Japan's Turn

And the Nikkei goes berserk, rocketing up a thousand points on Liquidity Mania World Tour '08. It seems the US has let slip details on the bank stock bailout scheme: another quarter trillion sunk directly into banks that includes a three-year guarantee on interbank lending, at last.

The planned equity investments are part of a U.S. Treasury, Federal Reserve and Federal Deposit Insurance Corp. program. As part of the deal, the FDIC will insure all non-interest paying bank deposits and new preferred debt issued by banks. The Treasury will provide a three-year guarantee of bank-to-bank lending.

Further, the Bush administration is expected to formally notify Congress that it intends to use the next $100 billion available to it under the $700 billion market rescue plan passed by Congress earlier this month, according to the source.

Treasury Secretary Henry Paulson met with top Wall Street bankers on Monday to nail down the plan for the government to buy shares in financial firms to restore confidence in rattled markets.

The evolving plan marks a quick about-face for Washington policy-makers, who until recent days had been focusing on building an apparatus to soak up bad assets from banks.

Meanwhile, the Wall Street Journal, citing people familiar with the situation, reported late Monday that the federal government plans to buy preferred equity stakes in nine top banks as part of its effort to battle the financial crisis.

The newspaper did not report how much would be invested in each institution, but said the move is designed to destigmatize government investment.

The overall push by the feds could provide faster relief to a paralyzed banking system and would put the United States more in line with Europe, where governments on Monday pledged billions of dollars to recapitalize banks or guarantee lending.

The nationalization of America's biggest banks will be under way this week. The "nine banks" will certainly include Morgan Stanley and Goldman Sachs, as well as Wells Fargo, Citigroup, and Bank of America 9can't live the biggest banks out of the largesse.) However the interbank lending guarantees that will be announced tomorrow almost certainly portend another huge rally.

Just remember who is paying for all this down the road. We've traded in one set of problems for another, and that "another" is hyper-inflation with the over $2.5 trillion we've dropped in the money system just since September 15.

Those are some big-ass IOUs we get to cover.

Your Liberal CNN

...gives us former Bush administration press flack and Moonie Times hack Tara Wall (Of Denial) to tell us 20 reasons why Obama is just like Bush, and therefore McSame should now attack Obama on that point, "point" in this case being stuff completely made up and so tortured not even the McSame camp is buying it, including such gems as these:

Abstinence: Bush expanded community-based abstinence education during his term, including a $28 million budget increase for 2009 in an effort to "Teach both abstinence and contraception to teens." Obama concurred in April when he said: "We want to make sure that, even as we are teaching responsible sexuality and we are teaching abstinence to children, that we are also making sure that they've got enough understanding about contraception."

Yes, Bush's efforts for only federally funding abstinence-only sex ed for states is exactly the same as Obama's position as stated above! Errm, wait...what about this:

Economics: Obama told reporters that he agreed with Treasury Secretary Henry Paulson and Bush's bailout package, then voted for the $700 billion plan. And despite routinely criticizing "the Bush tax cuts," Obama is now offering tax cuts of his own (although only for the 95 percent of taxpayers earning less than $250,000 a year). What a concept!

Obama wants to roll back the Bush tax cuts on the wealthiest Americans and give that money instead to the rest of Americans in the form of tax relief. Yes, many American voters will be convinced that Obama's economic plan announced today is just really more of the same Bush bromides...umm...but...

Faith-based initiatives/fatherhood: Bush is well known for his commitment to the faith-based community -- with initiatives for the poor and on fatherhood -- and he expanded the ability to allow faith-based providers a seat at the funding table. Obama, who has railed against Bush's efforts, has still found a way to embrace them, saying he would "expand" faith-based initiatives. He used his Father's Day speech to echo the president's Fatherhood Initiative.

Only the difference is Obama wants to increase oversight of these organizations, whereas Bush was using them as get out the vote operations and kickbacks to the religious right. Also, being a Christian and a father makes Obama just like Bush, so clearly McSame who is not a Christian and a father...oh wait, he is...hmm...

