The D Word

I started this blog in Summer 2007 with the following :

My intuition tells me people are very optimistic when it comes to wishing fortunes, but they tend to believe truths as they grow more exaggerated over time, like how prices of homes will continue to grow 10%+ each year.

Look where we are now in April 2008:

USA 2008: The Great Depression

Here it is, The Independent from the UK is reporting this is now official:

Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis

http://www.independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html">http://www.independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html

The Great Depression: The sequel

http://www.salon.com/opinion/feature/2008/04/02/depression/index.html??source=yahoo


Dominos: How Bear Stearns default threatens the entire world financial system

"The world financial system runs on credit -- on paper promises. If big borrowers and lenders don't make good on those promises, panic can set in, and the biggest financial institutions in the world can find themselves under siege."

http://www.rawstory.com/news/2008/Bear_Stearns_and_Domino_Effect_0325.html


Oil firms aren't to blame for prices, execs tell House panel

Growing demand and curbs on U.S. drilling are among reasons they cite for record highs at the pump.

http://www.latimes.com/business/la-fi-oil2apr02,1,4932355.story

So what is to blame? Geo-politics, peak oil, supply and demand? Is this going to improve any time soon?


I leave you with an excerpt of BBC news. A clip showing an example of how a news presentation can go from normal to bazaar, in a heart beet. Things can be sounding very secure and serious one minute and then fall apart the next...

BBC NEWS READER LAUGHS AT DEATH




________________________________________________________________

Run on The Bank (April Fools Day 2008)

Well, it is April Fools day today. I wonder how many people will fall for a joke today?...



Does anyone feel we could see a run on the bank, as what happened in England last September with Northern Rock? I don't see this as a joke. I think it could happen very easily and in a matter of months.

My Question: If the public starts to lose confidence in their high street bank, does outstanding credit (such as on credit cards) have to be paid back immediately to an insolvent bank? (I don't recall seeing this as a condition on the back of my credit card statement)

Last September Northern Rock was bailed out by the Bank of England after 1 billion (5%) of bank deposits was withdrawn in a day.

About one year ago, when I used to ask people around me if a run on the bank could happen, (similar to times of the 1930's Great Depression) I was laughed at. Now, unfortunately, it seems to be more of a reality. Today, the Disney ABC news station (Most mainstream) has the following headline: http://abcnews.go.com/Business/Economy/story?id=4544872&page=1

Are We Heading Into a Depression?

'Automatic' Economic Recovery Isn't Certain, Says Economist Robert Parks

When economist Robert Parks predicted early last week that there was more than a 60 percent probability the current financial meltdown in the United States would lead to the "Bush depression," his phone began ringing like crazy with calls from the media.




Here are more in depth articles showing how serious our situation has gotten:

http://www.latimes.com/news/printedition/front/la-fi-depression20mar20,1,1097237.story

A new Great Depression? It's different this time

And, as in the Great Depression, the financial system is in disarray. It was symbolized back then by the failure of thousands of banks, mostly small, local outfits -- 2,300 in 1931 alone. The parallel today is the crippling of one time giants such as Bear Stearns Cos., Countrywide Financial Corp. and Ameriquest Mortgage Co. Many economists believe that the U.S. will find it almost impossible to avert a recession, if one has not started already. Housing remains mired in a deep slump,with some analysts projecting that Southern California home values could plunge 40% from their peaks last year.


http://www.nytimes.com/2008/04/01/business/01regulate.html?ref=business

WASHINGTON — As Treasury Secretary Henry M. Paulson Jr. laid out an ambitious plan to overhaul the regulatory apparatus that oversees the nation’s financial system on Monday, lawmakers and lobbyists from an array of industries opposed to the plan predicted that most of it would be dead on arrival.

http://www.latimes.com/news/opinion/sunday/commentary/la-oe-schiff31mar31,0,1983693.story?
The economic crisis enters a new and more dangerous phase daily, and Americans of all levels of economic sophistication are scrambling to make sense of the myriad remedies and proposals that are springing from Washington.

The government is worried for good reason. The value of the trillions of dollars of mortgage-backed bonds that course through the American financial system is a function of homeowners' capacity -- and willingness -- to repay their mortgages. To an extent not widely understood, this is all tied to home prices.

http://www.nytimes.com/2008/03/31/business/31credit-1.html

But what investors fear is that financial companies’ pain will not end with the troubled mortgages, which by some estimates have already resulted in more than $200 billion of losses. Car loans, home equity loans, credit card debt, small business loans — any of that might run into trouble as the economy stalls.

“A year ago, we were told the problems were in subprime, ” said David Rosenberg, chief North American economist at Merrill Lynch, “and what is becoming increasingly apparent is that the participation in the credit bubble was far greater than just that.”

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702150.html
http://www.nytimes.com/2008/03/30/business/30regulate.html?em&ex=1207022400&en=fdd8c4dcdee4a685&ei=5087%0A


This is no April Fools day, except maybe an accumulation of many foolish days of everyone trying to join a world of unregulated unprecedented, unsustainable and irrational bubbles!

