time to panic? gas $4 a gallon by spring.

[RiversideGator]

I think things are not as bad as people think and that this is more a function of banks not trusting one another and a lack of transparency in the debt markets.  Basically, they are all assuming that the debt has no value when the truth is most of it will ultimately be repaid.  The trouble is the accounting rules require that they count such debt as huge losses even though it is an accounting fiction and they then have to liquidate to satisfy banking regulations which makes said debt worth even less.  Perhaps regulations could be temporarily changed to allow for a loosening of standards to prevent banks from having to liquidate debt.  I read a long piece about this, but suffice it to say that there are things that can be done to fix it and there are highly talented people working on solutions.  Every time there is a downturn of any time, some people claim it is 1929 all over again and they have been wrong for 79 years.  I personally never believe the permabears because pessimism is a way of life for them and pessimists are generally losers.  But who knows - even a broken clock is right twice a day.   

[RiversideGator]

one word:

"Ultrashort ETF's"

Actually that is 2 words.

[Driven1]

one word:

"Ultrashort ETF's"

yep      an addict since early January 2008

[Driven1]

I think things are not as bad as people think and that this is more a function of banks not trusting one another and a lack of transparency in the debt markets.  Basically, they are all assuming that the debt has no value when the truth is most of it will ultimately be repaid.  The trouble is the accounting rules require that they count such debt as huge losses even though it is an accounting fiction and they then have to liquidate to satisfy banking regulations which makes said debt worth even less.  Perhaps regulations could be temporarily changed to allow for a loosening of standards to prevent banks from having to liquidate debt. 

River...you are correct.  I just read a WSJ article the other day though that said the alternative to "mark to market" was much worse (we experienced it earlier this decade).  It is sad reality that "accounting fiction" is the best there is, but I think it is.  But u are right - it is leading to forced liquidations domino-style.  We differ on crystal ball projections though - I think we have at least 6-9 more months of write-downs and margin calls.  And the housing market has at least 21 more months before levelling out (only to have a couple good years and then 5-7 "flat returning" years following that - if it is like every other capital market out there). 

[RiversideGator]

I am glad to see shorting has become all the rage.  This probably means that a turnaround must be close.   

[Midway ®]

one word:

"Ultrashort ETF's"

Actually that is 2 words.

Just wanted to see if you were paying attention.

[JeffreyS]

I ran across Diesel today for $3.95. Whatever environmental change the government forced on us the earth isn't worth it.  Well not to a man whose business run Diesel trucks.

[Midway ®]

Editorial
Through Bush-Colored Glasses

Published: March 16, 2008

President Bush admitted on Friday that times are tough. So much for the straight talk.

Mr. Bush went on to paint a false picture of the economy. He dismissed virtually every proposal Congress is working on to alleviate the mortgage crisis, sticking to his administration’s inadequate ideas. And despite the rush of serious problems â€" frozen credit markets, millions of impending mortgage defaults, solvency issues at banks, a plunging dollar â€" he said that a major source of uncertainty today is whether his tax cuts, scheduled to expire in 2010, would be extended.

This was too far afield of reality to be dismissed as simple cheerleading. It points to the pressing need for a coherent plan to steer through what some economists are now predicting could be a severe downturn. Mr. Bush’s denial of the economic truth underscores the need for Congress to push forward with solutions to the mortgage crisis â€" especially bankruptcy reform to help defaulting homeowners. Lawmakers also must prepare to execute, in case it is needed, a government rescue of people whose homes are now worth less than they borrowed to buy them.

Mr. Bush said he was optimistic because the economy’s “foundation is solid” as measured by employment, wages, productivity, exports and the federal deficit. He was wrong on every count. On some, he has been wrong for quite a while.

Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush â€" which it is safe to assume is now over â€" produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945.

Mr. Bush also talked approvingly of the recent unemployment rate of 4.8 percent. A low rate is good news when it indicates a robust job market. The unemployment rate ticked down last month because hundreds of thousands of people dropped out of the work force altogether. Worse, long-term unemployment, of six months or more, hit 17.5 percent. We’d expect that in the depths of a recession. It is unprecedented at the onset of one.

