The rate cut came and went. Stocks fell. Barring a major surprise, this month is going to go down as the worst January in market history. They are up right now as MBIA says it’s going to magically keep its credit rating…for now.
As we go into the last trading day of the month, the Nasdaq and S&P are already having their worst January in history. The Dow is not far behind and is currently having its worst January since 1978.
And 1978 wasn’t exactly the best year for the Dow. Things continue to unravel. How long can the monolines last?
Another sign that the game is up is the latest consumer spending and jobless numbers.
Consumers, battered by harsh economic crosswinds, spent less in December than at any time in the past 15 months while applications for unemployment benefits soared last week, two more signs the economy is weakening.
The Commerce Department reported Thursday that consumer spending edged up just 0.2 percent in December — the year’s peak shopping season — down sharply from a 1 percent gain in November. It was the weakest performance in this area since spending fell by 0.1 percent in September 2006.
Meanwhile, the Labor Department reported that the number of laid off workers filing applications for unemployment benefits soared by 69,000 to 375,000. That was the highest level for jobless claims since the week of Oct. 8, 2005, when the economy was dealing with the disruptions caused by Hurricane Katrina and the other Gulf Coast hurricanes.
The numbers keep getting worse, even the highly padded employment figures are lousy, which means the raw numbers are terrible.
The market of course is going to expect more rate cuts from these lousy numbers. Inflation now is secondary to the market…but then again anyone who has had to buy gas, milk, or bread in the last 6 years already knows that.
Bush doesn’t care. We have literally the worst CEO in history as President right now. He only cares about personal power. Presidency for him is a trophy, not a duty. The economy reflects that. We’ve deficit-spent our way right back into stagflation, possibly even deflation and depression.
The monolines are still hemorrhaging blood like a John Woo movie.
an. 31 (Bloomberg) — MBIA Inc., the world’s largest bond insurer, posted its biggest-ever quarterly loss and may raise more capital after a slump in the value of subprime-mortgage securities.
The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern that the Armonk, New York-based company will lose its top credit rating. The loss came a day after FGIC Corp.’s insurance unit became the third financial guarantor to be stripped of its AAA grade by Fitch Ratings.
MBIA Chief Executive Officer Gary Dunton is trying to shore up capital and retain a AAA rating for the company’s insurance unit by selling stock and bonds. Without the AAA stamp, MBIA’s business would be crippled and ratings on $652 billion of securities would be thrown into doubt. That threat prompted New York State insurance regulators to call a meeting of banks last week to discuss a rescue.
Again, MBIA says it’s keeping that AAA rating for now…but for how long? Think about that for a second. One monoline — just one — is responsible for the confidence of $652 billion in securities products. And it is just one of the monolines that is coming close to imminent failure. Total, the monolines are responsible for trillions and trillions of dollars in paper wealth.
If the monolines go down, it’s over. And the monolines are not long for this world. If the monolines keep having to be bailed out in a panic, and they lose their credit rating, they are done. It doesn’t matter how much of a bailout they get if their credit ratings are lowered. They’re out of the game.
When they all get out of the game, the game ends, and along with it our economy. How bad is it? The whole reason monolines exist is to pay off when companies default. As long as companies don’t default, everything’s fine, it’s a great scam.
The risk of companies defaulting rose as negative ratings actions by Standard & Poor’s on $534 billion of mortgage-linked securities and a record loss at bond insurer MBIA Inc. reinforced concern that financial markets will worsen.
Contracts on the benchmark Markit CDX North America Investment Grade Index rose 2.5 basis points to 110 at 10:23 a.m. in New York, according to Deutsche Bank AG. Europe’s Markit iTraxx Crossover Index jumped 27 basis points to 477, JPMorgan Chase & Co. prices show. In Asia, the Markit iTraxx Japan index rose 6 basis points to 70.
S&P said its review of debt securities linked to home loans sold to people with weak credit may cause bank losses to exceed $265 billion and have a “ripple impact” on financial markets. MBIA, the biggest bond insurer, reported a fourth-quarter net loss of $2.3 billion, fueling concern that it will be stripped off its AAA credit rating, throwing doubt on the value of $652 billion of securities the company guarantees.
“A lot of investors remember what happened the last time we had a pretty broad-based downgrading of those securities,” said Ashish Shah, head of credit strategy at Lehman Brothers Holdings Inc. in New York. “We fully expect to see more writedowns.”
Downgrades last year of subprime mortgage-linked securities caused the world’s biggest banks and securities firms to announce at least $133 billion in credit losses and asset writedowns.
Like a focused explosion inside a nuclear device that compresses the nuclear material into a critical mass, the subprime crisis was just a trigger for a much larger market explosion.
Debt trading is what the modern market survives on. Without it, there’s no market.
And the truly frightening part is that when the monoline nuke goes off, it’ll only trigger an even larger event as the hundreds of trillions in derivatives disintegrate, and take the global markets with it.
It’s bad now, we’re seeing losses in the billions. It’s going to get worse. Losses in the hundreds of billions are coming when the monolines fracture. And after that it’s going to get into truly fucked territory…trillions, maybe tens or hundreds of trillions will vanish.
We’ll become a third world country and we’ll have quite a bit of company.
Right now I’m not really seeing any indication from the Presidential candidates that they even begin to comprehend what the next President is in for. Who knows what kind of election 2012 will be, because I guarantee you whoever does win in 2008 will get the Jimmy Carter/George H.W. Bush treatment when they go to be reelected (if we still have elections and aren’t under martial law by then).
No amount of finagling MBIA’s credit rating will hide the rest of the collapse. It’s just prolonging the inevitable.
And we’ll see what February brings.