Charlie Rose

sock puppet  10/11/2008 09:42 PM Report

Plagiarized from the Warren Buffett discussion. Totally agree. Credit Default Swaps are speculative derivatives that should not be bankrolled, rewarded by taxpayers if can be avoided. _______________________________ Comment by Robert C on Saturday, Oct 11 at 07:57 PM ________ WARREN BUFFET has called the $55 Trillion in outstanding credit default swaps (CDS) “financial weapons of mass destruction.” These agreements among banks and companies were intended to shield them from the risks created by mortgage-backed securities, corporate bond defaults and other financial disasters. The CDS instruments with Lehman Bros. as a counterparty became virtually worthless when Lehman filed bankruptcy. Same issue came up in the AIG nationalization. This threw the world banks into a lockdown where no bank would trust anyone to repay money loaned. They are waiting to see which of their other counterparties (banks, brokers, companies or insurers) defaults or files bankruptcy. HERE’S THE CORRECT WAY TO HANDLE CDS SYSTEMIC RISK, from a former bankruptcy attorney as well as former General Counsel to a Mortgage-Backed Securities Issuer: Markets will not resume rational behavior until the nuclear threat of credit default swaps has been rendered harmless. There are $55 Trillion of these private, non-regulated insurance agreements outstanding involving every major money center bank, investment house and major insurer worldwide. There are two ways to take away counterparty risk. One is to guaranty their performance. The other is to render them unenforceable or of only limited enforceability. Systemic confidence in world banks is so low that a government guaranty of counterparty obligations is totally worthless. Once everything has been guaranteed, nothing is guaranteed. As a matter of public policy, the risk of enforcement of credit default swaps would be much more destructive to world economies than would be the risk of their unenforcement. These instruments were an unregulated, and unsanctioned, form of insurance. These instruments must be taken out of the equation in order to return the world banking system to the status quo ante. The G7 meeting should result in a unified announcement that none of the currently outstanding credit default swaps will be enforceable in any of the G7 nations’ courts for at least five years as a matter of public policy. A G20 announcement could follow. A Derivatives Court of Claims could then be set up at the Hague to review such instruments, submitted by the parties and counterparties. The Court of Claims could then act as a Court in equity to determine the putative obligations and cross-obligations of the parties, with a decision as to what percentage of the obligations should be enforceable, if any. This would be, in effect, a bankruptcy court for an entire shadow insurance system, if you please. Remove the CDS Sword of Damocles by declaration of unenforceability. Then, banks could begin lending to one another again without worthless guarantees from each other or from governments who are already on the hook for systemic risk.

Alan   10/10/2008 11:33 PM Report

So I guess that we are being left to believe that some rogue trader took all the money in the world and invested it in home mortages and credit card debt...........................He then securitized it, collateralized it, packaged it and sold it in blocks. Now nobody knows what it is worth because some block members have defaulted and the price of homes has corrected? ...........................Just a terrible bit of luck old chap I hope you don't mind!

Bill Parks  10/10/2008 10:31 PM Report

Abraham Lincoln got it right. The US government must assume its sovereign responsibility to issue all the money for the nation. The government has many more options to deal with the economy when compared to any privately owned central bank. While both can lend money at interest into the economy, the government can create new money and spend directly into the economy independent of taxation. In addition, the government has the power to fine-tune the economy using tax laws.

NA  10/10/2008 03:04 PM Report

You can tell things are in bad shape when even the supposed free-marketeers are cheering the US into socialism. They've tried every trick in the book: from the huge bailouts to absurdly low artificial interest rates, and now a preposterous suggestion to buy up companies in preferred stock. What part of market correction do these economic pundits not understand? And as for the end bit parroting the words of Milton Friedman on the Great Depression, that is just wrong-headed. Do the words credit expansion, inflation and wage fixing ring any bells? Add to that the disruptive economic effects of WWI and the New Deal and the turmoil caused by one government intervention leading to another becomes blatantly apparent. And yet, we see history repeat itself. The government barges in, the public sheepishly takes the hit, and everyone waits until things mysteriously return to normalcy. The question is whether a severe recession will turn into an even longer inflationary depression.