(Just my intuition)


Happy April Fools Day!

Don't forget to laugh about it, this is only money after all!

Are we in for a kondratieff winter? (starting this sumer)

Are we in for a kondratieff winter?

Could our next kondratieff summer be green, with green energy?

I am not an over-paid economist but think I have common sense and intuition.

I have a feeling we're heading towards a turning point.


Starting with greed in housing markets, this reminds me of the Dutch tulip rush: The Dutch Tulip manias



Also reminds me of the California gold rush (1848 -1850)



Most people came from all over the world after 1949, after the gold rush had finished.




We know the last housing bubble corrected itself between 1985 and 1996 (11 year correction)

Click on image below to enlarge

....just look where the current cycle is right now: up above on the right


And what about the huge wave of introductory low ARM mortgages reseting this year? I got lots of info from Patrick.net by the way

I found this image in June 2007: (2008 is projected worse than 2007)

http://www.beearly.com/charts/mortgage-resets1262007.png


And what about oil production that drives everything right now (allowing for these tulips to grow).

The crude oil discovery chart below, shows we peeked finding oil before 1970:

Source image: http://www.clv101.plus.com/vt/discovery.gif


I see a similar wave pattern in this oil discovery chart to the 'ARM reset' wave chart above.


And demand today is going up uP UP !



It seems demand has increased beyond max output since June mid 2007:



Maybe this explains the steap $ per barrel increase this year, we reached the golden $100

If everything is about 'supply and demand' where cost goes up when demand is high



and crude oil demand is going up everywhere....





and we are going to get less of it...



including other non renewable energy sources....




With most of the oil now found in dangerous parts of the world:




and population growth expanding by billions.... (The J curve)







I think to myself... Houston, we have a problem:

I am certainly not sharing the population increase images because I think more billions should not be born, but I do think we should acknowledge QUICKLY how we think about our situation and DO something!

and NOW!

I pledge for Wind, Solar, clean electricity, efficiency, sustainability.

Today's stocks have already crossed the top line in this chart below. The last time they crossed this high was 1929, then almost as high in 1966 mini crash, then the 1987 black Monday crash which looks tiny, then the 2000 dot-com-bubble crash that also looks small now, we are still not in a great place according to history:



Has anyone heard of the kondratieff winter?
Long term stock markets suggest we are reaching a 'delayed' winter.

Here is an image to sum up a long interesting article I read about kondratieff:





I see the chart more like this:



Until we find a sustainable way of life.....











Maybe walking or taking a bus is not such a bad idea after all!


Click on image to enlarge CARS BUS BYCICLES

The world consumes about this much refined oil per second of each day and night: (84 million barrels of oil each day)





The 52 US states use this much:



The energy situation has been measured in many different ways. I am just showing a few charts to show my perspective on things. I hear biodiesel has already peaked and ethanol is not going to help. It costs too much energy to grow a field of corn (which also feeds one person for a year) to create one tank of gas. Nuclear energy for more electricity will cost energy to mine the uranium, as well as dispose of the waste. Building more nuclear power stations will not be a quick process, as it is politicized. I can see why, as a nuclear accident can effect generations of people. So far nuclear energy amounts to just a third of North America's total energy use, and even less for the world.

If I had money, I would buy energy stocks and they would be Green as the leaf on a tulip!




Please send me your comments, as I may post them in my next blog! Thanks!

Very close to a bank melt down last week

My March prediction of a bank melt down seems to have come very close last week.

Here is one article I found from a well established and conservative British newspaper covering what happened:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/23/ccfed123.xml

"There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."


I am amazed!

If just one US high street banks was to run into a problem with liquidity, how long would it take for American customers to start another "run on the bank"? I would not be surprised at all at this stage. After all, this has already happened on more than one occasion in past history:

1634-1637 - The Dutch Tulip manias
1717-1719 - The British South Sea Bubble
1717-1720 - The French Mississippi Company
1815-1830 -The Post Napoleonic Depression
1929-1939- The Great Depression

Interesting to read back on past a blog

March 18 2008: Well, I read my blog from last December and it seems a setup for a bank crisis is really unfolding and 1929 style chaos could be just around the corner, oh boy...

In December 2007, I wrote:

My concern now is that we are going to see panic in March 2008.
Last week I was at a stop light and I noticed a car had broken down. Some people in the broken down car got out and started to push it away. But from three cars behind, some people who did not notice the breakdown started to get very angry. They made noise with their hooter, siren, horn (what ever you want to call it) saying "what the F#*k is going on"

Seeing this behavior for something trivial really make me wonder, what will we see once everyone lives in anxiety, following a collapse of banking plus a spike in the price of oil???

