Thursday, October 9, 2008

Global No Confidence Vote: Bush Boom Kaboom

October 9 is a very important date in the recent history of the Bush Economy.

On October 9, 2002, the Dow hit its lowest point so far during the President's two terms: 7,286.27.

On October 9, 2007, the Dow hit its highest point in the Bush Presidency: 14,164.53.

Stocks drifted higher through the morning, flattened out in the early afternoon and then began to rise as investors digested the minutes from the Sept. 18 Fed meeting, released at around 2:00 p.m. ET.

"The market had a desire to keep going up and there was nothing in the minutes to prevent it," said Paul Mendelsohn, president and chief investment officer at Windham Financial Services.

Mendelsohn said that investors were a little cautious leading into the minutes but once they saw that there was nothing particularly surprising in the minutes, they redoubled their efforts to move stocks higher.

The Dow and S&P 500 carving out fresh all-time highs will give the stock market more ammunition in the short term, he said, provided that the earnings don't derail the momentum.

Investors already know that third-quarter earnings growth will be at the slowest pace in more than five years. But outside of the financial and homebuilding sectors, there may be expectations for results to beat, particularly in the case of multi-national companies that should benefit from the weak dollar, Mendelsohn said.

The period is called the "Bush Boom", the greatest economic story ever told if you ask Sean Hannity or Larry Kudlow. (You know, despite Bill Clinton taking the Dow from 3,500 to 10,500 during the course of his Presidency, tripling its value.)

Today, one year later after the Bush Boom, we have the Bush Kaboom. Today, October 9, 2008, the Dow closed at 8579.19...a loss of 39.4% in one year.

In the five years of the Bush Boom, the Dow gained 6878 points.

In the year since, we've given 5585 of those points back.

By January 20, 2009 I'm betting 7286.27 would be a really great level for the Dow to be at. I'm convinced we may be looking at Bush ending where Bill Clinton started on January 20, 1993...


We've lost over 2500 points in just 9 trading days...37% of the Bush Boom has vanished in the space of two weeks. We'd set a new low in Bushonomics sometime next week.

At that pace the Dow is gone well before January. Hell, it doesn't even make it to December.

The credit markets are still clogged. The housing market is still in freefall. The derivatives are still crushing the lifeblood out of companies. The cardiac arrest is now global.

The Great Reset Button has been hit. Things are accelerating now at a pace that even my wildest nightmares couldn't birth.

Tomorrow's G7 meeting is the last stand of the Alamo. Whatever comes out of this meeting is the world's last bullet in the gun.

This weekend's G7 finance ministers meeting will focus discussion on the current market turmoil as 'global phenomena,' Treasury Undersecretary for International Affairs David McCormick said today.

'We are all affected by it, and strengthened international collaboration is needed now more than ever to find collective solutions to achieve stable and efficient financial markets and restore the health of the world economy,' McCormick said today in a pre-meeting press conference.

McCormick noted that he and Treasury Secretary Henry Paulson have been in regular contact with the G7 and other international counterparts, but Friday's meeting 'will provide us with a timely opportunity to further strengthen our collaboration.'

The Undersecretary said that the US will not seek a 'one size fits all' global approach dealing with the current economic crisis, but would instead favor a framework in how to address economic strengthening. McCormick said that inflation is something the finance ministers will be 'mindful of' in their discussions this weekend, but is unlikely to be the focus as it was in their last meeting.

Don't fool yourselves. Inflation is very much on the minds of these ministers. They are wondering just how much hyperinflation it will take to "save" the global economy. That's the last magic bullet.

And should that magic bullet fail, as every other bullet has failed, then we get front row seats to the end. Even if it succeeds...we still get front row seats to the end.

The end is the final Bush/Cheney October Surprise. What does it entail? Who knows? My nightmares aren't talking much these days...they're too busy watching their 401(k)s become 911(doa)s. But any way you slice it the GOP is across the board dead. All the power Bush and Cheney have taken for themselves will be given to Barry and Joe in a matter of months.

Or at least, that's the plan on paper. The reality...well the last 3 weeks shows that reality can hit a snag every now and then.

Given what this President and Vice President have done in the last 8 years, do you honestly think they will sit back and allow John McSame to lose this election?