Ramesh  10/10/2008 12:14 PM Report

I wonder how the US would be like in a serious depression with 400 richest Americans owning as much wealth as 150 million of the poorest Americans. The GWB tax cuts, which McCain will continue, and the health care plan which will move people from company based group plans to individual plans will further accelerate this polarization. Pensions are already history and 401Ks are looking pretty slim in this down market.

Dr. Elizabeth Warren from Harvard has a great presentation available on Youtube which asks the question regarding how unequal we can get before social cohesion falls apart.

Johan Nakuci  10/09/2008 11:34 PM Report

Mr. Rose would it be possible to get Alan Greenspan on the show and have him comment on the situation

sock puppet  10/09/2008 05:14 PM Report

Labels re Liberal, Conservative are retro! If a viable solution falls under one or the other appellations is that pertinent? For instance the stock injection plan is considered socialistic by bankers (like bailing them out by purchasing their mistakes isn't?), but since their misjudgment got us here asserting that it's "Liberal" is a non sequitur - as in who gives a damn. "Conservatism" got us here. Giving the bail-outers (the taxpayers) the same chance as Warren Buffett works for me - much more than some ideological label. Protection priorities for the taxpayer trump labels in a NY minute. Even if it deemed conservative!

Monad  10/09/2008 11:30 AM Report

According to British author Benjamin Creme, we are now experiencing the death throes of an economic system that for decades has benefited relatively few rich and powerful men at the expense of billions of the human family who

do not even have the essentials to stay alive.

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Not only does this commercialization of life and excessive speculation prevent a just distribution of the world's resources,

it also fuels endless wars, which further devastate the innocent and could ultimately end all life on this planet.

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Creme is associated with one of humanity's Elder Brothers, a Master of Wisdom. He predicts an intense period of attitude

adjustment for America, the epitome of self-centeredness and excess in the modern world. The good news is that, upon the awakening of America's soul qualities, we will move into a

new era of social, scientific and spiritual achievement.

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Even with a new administration and a real change of heart, it is hard to imagine how we can get from where we are today to that remarkable future. In fact, says Creme, it would be impossible without the help of our Elder Brothers, who have guided us for millennia from behind the scenes and

are ready to work openly among us once again.

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Within a very short time, the head of this group the World Teacher, Maitreya will appear on national television and spell out, in no uncertain terms, the imperative for humanity

to see itself as one family and share the resources of the world, so the needs of all may be met. And further, he will leave no

doubt about the critical state of our planetary home, the dangers of global warming, and the effects of pollution on the health

of humanity. Simply stated his message is “share and save the world”………share-international.org

TABS  10/09/2008 03:23 AM Report

Mr Blinder is a very LIBERAL economist. If one recalls Mr Blinder was on the Fed Reserve Board. He was slated to become the Chairman of the the Fed, however Mr Greenspan was retained in that position and Mr Blinder soon left the Fed Board.....Mr Rose really should bring on some of the other former members of the Fed Board and ask their opinions. The idea in all things Mr Rose is balance, the ability to see both sides of an arguement and not be content with the easy "conventional wisdom" of those who are in your social circle.

Ricardo C. Amaral  10/09/2008 03:08 AM Report

Financial Derivatives Market Meltdown

http://www.elitetrader.com/vb/showthread.php?s=&threadid=57218&perpage=6&pagenumber=5

October 6, 2008 - SouthAmerica: No wonder the entire global financial system is scared to death right now.

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The Financial markets has the right to be in complete PANIC right now, because they have a very frightening event that is underway the nuclear explosion inside the global derivatives market has frozen the entire system. At this point nobody trusts anyone for a simple reason the derivatives are all over the place and they are out of sight since the banks and corporations don’t need to record the financial impact of these instruments on their books until the chain reaction of massive losses are spinning completely out of control as it is the case right now.