Global AIDS: Obama has said the U.S. must "lead the global fight against the AIDS virus." And earlier this year, he encouraged lawmakers to "Use whatever works with AIDS, including teaching abstinence." Obama has given Bush kudos for his efforts to combat global AIDS and the record amount of funding ($15 billion over 5 years) the president has earmarked for the fight. Obama said in September, "I think President Bush -- and many of you here today -- have shown real leadership in the fight against HIV/AIDS."

OH MY GOD, OBAMA ADMIRED BUSH FIGHTING HIV/AIDS IN AFRICA! That would explain the calls at McSame rallies of "Traitor!" and "Kill him!" Such horrible socialism, unlike we would ever see in America.

Health care: While they don't share similar views on universal health care coverage, Bush and Obama agree that the problem with health care is "about affordability" and there is a need to address minority health concerns with more coverage and targeting. That is why Bush expanded community health care centers, covering the uninsured and targeting urban areas, to the tune of $1.5 billion for 1,200 centers "coast to coast."

SOCIALIST! BUSH IS A SOCIALIST! I KNEW IT! I can't believe she's talking about Bush and his HIDEOUS GUILT-RIDDEN COMPASSION FOR HUMANS. God, McSame should attack on that point RIGHT NOW.

Minority homeownership: Obama adopted the Congressional Black Caucus principles "to increase minority homeownership" as it is "one of the best wealth-creation vehicles for minority families." These principles were developed as part of Bush's vision to expand minority homeownership to 5.5 million new homeowners by 2010. "Across our nation, every citizen, regardless of race, creed, color or place of birth, should have the opportunity to become a homeowner," Bush said.

SOCIALIST! GOVERNMENT HAS NO PLACE IN THE FREE MARKET (unless the free market is crashing out and bleeding all over the place and needs trillions of dollars in fiat money to fix like a junkie downing a gallon of methadone but that's perfectly acceptable, because we can't AFFORD SOCIALIST HEALTH CARE! HARRY AND LOUISE! HARRY AND LOUISE! CONTRACT WITH AMERICA!

National security: Obama voted yes on preauthorizing the much ballyhooed Patriot Act, sought by the Bush administration.

Aha! Obama is weak on national sec...wait, what? I thought he was a Muslim plant and...HE HATES CIVIL LIBERTIES AND...wait, what, McSame voted for it too? Umm...MIDDLE NAME HUSSEIN!

So, although he has been ranked as the most liberal senator by the National Journal and obviously hasn't voted with Bush as often as Sen. McCain has -- based on his voting "record" -- Obama's "rhetoric" still sounds a lot like, well, Bush. McCain might want to take that into account the next time Obama talks about another Bush term.

Oh yeah, I'm sure McSame will be able to pivot and attack Obama from the left, like the maverick he is.

After all, Obama has a Y chromosome...

Just. Like. Bush.

When You've Lost Bill Kristol, You've Lost Period

Bill Kristol revolted this weekend, but that didn't stop the McSame camp from attacking Kristol back.

Yesterday on Fox News Sunday, Bill Kristol said John McCain’s campaign has really become “a pathetic campaign.” In his New York Times op-ed this morning, Kristol went further, suggesting that McCain should “fire his campaign” and “start over.” Asked to respond to Kristol’s criticisms, McCain campaign spokeswoman Nancy Pfotenhauer said on Fox News:

Well, you know Bill is entitled to his perspective. And I used to work for Bill. And I can tell you personally sometimes he’s brilliant and sometimes he’s not. And this is one where it’s the latter category. You know, I think unfortunately he has bought into the Obama campaign’s party line.

Bill Kristol: Liberal Moonbat!