Do you think there will even BE an election? I'm not sure we won't be under martial law by then.

The next 3 weeks is the end of one story.

Who will write the next one? I don't know. I don't think it will be Obama, but I have hope.

But whatever that story will be, it will be a horror tale that will make your soul curdle and your blood boil. Whoever gets to write it, the poor miserable schmucks in the tale will be us. We will be hurting. The only question is how long and how deep it will be...a two or three year vicious recession and a lesson learned, a generation humbled...or a ten-year global depression and the resource wars that will come with it...or something in between. I don't know.

But be prepared. This time, I mean it. Be prepared...for anything. We're in uncharted parts of the map, folks. Tectonic plates are moving in our history. The new order that emerges from this will not be the same as what we have lived with so far. America will be radically different...and soon. Those standing near the edges will get smashed.

A wise man knows that the Chinese symbol for crisis contains the symbol for opportunity.

An even wiser man once said that "any man who can hitch the length and breadth of the galaxy, rough it, slum it, struggle against terrible odds, win through, and still knows where his towel is is clearly a man to be reckoned with."

Be prepared. Have a towel on hand. Things will get messy shortly.


Cross-posted at the Frog Pond.

The Wingnut Obsession With Patrick Swayze

Behold the glory that is Jonah Goldberg on Red Dawn.

My old friend Dave Plotz's piece on Red Dawn (Kathryn linked below) is close to a parody of the sort of liberal moral equivalence that made so many liberals useless in the late stages of the Cold War. He writes:

But what's most unsettling about Red Dawn today is not its infatuation with the warrior death cult. It's that the movie's historical parallels have been turned upside down. In 1984, the Soviets of Red Dawn represented, well, the Soviets, and the Wolverines represented both the Americans and also the plucky Afghan mujahideen then defeating the Red Army in a guerilla war. But on re-viewing, Red Dawn isn't a stark reminder of Cold War fears. Rather, it's a pretty good movie about Iraq, with the United States in the role of the Soviets and the insurgents in the role of the Wolverines.

I'm not going to go point by point through the whole thing. But what's striking about David's analysis isn't merely the out-of-date moral equivalence better suited for The Nation circa 1983, but it's even more recent dated moral equivalence argument as well. Plotz's thesis would have made some cultural or political sense — no matter how much I disagreed with it — if he wrote it in 2005 before the surge. Now even as retro-rethink journalism it seems like it's missed its moment.

Regardless, the comparison of Iraq to America only works if the pre-invasion Iraq was the peace-loving idyll of Michael Moore's imagination. It wasn't. The analogy also needs America's invasion of Iraq to be motivated by base imperialistic designs. It wasn't.

I will let you judge it on its own merits.


Vegeta, What Does Your Stock Ticker Show?

Stocks tanked Thursday afternoon - with the Dow falling nearly 700 points during the session - as panicked investors dumped stocks across the board.

Bank lending remained tight as nervous institutions continued to hoard cash. Treasury prices fell, raising their corresponding yields. The dollar gained versus the euro and the yen. Oil and gold prices fell.

According to early tallies, the Dow Jones industrial average (INDU) lost 679 points, or 7.3%, after hitting its lowest point since May 27, 2003 during the session.

The Standard & Poor's 500 (SPX) index lost 7.6% after touching its lowest point since May 1, 2003. The Nasdaq composite (COMP) lost 5.5% after hitting its lowest point since July 1, 2003.

A key measure of investor fear hit an all-time high: The CBOE Volatility (VIX) index, or the VIX, topped 61.

After seesawing through the morning, stocks turned lower in the afternoon, extending the recent slide. As of 3:35 p.m. ET, the Dow has lost more than 1,900 points over the past seven trading sessions amid growing skepticism that the financial markets can be stabilized.

One year ago today, the Dow hit an all time high of 14,164.53 and the "Bush Boom" was the "most under-reported success story in the modern age."

Well look how far the Bush Boom has brought us...33% straight down.

One Good Thing About The Financial Crisis may do what Washington politicians refused to do: cut defense spending.
In the fiscal year that just ended, the U.S. spent $694.2 billion on defense, up 52 percent from the 2000 defense budget in constant dollars. (That year, the department spent $292 billion.) The fiscal 2008 total includes $514.2 billion in the defense budget and another $180 billion to pay for the wars in Iraq and Afghanistan, which have been financed through so-called "supplemental" budgets.