Mr. Bush was wrong to say wages are rising. On Friday morning, the day he spoke, the government reported that wages failed to outpace inflation in February, for the fifth straight month. Productivity growth has also weakened markedly in the past two years, a harbinger of a lower overall standard of living for Americans.

Exports have surged of late, but largely on the back of a falling dollar. The weaker dollar makes American exports cheaper, but it also pushes up oil prices. Potentially far more serious, a weakening dollar also reduces the Federal Reserve’s flexibility to steady the economy.

Finally, Mr. Bush’s focus on the size of the federal budget deficit ignores that annual government borrowing comes on top of existing debt. Publicly held federal debt will be up by a stunning 76 percent by the end of his presidency. Paying back the money means less to spend on everything else for a very long time.

The fiscal stimulus passed by Congress, and touted by Mr. Bush on Friday, could juice growth for a quarter or two later this year. But the economy’s fundamental weaknesses indicate that Americans are ill-prepared for hard times. That makes the need for clear-eyed policies all the more urgent. We need them from the president, Congress and the contenders for the White House.

http://www.nytimes.com/pages/opinion/index.html

[jaxnative]

Please write or call your Senators and Representatives and insist that they take one positive step that will actually have a positive effect on the energy crisis we are facing. 

Alaska's Real Bridge
By INVESTOR'S BUSINESS DAILY | Posted Friday, March 14, 2008 4:20 PM PT

Energy: With oil now $111 a barrel, Alaska's senators are trying again to persuade Congress to let their state's massive untapped resources help bring prices down. How high do these prices have to go?


It'll be a long, hot summer across America with pump prices expected to hit $4 a gallon. It's no longer doom talk; it's real.

"Americans are getting fed up with astronomical oil prices being imposed by unstable foreign governments," said Sen. Ted Stevens, "and the problem is getting worse every day."

He and fellow Republican Sen. Lisa Murkowski are sponsoring a bill to drill for new oil in the Arctic National Wildlife Refuge.

Within just an 8% sliver of ANWR, some 10.4 billion barrels of oil may be recoverable, enough to beef up supply and cut prices. Stevens says he's been trying for 25 years to get such a bill passed, as 75% of Alaskans want. But he's always been thwarted by environmental lobbyists and errant fellow senators â€" including even John McCain â€" who busybody Alaskan affairs to everyone's detriment.

This time Alaska's two senators are trying to sweeten the deal by setting the trigger point for ANWR drilling at $125 a barrel over five days and dedicating royalties to aid alternative energy.

But the straightforward story right now is that our economy needs oil. Recession looms in part because businesses are being squeezed by high energy prices. Consumer spending is falling. OPEC isn't budging on production. And prices are going through the roof.

Congress, the Energy Department, presidential candidates and even President Bush talk a good game about "alternative energies" such as ethanol, solar power, batteries and switchgrass. It's nice sentiment, but it won't solve our energy problem anytime soon.

A recent study by Cambridge Energy Research Associates found that alternative energy will at best supply 16% of global electric and transport needs â€" by 2030.

In reality, drilling ANWR is critical, as the two senators urge. "We almost passed it in 2001," Stevens said. "Some said that if we had acted then, we would have had (the oil) to market right now."

Yes, getting oil into production would take time. But Murkowski thinks the very act of passing the bill would damp price speculation. Said Stevens: "There is so much oil out there. It would be a win-win-win across the board in terms of the economy."

No doubt Stevens and Murkowski are also eyeing the 200,000 jobs that ANWR drilling would bring, as well as the $138 billion in taxes and royalties it would generate for government coffers. But most important for now is the fact that it would help ease prices and spray out recession like Raid on roaches.

[Midway ®]

You might want to look into "peak oil". You may discover that this is not such a good solution after all.

[reednavy]

We're already "destroying the Earth", which I think 85% of Global Warming claims are bullshit anyways, why not go for Alaska. 

[gatorback]

law #1  no noncommercial diesel usage.  however, i do think that market forces will take care of this.

[Midway ®]

law #1  no noncommercial diesel usage.  however, i do think that market forces will take care of this.

How would this help? 

It is more difficult to make gasoline than diesel fuel. If the refineries stopped making gasoline, they could have a higher yield of diesel fuel from a lower grade crude.