Losing By Double Digits Is Winning

Because as Your Liberal New York Times Columnist Adam Nagourney sees it as he mails in GOP talking points in today's column, Obama's friggin doomed for six reasons:

1. You know all those new registered Democratic voters are mostly lazy college kids and minorities, so they won't vote (or will be easily disenfranchised by having 20% of the voting machines working in precincts.) Five point swing for McSame guaranteed.
2. Obama's GOTV operation hasn't been tested, the newbie scrubs that they are. Five point swing on election day, easy!
3. We're due for a spontaneous, unexplained McSame rally worth a good five points for McSame in the polls. It's just math.
4. Osama bin Laden hasn't shown up to give his "Terrorists Vote Democratic!" speech yet. That'll be a five point swing in McSame's favor right there when that happens.
5. Two words: Bradley Effect. Another five points in McSame's favor because of nervous, secretly racist whites.
6. Oh, and Barry Hussein Obama is a terrorist sympathizer. Another five points. Easy.

So really, Obama's not up by double digits, he's actually down by like 20 and McSame is going to ka-ruse to a Reagan landslide, yo.

Of course, there's the reasons the Obama camp has to be confident:

1. THE ECONOMY.

But that's just me. What do I know?

Obama Rolls Up His Sleeves

Earlier today I wondered if Obama would level with the American people on the tough economy ahead, and what his specific plan for dealing with it was. I have to honestly say that I'm very impressed with his speech today which did a marvelous job of covering both. First, the specifics of the Obama plan:

Obama's specific proposals include:

-- A temporary $3,000 tax credit to companies for each new job created in the United States over the next two years.

-- Penalty free withdrawals from 401(k) and IRA retirement accounts up to a maximum of $10,000 this year and next.

-- A 90-day moratorium on foreclosures for homeowners who are living in their homes and making good-faith efforts to make their mortgage payments to banks that receive assistance under the $700 billion federal bailout plan.

-- Calling on the Federal Reserve and Treasury to set up a facility to lend to state and municipal governments, similar to the steps the Fed recently took to provide liquidity to the commercial paper market.

The plan also calls for temporarily eliminating taxes on unemployment insurance benefits and having the Fed and Treasury prepare for guaranteeing a broader range of liabilities of the banking system.

Early reaction has been very positive. Josh Marshall at TPM has the recap:

As many observers have noted, Obama faces a choice: Whether to strike optimistic tones about our future that might play well politically, or to address our future more realistically and hence make it easier to govern. Today Obama tacked towards the realistic, and used that to pivot on to another attack on Bush.

"George Bush has dug a deep hole for us. he said, in an ad-libbed line not in the prepared remarks. "It's gonna take a while for us to dig our way out."

In a particularly ambitious moment, Obama also promised to try for nothing less than a paradigm shift in the way we view our relationship to the economy, calling for "promoting a new ethic of responsibility" and for a serious bid to break our "cycle of debt."

"It's a serious challenge," he also said. "But we can do it if we act now, and if we act as one nation."

All in all, it was a very significant speech, and a very credible bid to close the deal with voters.

Change we really can believe in, folks.

The Bounciest Dead Cat Ever

Dow rockets up 936 points, or 11%.

``You're seeing finally the magnitude of the response that's necessary to restore confidence,'' said Richard Campagna, chief investment officer at Provident Investment Counsel in Pasadena, California, which manages $1 billion. ``Off the kind of decline we had last week I would look for a 20 percent move off the low.''

One hell of a rally for sure.

But what will tomorrow bring?

Did We Hit The Bottom?

Dow's up 500 plus above the 9,000 mark here at noon. One-month and three-month LIBOR rates have fallen for the first time in two weeks. So have we hit bottom? Is it Dow 10,000 and beyond to business as usual?

Don't count on it.

While most of the economic and financial damage is already done and the global economy will not be able to avoid a painful recession, financial and banking crisis (i.e. the V-shaped short and shallow 6-month recession is now out of the window and we will experience a severe and more protracted 18 to 24 months U-shaped recession) the rapid and consistent implementation of these and other actions will prevent the US, European and global economies from experiencing a systemic financial meltdown and entering in a more severe L-shaped decade long stagnation like the one experienced by Japan after the bursting of its real estate and equity bubble.