At this point the market does not even know what are the derivatives instruments damages and losses that have been materialized in relation to the nationalization of Fannie and Freddie, the Lehman Brothers collapse, the AIG collapse, the WaMu collapse, and other financial institutions from around the world.

We are going to have a Tsunami of financial institutions getting insolvent and this financial Ebola virus is going to spread very quickly affecting banks, corporations, hedge funds, and so on….

The result will be PANIC and a humongous global financial meltdown.

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TABS  10/09/2008 03:07 AM Report

Mr Paulsons comments today helped put a floor under the panic. It gives the markets reassurance that there is a firm hand guiding the ship. This is the first reassurance since the House failed to pass the "Bailout Bill" on September 29TH. The effect of the the House not passing the B Bill was that the financial markets realized that the two parties would continue to argue with each other even if the house were on fire and burning down. That in effect telegraphed that the US government was dysfunctional and thus a failed government.That loss of confidence is what has put the world markets into a free fall. Mr Paulson is the first reassuring voice by an adult since the failure of the House. If the House had passed the B Bill the first time around the world financial markets would have felt the US government was on the job and confidence wuld have been maintained.

Ricardo C. Amaral  10/09/2008 03:07 AM Report

CNBC and Economic Damage Control

http://www.elitetrader.com/vb/showthread.php?s=&threadid=131887&perpage=6&pagenumber=3

October 6, 2008 SouthAmerica: I was watching CNBC TV and their talking heads were trying to spin every way they could for people to go back into the market.

Basically, only idiots would invest their money right now since the market is heading South and nobody have any idea where the bottom is regarding the current stock market MELTDOWN.

The market is littered with nuclear mine fields called “DERIVATIVES” and these devices are exploding all over the place, but nobody can get even an estimate of the carnage that these devices are going to inflict in the financial institutions, and also on regular corporations.

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Here is only one example of what is in store for companies around the world.

When the new earnings season starts the new estimates are going to be full of surprises, but Real bad surprises – the type of surprise that the stock market does not like it.

Not little surprises, real big surprises as in the case of Sadia – they lost almost $ 500 million dollars in Derivatives and Lehman Brothers.

You can bet that the major American corporations are also going to disclose that they incurred a massive amount of losses in the derivatives market.

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September 26, 2008 - Sadia shares plunge 28 pct on Lehman, derivatives collapse (guardian.co.uk)

Shares of Brazil's largest poultry and pork processor Sadia plunged on Friday after the company reported serious losses due to forward derivatives positions taken on the currency exchange markets…

Sadia said it had 760 million reais in losses (US$ 410 million) due to foreign exchange positions and Lehman Brothers Holding Inc bonds. That was more than the 689 million real profit the company had in 2007.

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CNBC and Economic Damage Control

http://www.elitetrader.com/vb/showthread.php?s=&threadid=131887&perpage=6&pagenumber=4

October 7, 2008

SouthAmerica: Today I was watching CNBC TV for a few minutes in the morning, and a group of talking heads were discussing the growth in the U.S. GDP in the coming year.

I don’t know why these guys don’t understand that – not only the financial markets is going through deleveraging, but also the U.S. GDP. I guess that is a hard concept for people to understand.

Kevin Phillips mentioned on his book that over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy and that translates into approximately $ 3 trillion dollars worth of GDP.

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The US government claims a GDP of around $ 14 trillion dollars, if we adjust it for the Fairy Tale figures added to this number – Paul Krugman calculates that it is at least 15 percent = $ 2.1 trillion – and if we adjust the financial services section for the current deleveraging that is underway in the US financial sector then that number probably will be closer to $ 1 trillion dollars worth of GDP.

