Monday, September 29, 2008

The Winds of Change

WaMu and Wachovia have both been gobbled up by other banks, in both cases ultra fast deals were slapped together in order to prevent a bankruptcy that would collapse the FDIC balance sheets. I don’t know if these were good deals for the buying banks but I do know they were seen as necessary for political reasons, if only to keep the lid on an every growing problem until the U.S. gets through this election cycle.

Despite these backroom deals and the attempted $700 billion bail out the contagion continues to spread as Iceland nationalizes a major bank
As does the U.K. with Bradford and Bingley

There will certainly be many more of these deals to come and as time progresses they are becoming more convoluted as the government, or agencies like the FDIC end up taking equity positions in either the failed companies or the purchasers of these companies as a method to fund the takeover and/or backstop losses that could well end up being more than these rushed purchasers bargained for.

It’s amazing how fast things are moving, WaMu failed on a Thursday which is unprecedented to date. After all the other failures have been Friday after closing so the FDIC ninjas could swoop in without spooking the market and allowing the details to be finalized and publicised while the markets were closed. This one was so desperate that they could not wait a single day longer to do the deed, harsh times indeed.

It’s good to see people are walking finally up with protests on wall street, people calling their leaders, tearing up talk radio and the blog sphere but this is far too late to save the system and perhaps too late to save themselves. When the bubble was inflating few said WTF are you guys doing? Few asked if they could really afford that house, fewer even questioned the soundness of banks that gave mortgages without asking for a work record. Now they are all up in arms and outraged that their stupidity and apathy on all things financial is going to give them a $700 Billion bite in the ass.

People get the government (and apparently banks) that they deserve. Lazy, ignorant people are destined to get corrupt or incompetent leaders. Democracy only works with a well educated and vigilant population, considering more people know who Dr Phil is than Ben Bernanke, and only 60% vote there is not much else to say!

The shit is finally hitting the fan and people only have a very short time prepare. Had the bailout proposed passed, (it just failed in the house minutes ago) they might have held things together at least until the end of the election cycle, now however all bets are off. The market could freefall; and we could see runs on banks and civil insurrections as the next topics of presidential debates.

Either way however the U.S. is in dire straits had this bailout passed or the soon to be seen Son of Bailout passes, the U.S. will be monetizing corporate debt and heading for a insane inflationary spiral.

If this stays as is with no bailout then the banking system freezes up and a different but just a destructive set of events will unwind. Either way the U.S. is in for a world of pain and Canada and the world by contagion will get roughed up too.

On the Canadian side I know people on the mortgage floor of some big banks and there is real panic in the air. No one knows what to do and they fluctuate between panicked actions to total inaction. Of course once you hear things like the Chinese Government has told its banks not to make any more bank to bank loans to American institutions you can see why there the mood is turning from sour to putrid. I’m also noticing very high hits on both my site and the ads despite my limited posts of late. (very busy with Canadian election)

What really strikes home is how many people who ignored my rants have suddenly started asking questions.
“What’s this about failing banks?”
“Tell me about this silver thing?”
“You said a depression is coming and some guy agreed with you on the news last night, what does it mean?”

It means prepare for the worst because no one can tell for sure what is going to happen, especially in the U.S. Stock up on food, have a little extra cash on hand, some gold and silver and stay away from protests and riots.

I would also say to Canadians that one party in our election still claims the financial crisis is contained and won’t affect Canada. This party is either lying or too damn stupid to remain in power. Beware!


Anonymous said...

Do you really believe people will be finally enlightened and this will never happen again? I wish so! What have we learnt from the Great Depression?? Nothing! We are still arguing, if the New Deal was solution, or just have prolonged the suffering. And with actual crisis it's all the same. Right winged will be blaming regulation and governments, left winged will be calling for more regulations and against capitalism. Nothing new...
Take care

Anonymous said...

Julie there seems to be a pattern, thats 3 generation long,
Gen 1 lives through a crash and survives through hard work and perserverance.

Gen 2 sees the hardship learns the lesson and keeps out of financial trouble for the most part.

Gen 3 is totally seperated from the cause and recreates the ground work for the next crash.

So no this will happen again we just happen to be the Generation that has to live the hard times to ready our children for better life.

Left or right is the silly arguement, there are some good ideas and horrible ideas on both sides of the fence, which was exactly why I've gone green. They steal or adopt what they believe can work without and idealogical bagage, (I'm sure it will come however). Not that they are perfect but at least not stuck in a perputual pattern of simply gainsaying the other opinion.

Both sides of the political fence also has evil, stupid and corrupt people, its human nature. Always remember that if the median IQ is 100pts half the population is dumber than average, and some of them run countries, Shudder!!!!!!

Thanks for dropping by, maybe you can find me a cheap farm after the Crash!

Unknown said...

A lot of very cheap farms in the Maritimes. People are giving up on farming at the worst possible time. I have land with abundant wood, fruit trees, wild life ..etc. I have some of the shinny stuff as well, I just hope the banks don't go under before I can trade the rest of my diggy money for things that will be of some use in the future. These are scary times.

Anonymous said...

First off Im new to precious metals. Just curious how precious metals tend to fair with the stock market taking a dump?

Anonymous said...

There is no fixed relationship between stocks and gold.

Fear and panic should aid metals (but apparently not today)but the strongest relationship is between the dollar and metals. If the U.S. dollar collapses or if fiat money in general looks suspect metals will soar.

Metals are real money or "anti" money vs paper currency

CHR said...

There ~is~ a relationship between precious metals and the stock market
(gold), but as CSB suggests, it's not a fixed relationship; like a
currency exchange.

The metal markets made a counter move
today, going down appreciably. Silver down over a dollar.
Another unexpected buy opportunity! But I find that 'others'
have bought up most of the available supply leaving me with but
one bar and some US Junk to grab.

Forget the DOW/TSX, you should have been out buying silver, today.


CHR said...

CSB has been suggesting that there is no significant supply of consumer sized silver available in the Big Smoke and hasn't been for a while.

I have been fortunate enough to find small amounts available (away from the Smoke) which I have been picking up as the price has been dropping.

In the last two weeks, all of a sudden, I am waiting in line behind brand new buyers looking to buy silver; "at spot", of course! They look confused when the owner explains that you can't buy it for anywhere near that ~and~ that he doesn't have anything for sale in small sizes (if at all), anyway. These owners suggest that they have been answering this question way more times, all of a sudden.

These are the folks who have been depleting the supply in the shops I have been visiting. Now the supply I was hoping to whittle away at has been largely bought up.

The US junk I was planning on buying, today, was gone so I picked up some 1976 Canadian Olympic $5 coins (in mint cases) as that was all that was available that met my specs. These are .925 Fine and I got them at spot :O) That means that they were about 80 cents more today than the price they were issued at in the mid 1970's! That seemed like a good deal.

One shop is expecting some large bars shortly with these "mostly reserved" at several dollars over spot, weeks in advance.


CHR said...

And I meant to ask ...

So .. what's everybody else buying? I'd like to hear other's experiences in their local coin stores? What is available, at what price; even if you weren't buying?


Anonymous said...

I've been too busy with election work and too poor do to exploding appliances and computer so I've not been visting my usual vendors. The word however is drought, with 3 people reporting getting nothing in Toronto in the last 2 weeks.

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