Are we close to the bottom of this financial crisis? Today stock markets – and other financial markets - will rally on the news that terrified policy makers peering into the abyss got religion and started to do in a consistent way what is necessary but financial markets will remain volatile with significant downside risks over the next few weeks as:

- details of these plans are still very fuzzy and ambiguous and with uncertain effects on various assets classes (common shares, preferred shares, unsecured debt of financial institutions, etc.);

- macro news will surprise on the downside as the economies sharply weaken and contract while fiscal policy stimulus is lagging;

- earnings news for financial and non financial firms will surprise on the downside;

- the damage done to confidence and to levered investment is already severe and the process of deleveraging of the shadow financial system will continue;

- major sources of future stress in the financial system remain; these include the risk of a CDS market blowout, the collapse of hundreds of hedge funds, the rising troubles of many insurance companies, the risk that other systemically important financial institutions are insolvent and in need of expensive rescue programs, the risk that some significant emerging market economies and some advanced ones too (Iceland) will experience a severe financial crisis, the ongoing process of deleveraging in illiquid financial markets that will continue the vicious circle of falling asset prices, margin calls, further deleveraging and further sales in illiquid markets that continues the cascading fall in asset prices, further downside risks to housing and to home prices.

It's quite possible that we've dodged the bullet to the brain, but there's still gunshot wounds to be treated, and any of the above problems could still trigger another round of panic, and if the specifics of the plans announced this weekend aren't solid and if they aren't implemented quickly, we still could very likely face another meltdown scenario.

Look what the world had to do -- another Bretton Woods style global financial agreement -- just to give us a shot at getting out of this mess.

There are still plenty of systemic-level landmines we could stumble into over the next few months. The immediate threat of a credit crisis driving us into a Depression is over. But the situation that created the crisis is still a long way away from being solved.

If anything else goes wrong, we're right back in the soup.

Obamanomics

Obama plans to unveil specifics of his economic plan this afternoon in Toledo.

Democratic presidential candidate Barack Obama plans to give a speech on the financial crisis and issue a ``rescue plan'' for the middle class, his campaign said.

``Our economy is facing its greatest uncertainty in over 70 years,'' the Illinois senator's campaign said in an e-mail to reporters this morning. ``Families who saw their incomes decline by $2,000 in the economic `expansion' from 2000 to 2007 now risk seeing deeper income losses.''

His campaign didn't release details about the new proposals. Obama, 47, is due to speak at 1:30 p.m. local time today in Toledo, Ohio. It's the only public event he has scheduled in the next few days as he prepares for his final debate with Republican nominee John McCain on Oct. 15.

Will the plan include any austerity measures? Times are tough here in the tri-state and across Ohio. Perhaps on October 29 during the 30-minute prime-time block he's bought we'll find out more about that.

Obama needs to be ready to hit the ground running with his econ team on November 5, and part of that I think needs to include leveling with the American people on the fact the party's over.

Rally Hats On

Green screens across the globe, as they say. Details are still sketchy, but a global bailout of banks with promises of "unlimited liquidity" in the US and global interbank lending guarantees in the Eurozone seem to have stopped the hemorrhaging...for now.

Major central banks pledged on Monday to pour unlimited amounts of dollars to unblock frozen credit markets, as governments around the world announced measures to prop up ailing banks.

"The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment," the Federal Reserve said in a statement.

"Funds will be provided at a fixed interest rate, set in advance of each operation," it added.

The sizes of the reciprocal currency arrangements (swap lines) between the Fed and the Bank of England, the European Central Bank and the Swiss National Bank will be increased to accommodate whatever quantity of U.S. dollar funding is demanded, the statement also said.

UK Prime Minister Gordon Brown wants to go even further, saying publicly that he wants a second Bretton Woods agreement to establish the new financial order of things, as was done after WW II.

