health problems whom insurance companies won’t cover.

And in the process of comforting the comfortable while afflicting the afflicted, the McCain plan would also lead to a huge, expensive increase in bureaucracy: insurers selling individual health plans spend 29 percent of the premiums they receive on administration, largely because they employ so many people to screen applicants. This compares with costs of 12 percent for group plans and just 3 percent for Medicare.

In short, the McCain plan makes no sense at all, unless you have faith that the magic of the marketplace can solve all problems. And Mr. McCain does: a much-quoted article published under his name declares that “Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.”

I agree: the McCain plan would do for health care what deregulation has done for banking. And I’m terrified.

John McSame: Doing For Health Care What He Did For Wall Street.

Nice slogan.

It's A Worldwide Wipeout

Not only are Asian, European, and US markets tanking by 5% or more today, but emerging markets are getting slaughtered, lead by Russia's main index dropping almost 20% in value.
Emerging market stocks fell the most in at least two decades and exchanges in Brazil and Russia were forced to halt trading as the global banking crisis escalated in Europe and oil fell below $90 a barrel.

Brazil's Bovespa index tumbled 10 percent, while Russia's Micex Index plunged 18 percent before trading was halted for a second time today. Indonesia and Saudi Arabia lost the most in at least six years. The MSCI Emerging Markets Index slumped 10.5 percent, the biggest intraday loss since 1987 when Bloomberg records began.

Brazil's two largest companies, Cia. Vale do Rio Doce and Petroleo Brasileiro SA, declined more than 10 percent on concern demand for metals and fuel will weaken. Financial shares retreated worldwide as BNP Paribas SA agreed to take control of Fortis after a government rescue failed, and German state and financial institutions put together a 50 billion-euro ($68 billion) rescue package for Hypo Real Estate Holding AG. The actions spurred speculation credit losses are spreading even after the U.S. passed a $700 billion bank rescue package.

``Investors are escaping in a flight to quality,'' Francisco Busquet, who manages $150 million at Larrain Vial SA, said from Santiago, Chile. ``The main fear is greater probability of recession in developed countries and the feeling that the bailout, although good, may not be enough.''

The credit markets are still locked up tighter than a drum. Nothing's going to change that. Another week on Wall Street like today and the Dow will be back to where it was in October 2002...south of 7500.

Does The GOP Really Want To Bring This Up?

As in accusing Obama of taking illegal campaign donations and demanding an in-depth audit of his entire operation?
The Republican Party on Sunday said Democratic presidential candidate Barack Obama had not done enough to screen out illegal campaign contributions and asked U.S. election officials to look into the matter.

Citing news reports, the Republican National Committee said Obama had accepted contributions from foreigners and taken more than the $2,300 maximum from donors who give in small increments. The Obama campaign denied the charges.

The RNC said it will ask the Federal Election Commission to examine Obama records in detail to determine the extent of the problem.

Because if we're going to be getting into campaign finance irregularities of John McSame, there's quite a bit more there to worry about on the GOP side.

[UPDATE] And Obama is now attacking with the Keating Five scandal at his new site, and the McSame camp is going ballistic, calling the Keating Five scandal a 'political smear job' to get John McSame.

That's mavericking we can believe in.

Well, This Can't Be Good AT ALL

Dow's off, oh, 500 points here at 10:45 AM.

I picked a hell of a week to stop drinking. Dow well under 10k, NASDAQ well under 2k heading for 1800, S&P about to drop under 1k. Confidence restored!

The Race In Missouri May Come Down To Race

Nobody's surprised that race is an issue in Missouri for Barack Obama, least of all Missouri Democrats.

Four years ago, one yard in a working-class Kansas City suburb sported a "Kerry" sign bigger than a bed mattress.

But this season there's no "Obama" sign there of any size, not even throw-pillow dimension.

"It's the 'B-L-A-C-K' issue," a neighbor explained. "You hear it everywhere."

But it hardly has to be spelled out for most of us that race has been injected into presidential politics in unprecedented ways.

Barack Obama, son of a Kenyan father and white American mother, is rewriting the history of an America shackled since inception by racial divide.

Missouri has been at the crux of that old story and is at its crux now.

A swing state, a bellwether, it looks like a jump ball once again. But could Obama, positioning himself as a post-racial candidate, be pulled down by racism there?

No one knows, but many are wondering.

Social trends, past elections, black enthusiasm and polls, polls, polls offer some clues, but no amount of analytical scrubbing can make transparent a voter's bias, said polling expert Scott Keeter.

"The election itself is the checkup."

An Obama loss Nov. 4 in deep red Kansas will pass without much mention. But in pink-trending Missouri, it promises to attract national scrutiny, especially if white Democrats do well in other statewide races.

Should he lose, said Brad Stokes, a union official in Springfield who is white, "it would be a shame to tell our kids the reason was that race was part of it. And for some of our members, it may be."

Missouri has picked the President correctly in 25 of the last 26 elections, the only mistake in that time was going for Adlai Stevenson in 1956. But there's an honest problem for Obama in this state and many others if 5-6% of voters won't vote for him because he's black.

Panic, Global Style

A couple of stories caught my eye this morning. First, with Asian and European markets in complete freefall this morning, it's clear that this weekend's efforts failed miserably. European futures were up sharply last night. That fell apart as the bailout for one of Germany's largest mortgage banks, Hypo Real Estate, fell apart as well. A new deal was crafted at the last hour, but that shocked the Euro markets enough to turn a 4% futures gain into a 5-6% loss. The EU economy is coming unglued this morning.

LIBOR numbers are still bad, bad, bad. The 3 month rate fell 4 basis points, but the overnight rate shot up 37 basis points and that's enough to prove that the bailout is doing nothing at this point to unlock credit markets. The US response this morning? The Fed wants to create a centralized marketplace for credit default swaps. Surely that's part of a solution, but with stock markets dropping at the rate of 5% or more a day, it's not going to have an immediate impact at all.

Things are bad, folks. We're deep into a worldwide death spiral here and nothing seems able to lift the markets out of it. US futures are down about 2.5% so far this morning. This will most likely be the day the Dow falls under 10,000 and that's going to be a pretty nasty psychological blow.

Keep in mind that the last recession we had knocked the Dow all the way down to under 7,500 on this month six years ago.

We've got a long way to fall still.


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