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Ummm I'm actually siding with Realist, in the nominal sense, in that we are more fucked than we realize. Fuck the dow ... the equities market is the least of our worries because it is not what is fucked up. What is completely fucked up are the money markets. To put it in simple terms, commercial paper and the commercial lending industry are completely frozen. NOBODY is lending anybody any money whatsoever because banks are not lending. Libor and Euribor have been skyrocketing over the past couple weeks. To give you an idea of how critical the money markets are, here is a VERY simplistic example of their purpose:
Let's say a company like Boeing or GE perform 1 contract at a time. Under normal business conditions this is what would happen:
Day 1 – Boeing lands an $8 billion contract of which they receive a $2 billion deposit. They stick it in a 30 day bank deposit @ 4% interest
Day 20 - they have to make payroll, pay bills, etc., to the tune of $4 billion. They end up borrowing $4b @ 4.5% interest
Day 30 - they deliver the contract and receive the remaining $6 billion. They pay back the $4b loan, and get back the $2b in cash they had sitting in the bank long with interest interest
Now this is what is happening in the current credit crisis:
day 1 - they land the contract and receive the $2 billion deposit which they put under the mattress earning no interest because they know that getting loans is scarce
day 20 - they have to make payroll, pay bills, etc., so they pay $2billion in cash from the mattress and try to borrow the other $2billion it still needs. The bank says no …. boeing says but hey guys on day 30 I'm going to get $8billion so you can lend me the money, I'm good for it ... the bank says sorry, I can't help you, not only do I not have no cash of my own to lend you, but even if you say you can pay me back, I don't want to take the risk of you failing and I lose all my principal.
day 21 - Boeing says they're going out of business because they have run out of cash, can't pay their bills, or their employees.
Large companies employ a division of treasury employees to manage their cash management operations because it gets to be so complex. That entire industry is SHUT DOWN. GE and Goldman Sachs were essentially a firesale for Buffett because they were so desperatet o secure funding. These are LARGE companies that are AAA rated ... can you imagine medium size companies who are trying to secure credit?? Shit has gotten to the point where the STATE of California and Massachusetts need a bailout by the government because they can't raise short term funding to cover their cash flows via revenue anticipation bonds by the time they see this money by Thanksgiving, Christmas, or tax season next april:
http://www.bloomberg.com/apps/news?...id=aHVUec5r7Ejg
This shit has gotten so out of control that small countries are now failing:
http://www.bloomberg.com/apps/news?...id=a5UX01HU3gcA
I think this financial crisis is the worst since the great depression. Fuck 87 ... fuck stagflation from the early 80s ... I think we're going to see 8 or 9% unemployment, at the very least, in the US unless we see a concerted worldwide bailout orchestrated by the fed and the ECB. This level of central bank direct involvement is unbelievable ... that should tell you how serious this shit is. Let me put it in different terms ... I have never even thought about writing a letter to my congressperson urging drastic deficit spending to do whatever it takes to avert a complete financial catastrophe ever. If you see my postings in the PDD I am a free market economist and I abhor the thought of government intervention. But I sent an email to my congressperson yesterday because I am that afraid.
I feel sooo retarded for soliciting shit like this but please contact your local politician to voice support of aggressive, and above all cooperative, fiscal and monetary policy. What is critical is the need for a global bailout initiative. Central banks are cooperating, but I fear that the governments behind them lack the political willpower to do what is needed in the face of perceived voter perceptions.
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Retro ...
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...My attention to diversification though, requires me to only invest in 1 dry-bulk shipping company, so I try to find the best of the best according to my model.