An agreement like that will be needed and soon, which is the first really good idea I've heard a world leader propose this week. The problems: the LIBOR rates and TED spread barely budged downward this morning. Banks STILL are taking a wait and see attitude. While stocks may be taking a breather, it's going to take far more specific details to convince banks to lend, especially since there's no bound guarantee that any of the EU nations will agree on the Paris Plan.

Once again the real action is going to be in the bond markets this week (they are closed in the US and Japan today). If the LIBOR rates drop and the TED spread finally shrinks significantly, that will be an excellent sign. But banks are seeing the devil the in details, and so far the details are short in supply.

Most likely this is just the eye of the storm.

StupidiNews, Columbus Day Edition

• Paul Krugman wins the Nobel Prize in Economics (yes, that Paul Krugman.)
• The Fed also approved the sale of Wachovia to Wells Fargo this weekend.
• Mcyou-know-who vows to "whip Obama's you-know-what" in Wednesday's final debate.
• It's not hackers stealing corporate data...it's employees, a new study shows.
• Dodgers take Game 3 to make the count 2 games to 1.

Once More Into The Fray

Turns out the Nikkei is closed, but US markets are open tomorrow. Early news from Australia is that we're indeed seeing a bear market rally and bargain hunting to an extent. Dow futures are up around 3%.

But the remaining problems are still very much present. I seriously doubt we've hit bottom yet. Third quarter earnings are going to come in and really knock the steam out of things. There's a lot that will continue to go wrong before it goes right, and any other kind of shock right now, another round of near failures in banks for instance, might be enough to do us in.

All the problems we had three months ago are still there. Some measures are in place, and there may yet be some short-term recovery.

But I'm still betting on bad numbers in the future. This problem will keep unwinding and we're now all but out of options to deal with the next problem: massive inflation. Cleaning that up will take a long, long time. We're in for years of pain, not months.

How Bad Could This Get?

There's a still a lot of space between where we are now and a long-term outlook of a global depression. Not a much as even last week, but there's still a way out. But in the medium term things could get very, very bad.

Economists are beginning to warn of a depression-like cycle where an inability to obtain credit stalls growth, triggering more defaults and still tighter lending terms. Governments have unveiled one unprecedented move after another in the past three weeks to boost confidence and get banks back in business, yet so far nothing has been able to arrest the fall.

"There's no hyperbole that can describe it," said Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund. "It's very, very unlikely (that the world economy will fall into a depression) but we've taken five of the 10 steps we need to get there. Hopefully we won't take the other five."

I'd argue it's more like step 7 or 8, frankly. We're deep in a spiral and the means of getting out will require far more action than has been taken even with today's EU announcements.

"With no desire to exaggerate, this might be considered the financial pre-conditions of a depression," Citigroup economist Steven Wieting wrote in a note to clients.

"Evidence suggests credit rationing is inhibiting day-to-day activities for many firms, with a harsh and worsening backdrop for consumers," he said. "Sadly, some risk exists that financial events could still unfold like a proverbial 'dam break.' This might leave policy-makers treating very serious and lasting damage to the financial system, rather than preventing further erosion."

Already, the crisis has taken a heavy toll on economic prospects. Wieting now expects nominal U.S. economic growth next year will be the weakest since 1954, with unemployment climbing to 8.5 percent from the current 6.1 percent.

And I honestly believe those numbers are far too tame. 2009 is going to be a miserable year. Remember, the same people who didn't believe the housing bubble would burst, that the banks would tumble, that Fannie and Freddie were toast, or that the credit crisis would worsen are the same people that believe 2009 is going to be the start of a massive rally in stocks.

The Dow had its worst week in both point and percentage terms and is down 40.3 percent since reaching a record high close of 14,164.53 on Oct. 9, 2007. In the last eight trading days alone, the blue chip index has lost a staggering 22.1 percent of its value.

