Saturday, August 30, 2008

[fannie and freddie] the couple who might bring it all down

The WSJ had this to say about Fannie Mae and Freddie Mac:

In Henry M. Paulson's first month as Treasury secretary, two deputies flagged Fannie Mae and Freddie Mac as significant risks to the economy. He didn't share their level of concern. When he was at Goldman Sachs, he told the aides, the mortgage giants weren't on the list of things that kept him up at night.

Two years later, they're at the top of his list. Mr. Paulson is embroiled in emergency planning on ways to shore up the companies to avert a destabilizing jolt to the U.S. economy and the world's financial system.

Moving obliquely from the big crash, it makes one think about whether to own property or whether to rent and take your chances.

Methinks it is going to be increasingly the case that more and more people will be keeping their assets, such as they are, as cash. Advice is to put it in commodities but the average Jo can't do these things.

I wonder how much my own current situation is the worst available option. Looks like it at the moment but mobility might become a key factor in a few years or even earlier.


Dragonstar said...

Not all that many years ago most people rented - they tended to move house when it was time to decorate!

Gallimaufry said...

What better way to invest in commodities than by buying blackberry jam?
Seriously, buy razor blades, tinned sardines, Worcester sauce and a steam powered heat and power generator.


Yes, I suspect cash is the place now. If you believe Alice, house could fall 44% to trend and then probably overshoot; even if she's drawn her trend line wrongly, we might be looking at 20% to trend.

I noticed a gypsy caravan in someone's front garden today...

CherryPie said...

I think these things come round in cycles and now is not a good time to invest in property!

Anonymous said...

Property decline.....60% plus
But they won't tell you.

L - shaped recession, and NEVER returning to current highs.
But they won't tell you.

Up to 20% unemployment (official!!). Probably 35%.
But they won't tell you.

Britain is WORST PLACED of all G7 to withstand coming tsunami.
But they won't tell you.

Total smash of society.
But they won't tell you.

Renege on most of social financial promises. Pensioners are toast.
But they won't tell you.

Planned for decades.
Evidence is crystal clear.
For the last 5 days gold has functioned as an independent financial medium. Disconnected from £, $, Euro, Yen, .....
But they won't tell you.

Peak credit is passed. (one month)
Peak currency is passed. (one week)
Peak oil is passed.
Peak food is now.
Peak libor is not yet.
$/yen unwinding.
£/Yen unwinding.
Euro/Yen unwinding.
Global central banks supporting $, but for ever???
ECB message to national banks one month ago, - - we can't and won't keep the lending window open forever. UK banks failure to raise finance via share issue (held by underwriters) shows NOW TOO LATE TO RAISE CAPITAL.... Shotgun Marriages.
China and Russia hold billions of foni and fraudi bonds. Both demand treasury make good, or stop buying T bills....Foni and Fraudi will be made good. Equity holders are toast. All on taxpayers shoulders.
GCC States talking about monetary union, - - floating currency NOT PEGGED TO $.
But they won't tell you.

Biggest Fiat fuck-up by the powers that be, - EVER. In their greed for power they have destroyed their own power base, and destroyed millions of lives.

Non Illuminati countries will unite against bankrupt fiat nations.

Cash, Gold, and Swiss gov't bonds.
In 7 years, it could very well be that a Krugerrand buys a decent house!

Book it.

Anonymous said...

yesterday, (friday) the gold/$ battle for the global currency position was intense.
Having won the previous 4 days, gold lost yesterdays jousting.

$ will fail, - as solid as warm butter.

Nations who want(ed) to denominate in other than the dollar, - -
Iraq, (look what happened)
North Korea, (who cares?)
Iran, (New oil trading centre in Euros)
A eureka moment?????????

Another false flag operation like 9/11, or 7/7, - Georgia, Venezuela, Iran????????????

Now the GCC talks, but the US is powerless.

Several projections
$ is involved in a world currency basket, ---Decline 50% +/- from here.
$ not involved in basket, - - declines 80% +/- from here.

To a large extent, £ follows $ (falling heavily against $ now, given interest rate differentials and prospect of a MPC rate cut upcoming)

Foni and Fraudi will not be the tipping point, need to roll over billions of debt BEFORE the election.
Tipping point comes later.

Paulson retires after the election!