Eight years of borrowing to pay for the Iraq and Afghan wars, coupled with an aging baby boomer population, growing health care costs and a push to enlarge the Army, could force legislators to make tough decisions about which needs should take priority, and the next president to reassess how much the military can do.

Congress' decision earlier this month to approve a $700 billon bailout for the financial industry adds to the strain on the federal budget, and the stock market decline and the credit crunch could slow economic activity and eliminate jobs, which in turn could reduce tax revenues.

"How the U.S. government funds its military answers the question of: How committed it is to fighting these kinds of war?" said James Quinlivan, a senior military analyst and mathematician at the RAND Corporation.

The pressure is likely to be felt most acutely by the Army, the military's largest and most expensive branch, which is already strained by the war in Iraq and planning for another decade of sustained conflict. Both presidential candidates have called for more troops in Afghanistan while maintaining a substantial force in Iraq.

The Army plans to add about 30,000 soldiers by 2010, and expanding the force to 547,000 would cost at least $5 billion, according to Army estimates. Some internal estimates put the cost of repairing or replacing worn-out and damaged equipment and procuring new technology at another $150 billion a year.

Cuts will have to be made, period. To fund what either McSame or Obama want to accomplish, drastic cuts will have to be made.

Either the promises go or the guns and bombs do.

Throwing More Money At The Problem

Hank Paulson's next plan? Use the UberBailout to directly recapitalize banks.
The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.

Using authority granted to it by last week's $700 billion market rescue legislation, Treasury would get common or preferred shares in the banks it capitalizes, the source told Reuters on Thursday. The government does not intend to seek seats on companies' board of directors in the voluntary capitalization program.

White House spokeswoman Dana Perino said later on Thursday that Paulson is "actively considering" capital injections into troubled U.S. banks.

"Secretary Paulson is looking at all the different tools to figure out which ones should be used at what time and how robustly and how much money to put into each," she said.

A Treasury spokesperson declined to comment in detail but said: "Treasury has broad, flexible authorities under the financial rescue legislation to buy assets, provide guarantees and inject capital and intends to consider all of them."

If the U.S. Treasury does inject capital into banks, it would be following the playbook of the British government, which on Wednesday pledged up to $87 billion to shore up banks' capital in exchange for preference shares.

The source familiar with Paulson's thinking said Treasury was working "extremely fast" to put together a capital injection plan.

This plan is basically the nationalization of the bad players in the financial sector. It's come to this. The government will end up owning shares of banks. In some cases these may be majority shares of banks, giving the government de facto ownership of banks to keep them alive long enough to be properly disposed of. The slow death of America's financial sector is at hand. Paulson is seeking an orderly death, not a chaotic one that takes down other sectors of the economy with it.

As it is, he may be too late.

Keep in mind the end of the month is a mere days before the election, too. Political implications will keep the bulk of this until after November 4th, then the undertakers will be called in to cart off hundreds if not thousands of banks to their eventual resting place over the next several months and years.

It will be the next President's problem.

Who The Watchmen Are Watching

Turns out ABC News has stumbled onto proof that the NSA's "terrorist surveillance program" is targeting ordinary Americans.
Despite pledges by President George W. Bush and American intelligence officials to the contrary, hundreds of US citizens overseas have been eavesdropped on as they called friends and family back home, according to two former military intercept operators who worked at the giant National Security Agency (NSA) center in Fort Gordon, Georgia.

"These were just really everyday, average, ordinary Americans who happened to be in the Middle East, in our area of intercept and happened to be making these phone calls on satellite phones," said Adrienne Kinne, a 31-year old US Army Reserves Arab linguist assigned to a special military program at the NSA's Back Hall at Fort Gordon from November 2001 to 2003.

Kinne described the contents of the calls as "personal, private things with Americans who are not in any way, shape or form associated with anything to do with terrorism."

She said US military officers, American journalists and American aid workers were routinely intercepted and "collected on" as they called their offices or homes in the United States.

Raise your hand if you're still surprised by this.

Now raise your hand if you think an Obama administration would put a stop to it.

I didn't think so.


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