If we make the following adjustments and don’t even consider that the rest of the U.S. economy it is shrinking by the day and is getting into a very deep recession (and the real estate sector of the economy which has represented a real engine of US economic growth for many years is no longer there, since the US has a very large inventory of available real estate around the country – then we come to the conclusion that the U.S. GDP should be lower than $ 10 trillion dollars and still declining even further. And I would not be surprised to find out that today after all these adjustments are taken in consideration the real U.S. GDP is around $ 9 trillion dollars.

If that is the case then Defense spending in the United States is completely out of line and it is hurting the future of the US economy - and in economic terms the United States has turned itself into just a dying Soviet Union.

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Ricardo C. Amaral  10/09/2008 03:06 AM Report

Economic Forecast For US Economy for 2005 and Beyond

http://www.elitetrader.com/vb/showthread.php?s=&threadid=49982&perpage=6&pagenumber=7

November 5, 2004 “Economic Forecast for the US Economy for the Year 2005 and Beyond.” By: Ricardo C. Amaral

If you have been reading most of my articles, then you know that I am very pessimistic about the direction that the US economy is taking.

In my opinion we are heading for a worldwide depression, probably even worse than the depression of the 1930's. The US economy is heading south and it is picking up speed.

The Bush administration's policies are a sure bet for a new economic depression. I have no doubts about that. We have a very weak economic team running economic policy in the country today.

Here are my predictions for the year 2005 and beyond for the US economy:

1) The US dollar should decline further during the year 2005 at least to the range of: US$ 1.50 - US$ 1.60 equal 1 Euro.

2) Gold should increase in price from the current $440 price to around to $ 500.

3) The stock market should decline in the next 3 to 4 years in the range from 30 to 50 percent from current levels. (There are many reasons for that decline to become reality.)

Market will trade in the following range in the next 3 to 4 years:

Dow Jones from 7,300 to 5,200

Nasdaq from 1,400 to 1,000

S&P 500 from 800 to 600

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4) The real estate bubble will burst in the near future when interest rates starts rising to higher levels. Housing should lose in value from 25 to 40 percent depending where the real estate is located. (The actual price of real estate will decline in real terms, since inflation is very low)

5) To stabilize the US dollar decline, the US Federal Reserve will need to raise the Fed Funds rate to a level between 4 and 5 percent by the end of 2005. As the US Federal Reserve increases the Fed Funds rate at this fast rate, the US economy growth rate will decline accordingly; in turn helping the implosion process of the US economy.

6) Outsourcing American jobs to foreign lands will help the implosion process of the American economy. It is open season on American jobs, and millions of American jobs are leaving the US for cheaper labor places. Americans want equality, in terms of wages, equality is at the 50 cents per hour without company benefits. In the future, Americans will get what they are wishing for.

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7) Companies of every size will transfer the responsibility of their pension plans to the US government. Most of the people now receiving pensions from these companies will receive a very large cut on their pension benefits when the pension responsibility is transferred to the US government: Pension Benefit Guaranty Corporation's (PBGC)

These large cuts in pension income will result in a reduction in spending by pensioners, and in another important negative trend to affect the US economy in the coming years. (We are talking about millions of retired people here in the US.)

It is pathetic to see a country such as the United States to decline economically so fast. But gross government mismanagement will do it every time.

Without taking in consideration the US government’s usual published misinformation, the real rate of unemployment in the United States should be in the range of 13 to 15 percent, not the fictitious number published every month by the Labor Department of around 5.6 percent. The unemployment rate will increase drastically in coming months and years, as the US economy continues to deteriorate on its race to the bottom.

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After reading one of my articles someone asked me: "Are you able to suggest financial refuge for those of us who are small landowners and investors?"

All I can say is that the risks are too high here in the US today. I would not invest any money in the stock market. The housing bubble is ready to burst. The only place that makes sense to park your money is in U.S. Government securities - "TIPS"

Below is brief information about these US government securities. Better safe than sorry.

Cash is king when the S… hits the fan. If you have cash on hand, after a major market decline, then you can pick up the pieces for a fraction of its previous price.