Here are some articles to show where we are today and why I think the big wave of crisis that will affect nearly everyone is going to be very soon, oh heck, I hope we all survive this mess: (credit for article links goes to Patrick.net)

How This Crisis Is Different (washingtonpost.com)
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702150.html?referrer=emailarticle&ref=patrick.net

It's said that we're in the worst financial crisis since the Great Depression. Maybe. But remember the S&L crisis of the mid-1980s? Or the commercial banking crisis of the late 1980s (from 1988 to 1992, 905 banks failed). Or the 1997-98 Asian financial crisis, which sent South Korea, Indonesia and other countries on a boom-bust rollercoaster? All were frightening. What distinguishes this crisis -- which brought down Bear Sterns over the weekend -- is that it involves the entire financial system, not just depository institutions, and it's more mystifying than any of its predecessors.

Previous financial crises so weakened the banks and savings and loans that they lost their primacy. As recently as 1980, they supplied almost half of all lending -- to companies, consumers and home buyers. Now their share is less than 30 percent. The gap has been filled by "securitization": the bundling of mortgages, credit card debt and other loans into bond-like instruments that are sold to all manner of investors (banks themselves, pension funds, hedge funds, insurance companies).
.....Financial institutions (banks, investment banks, hedge funds and others) are interconnected through networks of buying, selling, borrowing and lending. These require confidence that commitments made will be commitments honored. If confidence collapses, the processes of extending credit for the economy and of trading -- for stocks, bonds, foreign exchange -- may also collapse.

Sub-prime collapse 'beyond the US Federal Reserve'
http://www.news.com.au/story/0,23599,23393912-462,00.html?ref=patrick.net

The crunch bites deeper in the US (news.bbc.co.uk)
http://news.bbc.co.uk/2/hi/business/7302140.stm?ref=patrick.net

Can't Grasp Credit Crisis? Join the Club (nytimes.com)
http://www.nytimes.com/2008/03/19/business/19leonhardt.html?ref=patrick.net

Can't Grasp Credit Crisis? Join the Club (nytimes.com)
http://www.thetrumpet.com/index.php?q=4954.3219.0.0&ref=patrick.net

Bernanke's dollar sinks worldwide (news.yahoo.com)
http://news.yahoo.com/s/ap/20080313/ap_on_bi_ge/diving_dollar?ref=patrick.net

Greenspanspeak (solari.com)
http://www.solari.com/blog/?p=703&ref=patrick.net

My intuition looks spot on so far, I am sad to say

Well, I have been watching the markets and I think the prediction I had last summer is getting close: Here is what I wrote to myself.

Monday June 25:

>>I am writing this as a time capsule to show (I have a
>>sense of knowing) what is going on in the world.
>>I think we're on the brink (about two weeks away)
>>from an economic breakdown --a depression as close
>>to the 1930's.  I am not an economist but I have
>>read enough on the web to judge this is happening
>>and am writing this down before it happens.

Dec 17th 2007:

So here is what we are reading today from:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/14/ccbanks114.xml

The massive cash injection from the Bank of England, along with funds from its international counterparts, is welcome but too little to calm the fears sweeping money markets

A mere 24 hours after the western world's major central banks banded together to announce an almost unprecedented set of money market rescue operations, by early afternoon yesterday it was all too clear that the medicine was not having the desired effect.

(OK, more than two weeks than I thought, but five months is close):

My concern now is that we are going to see panic in March 2008.
Last week I was at a stop light and I noticed a car had broken down. Some people in the broken down car got out and started to push it away. But from three cars behind, some people who did not notice the breakdown started to get very angry. They made noise with their hooter, siren, horn (what ever you want to call it) saying "what the F#*k is going on"

Seeing this behavior for something trivial really make me wonder, what will we see once everyone lives in anxiety, following a collapse of banking plus a spike in the price of oil???

I am keeping this blog to keep a time stamp of my intuition. I read a lot and I want to share my thoughts....

Please send some comments!

Unfortunately the S. H. eye. T seems to be hitting the fan

Is the stock market about to go into a free fall?

I think it will be falling down stairs over the next year. The past 20 years of easy credit surely can't sustain artificial wealth any longer... It seems we are reaching a pivotal moment. I remember in the past it was difficult to get overdrafts from banks. Now we are offered credit cards with $10,000 limits with introductory 1 or 2 % interest rates. Where does all this money come from? The business news on October 16 2007 is looking very concerning.

I feel I want to learn more about sustainable living. Today someone wrote me an email related to sustainability so I feel my writing may be having an effect!

Crude oil at a record high - $84 now per barrel.
http://www.thehindubusinessline.com/blnus/08161305.htm

Big U.S. Banks Try to Restore Confidence in Credit Markets:
http://www.nytimes.com/2007/10/16/business/16fund.html?ref=business

Also I just felt a small earthquake a few minutes ago. I am going to check the news now to see what it was.

Ah, here it is a 4.2 Quake in Mt. Baldy:
http://quake.wr.usgs.gov/recenteqs/Quakes/ci10285533.html