Added up, the value of U.S. stocks has tumbled a breathtaking $8.4 trillion in the past year, as measured by the Dow Jones Wilshire 5000 index.

“These are all indicators of a bottoming process,” said David Kotok, said chairman and chief investment officer of Cumberland Advisors. “When you see this array of signs at these levels, three to six months later there was a rally under way. I am becoming very bullish strategically because I don’t think we’re going to have an inflationary Great Depression repeat.”

Keep telling yourself stocks can't go any lower, guys. Keep telling yourself this is another mild recession like 2002. Keep telling yourself this isn't a generation-defining event. Keep telling yourself capitulation selling will solve all the economy's problems.

Keep telling yourself that Dow 14,000 is just a couple of months away again if we just all clap our hands and just believe hard enough...

McSame's New Stunt Of The Week Is:

...Guess. If you said "A new shiny wrapper for his existing corporate tax cut Ponzi scheme" then you win.

Republican presidential candidate John McCain is considering rolling out a new comprehensive economic package to tackle the U.S. financial crisis, one of his closest supporters said on Sunday.

"I think it goes along the lines that now is the time to lower tax rates for investors, capital gains tax, dividend tax rates, to make sure that we can get the economy jump-started," said Republican Sen. Lindsey Graham of South Carolina.

Yes, because I know my largest problem right now as a taxpayer is capital gains on my investment portfolio. Also, I'm equally sure the only reason the Dow is plummeting is because the capital gains taxes are too high. We're all just getting crushed by capital gains taxes right now from our investments.

This plan will help out Aunt Sandy at Wal-Mart, surely.

Another Vital Step As The Clock Winds Down

While an agreement with the G7 nations to stop the banking crisis has largely failed, the EU has at least vowed to go down swinging with another necessary tactic: a five-year guarantee on interbank lending in the Eurozone.

The declaration says the governments would guarantee "for an interim period and on appropriate commercial terms" new debt issued by banks for up to five years.

"This scheme would be limited in amount, temporary and will be applied under close scrutiny of financial authorities until Dec. 31, 2009," it says.

The leaders of the 15 euro-zone nations held an emergency summit Sunday night in Paris to seek European solutions to the financial crisis engulfing markets worldwide. The meltdown dominated summits around the world this weekend.

The statement also says that one way governments could save banks would include buying big stakes.

Whatever is decided Sunday will then be proposed to the full 27-member European Union at a summit later this week.

British Prime Minister Gordon Brown, who met with France's President Nicolas Sarkozy before the euro summit, said the plan "would involve not only more cash in the financial market but also a recapitalization of our banking system.

"And allied to that -- something that I believe is absolutely crucial -- to begin again the funding of businesses and mortgages with a guarantee given by governments. That can happen and will happen in the next few months," he told reporters.

Again, it's a start. Combined with the nationalization plans of the UK, at least the Euros are taking concrete action. But it should have been done months ago. And without the cooperation in this interbank lending plan from the US and Japan, it most likely is too little, too late. There's little point in guaranteeing bank lending if the banks most likely to fail -- US banks -- are left out in the cold.

There's also the nasty problem of a week before the full EU will vote on the measure. Another week could knock another 20% off world markets...and should the measure not pass, it will be catastrophic. We'll see how it goes in a few hours.

Europe it seems is battening down the hatches in the middle of the perfect storm. Call it prudence, neccessity, or protectionism, most likely it will not be enough to stop the worst of the damage.

It's Not Violence If You're The One With The Gun

Bard at Sadly, No! brings up an excellent point:

It’s quite amazing to watch the same people who pushed for concentration camps, hanging courts and genocide during the Bush years to now talk about taking up arms against the tyrannical and violent government that Barack Obama is about to unleash. There are many words one could use to describe this mentality, but I think calling them “crazy assholes” will suffice.

Bush Derangement Syndrome has nothing on the calls to kill the Muslim traitor terrorist Barry Hussein Obama.

Do any of you honestly think they will stop out of respect for the office of President?