The elephant in the room?


Current prices are high enough to tip the world into recession.
Add in the largest contraction of credit, EVER, - REMEMBERING THAT SUCH A CONTRACTION BEGOT 1929/34, and you have the perfect storm, with the protagonists nuclear armed.

And lets feed in a collapsing Pakistan, with the Taliban taking Pak cities, and no doubt planning to take the nukes.

On the day Russia rolled into Georgia, oil and gold fell.
Can you spell manipulation?
Is oil rising with gustav?
As I write its $115.
Can you spell manipulation?

The further that the over-issue of Fiat is extended, the more $ must be created to give one more dollar of GDP (honest GDP - excluding honest inflation)
The point is passed. Monumental $ values now needed.

Toast, toast, toast.

TBRRob said...

I wouldn't by a house even if I could afford the deposit.

3-5 years and I might re-asses the situation.

CityUnslicker said...

anon - that is mostly rubbish of the highest order. How you think a few days $/gold trend in a highly volatile market is evidence of years of planning is beyond parody.

Things will though get real tough in 2009 and 2010 - we all know it now. We have to pay for stealing the prosperity via the credit bubble.

Anonymous said...

anon - that is mostly rubbish of the highest order. How you think a few days $/gold trend in a highly volatile market is evidence of years of planning is beyond parody.

Sorry if you found the post confusing SUS, or maybe you just wanted to score a point?

A few days of jousting was not planned, and you know it, but is natural order as dynamics change.

What was planned was/is the over issuance of fiat, compounded by interest rates too low for too long.
Read greenspans words before he was appointed to the Fed on the subject of gold, and then his later words/obfustications on the problems of over issuance of fiat, particularly under questions from Ron Paul.
He knew what the results would be.

He campaigned for the repeal of GS legislation, and then heavily promoted the use, and global sale of toxic paper. He is a member of CFR.

Things will though get real tough in 2009 and 2010 - we all know it now. We have to pay for stealing the prosperity via the credit bubble.

How astute to realise that, why, even our No.11 occupant realises that.

What someone in your position should realise is the magnitude of what is coming.

You apparently do not!

We have to pay for stealing the prosperity via the credit bubble.

Are you really advocating the socialising of losses and the privatising of profits created by lax monetary policies, and lax oversight administrations?

My oh my!

But then again I don't believe you would advocate that, so maybe I was just scoring a point.

Annoying isn't it.

Seriously though, SUS, I don't believe that 2009/10 will see the end of these problems.

As far as the UK is concerned the lack of so much planning, and the excess of so much social engineering over the last decade has resulted in a hollowed out service economy overly dependent on financial services, which now requires serious surgery. It will be painful, and 2 mill unemployed is just the opening chapter.

If Darling is true to form, the result will be more gov't spending/borrowing for "infrastructure investment", and band-aids, which will ultimately require more surgery a decade down the line.

What makes you think that 2009/10 will see the problems through?

Anonymous said...

I'm with anonymous... we're in seven shades of the brown sticky stuff.

Baht At said...

no the banks and people in finance are in seven shades of sticky stuff.

For the general public this is the time to mass default on borrowing and laugh

Anonymous said...

First signs of a crack in the EUSSR??


jams o donnell said...

I think I'll put my money in potatoes!

Anonymous said...

You have to realize that what they're trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. They're not trying to make the economy more equal, and they're not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards; it's the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite.

The former Soviet Union provides a model of what the neoliberals would like to create. Not only in Russia but also in the Baltic States and other former Soviet republics, they created local kleptocracies



Anonymous said...

BAHT... the day the banking fraternity end up in the sticky stuff... is the day I slip one to Kylie Minogue.

Lord James Bigglesworth said...

Sorry to be late to the party but not much internet usage on the weekend - more organizational matters.

Dragonstar - might be the way.

Gallimaufry - Sound advice.

Sackerson - cash would be the place if it were possible.

Cherie - most certainly at this time.

Anon - thanks for that - I'm saving to read later.

Rob - I'm inclined to think so and yet rental is like being held hostage.

CUS - saving yours too to read later.

Harry, Baht 'at - yes.

Jams - yes.

OK, have read them through and there is too much to internalize here and now. I'll get back tomorrow or next day with a better comment and thanks for that.