NOTE: Above are the predictions that I made right after George W. Bush was re-elected. Most of you think that they are silly predictions, and full of gloom and doom. Do yourself a favor make a copy of these predictions and check them again by November 2008 (The new presidential election here in the US), and you will see that I was right in the nose.

I am so confident about my predictions that I am putting them in writing for entire world to see it, as I did in the past. (And I did identify myself, and signed my real name)

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sock puppet  10/09/2008 01:18 AM Report

Then there's RON who unfortunately is all too clear.

sock puppet  10/09/2008 01:13 AM Report

RE Mant - You're an exhausting scoundrel. Not smart enough to come away with an, or 'the,' intended message. The conclusion of your second message cobollixed me completely, ". . . the corn and the grass and the trees will grow without paper-money; the Banks may all break in a day, and the sun will rise the next day, and the lambs will gambol and the birds will sing and the carters and country girls will grin at each other, and all will go on just as if nothing had happened,..." -----------> I'm happy for you. It sounds like you're insulated from the current problems. Surprising somewhat since . . . . well, . . . not everyone's

position is . . .

RE Mant  10/09/2008 12:20 AM Report

The British political writer William Cobbett on a similar occasion 200 yrs ago: "To hear the greater part of people talk upon this subject, one would imagine, that the Bank Notes were the meat, drink, and clothing of the inhabitants of this island; and, indeed, that they gave us sunshine and showers and every thing necessary to our existence. One would really suppose, that the general creed was, that the Bank Directors were the Gods of the country, that they were our Sustainers if not actually our Makers, that from them we derived the breath in our nostrils, that in and through them we lived, moved, and had our being. No wonder, then, that there should be an apprehension and even a horror inspired by the idea of a total destruction of the paper-money; But, Gentlemen, is there any ground for these apprehensions? Are such apprehensions to be entertained by rational men? No: the corn and the grass and the trees will grow without paper-money; the Banks may all break in a day, and the sun will rise the next day, and the lambs will gambol and the birds will sing and the carters and country girls will grin at each other, and all will go on just as if nothing had happened,..."

RE Mant  10/09/2008 12:08 AM Report

Guha is a ding-a-ling. Norris is also wrong about "the 1930s." And Blinder is certainly wrong in theory, and given that most of the banks around me are offering a good deal more than 1.5% for CDs, I suspect the rate cut will have little effect in any case, so the question is moot, but we do know what works if academic economists would get their heads out their textbooks and journals and learn some history...