And what about the millions of people who use #2 oil (AKA Diesel, the same distillate without the additives) to heat their homes?


The price of oil is not so much going up as the value of the dollar is falling. While the price of oil is quoted in dollars, it is not firmly fixed to the dollar. It is just like buying Euros, they are also more expensive for the same reason. The Arabs are not stupid, they want the same relative value for their oil. They also know that the value of the dollar is dropping like a rock, so they up the price of their oil.  If you were to look at the value of the Euro against a gallon of oil, the price would be more stable because most every time the Arabs raise the price of oil, it is usually in response to the value of the dollar declining, which concurrently raises the value of the Euro (against the dollar, at least).

[jaxnative]

the 'shortage', and 'increased barrel costs' are bullshit anyways.

I agree.  But the "bullshit" won't change until we instill some confidence in our domestic markets by increasing our leverage with our own supplies. 

A point rarely noted in discussions of the Brazilian biofuel program
is that, along with ethanol, oil self-suffi ciency has been a long-term goal
of the Brazilian government. After the crisis with PROALCOOL during
the late 1980s, the Brazilian government, through PETROBRAS, has put
much more emphasis on increasing oil production. Based on its excellent
performance on offshore exploration, PETROBRAS increased oil
production by an average of 9 percent per year since 1980, in the range of
1.8 million barrels per day. In 2006, Brazil achieved self-suffi ciency in oil
and expects to export an estimated 500,000 bpd by 2010.
If ethanol were truly key in displacing oil imports, the Brazilian
ethanol program also shows that biofuels should not be considered a
panacea for the world’s energy challenges.

http://cei.org/pdf/5774.pdf

Looks like some folks "get it".

we don't need to destroy alaska in order to solve those problems.

Alaska will not be destroyed.

Just a few good arrests and a couple of laws.

Yes, I would like to see a few Congressmen and some environmentalists arrested.  And I would like to see the laws and/or regulations rescinded that are interfering with the free market in the domestic energy supplies sector.

[RiversideGator]

Looks like the hedge funds are now starting to come in and pick up some bargains:

Subprime Eyed by Blackstone, Goldman for Contrarian Hedge Funds

By Bradley Keoun and Tom Cahill
Enlarge Image/Details

March 19 (Bloomberg) -- Hedge fund manager Steve Moyer joined 4,000 realtors and bargain hunters at a five-hour Southern California housing auction in February. As the tuxedoed barker peddled foreclosed homes for hundreds of thousands of dollars below their previous sale prices, Moyer took notes -- research that may help him make money from the biggest housing collapse in 26 years.

Moyer, who helps oversee $7 billion at Tennenbaum Capital Partners LLC, is part of the rush of more than 70 hedge funds -- including those run by Blackstone Group LP and Goldman Sachs Group Inc. -- to snap up distressed mortgages and securities from banks battered by the subprime meltdown.

``The risk is getting in too soon, before all the losses are flushed out,'' says Moyer of Santa Monica, California-based Tennenbaum, which is considering investments in securities linked to the housing market. ``It's really just hard to call the bottom.''

Hedge funds are taking this gamble as the slate of money- making strategies shrinks and profits vanish. Their returns fell 0.5 percent in the first two months of 2008, according to Hedge Fund Research Inc.'s composite index. Managers who specialize in stocks were among the hardest hit as equities markets worldwide tumbled on concern the U.S. economy might be in a recession.

In 2007, the funds gained 10 percent on average, almost double the performance of the Standard & Poor's 500 Index.

``Every couple of years, we go through a cleansing where we flush out some of the weaker hands,'' says Marc Freed, managing director at Lyster Watson Management, an investment advisory firm in New York that specializes in hedge funds and oversees about $2.5 billion. ``This may be one of those years.''

Goldman, PIMCO

Hedge funds have raised at least $20 billion to take advantage of the housing recession. Goldman Sachs, whose $10 billion Global Alpha fund fell about 40 percent last year, created two distressed-debt pools with a combined $4.5 billion in assets. Pacific Investment Management Co., manager of the world's biggest bond fund, has raised $3 billion.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aydq9W8nb3UQ&refer=home