Our economic problems stem from our trade deficit, our budget deficits, an oversupply of money and credit, and a lack of savings. We perhaps would not have come to this pass with better regulation, but that did not CAUSE the problem. We've created money instead of saving, bought Chinese products with it, or sunk it is real estate, and those dollars have flooded the rest of the world, no doubt now making them quite angry with us. Keynes and Friedman were interested in finding monetary ways to deal with economic problems instead of substantive ones, but that is wrong-headed. The only way to get America working again is - surprise, surprise - to get America WORKING again. The question overall is not leveraging vs de-leveraging, but mis- or mal-investment, altho this would be much less of a problem if money, itself, were not being manufactured out of whole cloth to such an extent instead of being made to come from savings, which anchors it to productivity. The way out of a liquidity trap (assuming you believe one to exist in the first place) is to offer investors real value. Those left with money will be the object of envy yet and their position considered unwarranted, if not tyrannical, but there is no other alternative, unless you want to take it from them by taxes, or repudiate or bypass it altogether. Indeed making more money will depreciate what they hold, but without any change in productivity it can not change the situation and will probably encourage more hoarding of essential skills and commodities or encourage immediate consumption, as always in an inflationary situation, so lowering rates amounts to a temporary relief measure, unless you believe in fantasies such as the multiplier. Besides, more debt means proportionately more money, not less, in their hands. The best way to solve income distribution problems is to ensure that people have to work for their money rather than having it given to them. Anyone taking an entry-level microeconomics course should realize immediately that theoretically no one should make a profit. The only reason they do is through force, as in cases when an employer pays below mkt wages, or fraud, the latter including writing themselves below mkt rate loans, or loans based on anticipations rather than savings. Too, increasing debt is another step towards a command economy. Another way to put this is that stagflation is always the case in economic downturns, created over a long period. We have seen productivity gains on paper from the greater involvement of the Chinese and 3rd-world countries, and hence little rise in what has now been whittled down to "core" inflation, but this has hollowed-out our own real productivity, and the latter is not an accurate measurement. Rather than Iran or al-Qaeda our number one enemy has all along been the Chinese, who, instead of dealing with, we have embraced with a view to world peace, but that has to stop. If it does not, both we, and the rest of the world, will be lowered to their level. An oft-used metaphor in old econ literature for this process is that wealth or trade, like water, seeks a level, and seems to me to be perfectly accurate. Having written all this over-and-over, so many times, I, nevertheless, have to say that I see a great deal in the US and the rest of the world to be hopeful about. Science and technology have made very great strides in my lifetime and I have come to think of them as more or less independent of the normal measures of our economy, neither influenced by economic incentives, nor discouraged by their absence. Of course, it would have helped if many of our brightest kids hadn't been diverted into law and finance, while our short-sighted management, harried by the stock mkt, has no doubt hurt long-term development. Scientists and engineers tho are the real republicans we never see or hear from in our political life and the backbone of any nation. For those seeking good investments and ways to help, it is probably a good time to start putting money into those small-caps instead of consumption, gold and real estate.

sock puppet  10/08/2008 05:18 PM Report

The elephant in the room is Credit Default Swaps (CDS). ------------------> From Business Week and the AP 10/08/08 10:48 ET: "The roughly $60 trillion market for credit default swaps lacks transparency, is unregulated and creates an environment for market manipulation, Securities and Exchange Commission Chairman Christopher Cox said. The market's size exceeds the gross domestic product of every country in the world combined, he noted." ---------------------------------------> With a 6 billion world population that's $10,000 per head. And $200,000 per capita US -------------> Are CDSs a part of the BAILOUT? If not do many more financial institutions belly up - as they deserve - or do they get coddled like AIG et al? ----------------------> If CDSs are included then we're finished. That will debauch and debase our currency to wallpaper. They couldn't print it fast enough. All western currencies might collapse in tandem (dollar, pound, euro) while eastern's (China, Russia? oil producers et al) would appreciate. We have some Pyrrhic choices to make (as in damned if we do and damned if we don't). ---------------------------------------> My choice: no CDS bailout and let the financial institutions that indulged collapse (as they may anyway a la Lehman, Bear-Stearns) and as they should. Then inject preferred stock into banks that request assistance - and ONLY if they request. In the interim think gold. Again, I hope CDSs will be a (major?) part of the conversation. But I'm not holding my breath.

sock puppet  10/08/2008 04:27 PM Report

Emergency Economic Stabilization Act of 2008 has sections that will allow the so-called "stock injection plan." To wit: -------------------------------------->

From Section 113:

IN GENERAL.The Secretary may not purchase, or make any commitment to purchase, any troubled asset under the authority of this Act, unless the Secretary receives from the financial institution from which such assets are to be purchased ------------------------------>

1. in the case of a financial institution, the securities of which are traded on a national securities exchange, a warrant giving the right to the Secretary to receive nonvoting common stock or preferred stock in such financial institution, or voting stock with respect to which, the Secretary agrees not to exercise voting power, as the Secretary determines appropriate; or ---------------------------------------------->

2.in the case of any financial institution other than one described in subparagraph (A), a warrant for common or preferred stock, or a senior debt instrument from such financial institution, as described in paragraph (2)(C). ------------------------------------------>

Despite bankers decrying the socialist aspects of government ownership they have proven their judgment isn't something to be taken too seriously. Here's hoping this will be discussed by Mr Blinder. (Not a real propitious name for an economist.)