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• Nationally the index was up 8.8% as compared to August 2007.
• The Northeast region was up 2.0% as compared to August 2007.
• The Midwest region was up 6.6% as compared to August 2007.
• The South region was down 2.1% as compared to August 2007.
• The West region was up 37.8% as compared to August 2007.

• A. October 1998 ' S&P 500 gives early warning sign by crossing its 400 day simple moving average (SMA). Notice also that the 50 day SMA breached the 200 day SMA.
• B. October 1999 ' S&P 500 gives a second signal by crossing its 200 day SMA after a solid twelve month expansion. 50 day SMA touches the 200 day SMA.
• C. Three prominent but decelerating peaks set up the top.
• D. Between second and third (last) peak S&P 500 index breaches 200 day SMA. After the final peak S&P 500 index breaches the 400 day SMA.
• E. 50 day SMA heads down fast and crosses the 200 day SMA. (Cross of Death)
• F. 50 day SMA crosses 400 day SMA. (Cross of Far More Death)
• G. 200 day SMA crosses 400 day SMA. (Cross of Fiery Gruesome Death)

• A. June 2006 ' S&P 500 gives early warning sign by crossing its 400 day SMA. Notice also that the 50 day SMA breached the 200 day SMA.
• B. March 2007 ' S&P 500 gives a second signal by falling near its 200 day SMA after a solid nine month expansion. 50 day SMA similarly depressed.
• C. Three prominent but decelerating peaks set up the top.
• D. Between second and third (last) peak S&P 500 index breaches 200 day SMA. After the final peak S&P 500 index breaches the 400 day SMA.
• E. 50 day SMA heads down fast and crosses the 200 day SMA. (Cross of Death)
• F. 50 day SMA crosses 400 day SMA. (Cross of Far More Death)
• G. 200 day SMA crosses 400 day SMA. (Cross of Fiery Gruesome Death)

Learn how to drive a tractor.

-Legendary investor Jim Rogers, who gave this advice to out-of-work Wall Street MBAs the other week while speaking at the Toronto CFA Society's annual forecast dinner.

These are extraordinary times and' we could possibly see a breakdown of our society like you and I have never experienced. We may want to replace grains and oil with guns and butter because that's what we're probably all going to need plenty of if this thing really gets out of hand.

-Dale Doelling, chief market technician at Trends In Commodities in an October 10 MarketWatch piece.

My fears have now been confirmed, and the U.S. Government is now set to destroy all hope of economic recovery.

Make no mistake; had the government resisted the political pressure to interfere with the markets, we would now be experiencing a very deep recession. But by refusing to let the markets work, policy makers are resisting the only medicine capable of curing the economic disease that afflicts us. The same mistakes were made in the early 1930’s, causing a severe financial crisis to morph into the decade-long Great Depression.

The government will now attempt to keep bad loans from failing and real estate prices from falling. Rather then allowing market forces to rein in excess borrowing and replenish savings, it will encourage even more borrowing and drain what is left of our savings pool. Rather than allowing our economy to return to one based on legitimate production, it will continue to encourage reckless consumption.

In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of marshal law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded.

-Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, in an article last week entitled 'The Beginning of the End.'

Two more banks have bit the dust. MarketWatch's John Letzing wrote tonight:

Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank became the latest victims of the ongoing financial crisis on Friday, when they folded and their deposits were transferred by the Federal Deposit Insurance Corp.

The closures are the 14th and 15th bank failures so far this year.

Letzing noted how much would need to be drawn-down from the FDIC insurance fund:

The FDIC said Main Street Bank’s failure will cost its insurance fund between $33 million and $39 million, while Meridian’s failure will cost the fund between $13 million and $14.5 million.

More to come'

Source:

'Two banks fold, bringing total to 15 failures this year'
John Letzing
MarketWatch, October 10, 2008

Surprise, surprise. Jim Cramer is in the headlines and under fire again— and it's not from the real estate industry. TodayShow.com contributor Michael Inbar wrote on Monday:

Bullish investors should turn into shrinking violets as the stock market continues its shocking downward spiral, CNBC's 'Mad Money' host Jim Cramer told Ann Curry on TODAY Monday.

In what Curry called a 'dramatic statement,' Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out.

'I thought about this all weekend,' Cramer told Curry. 'I do not want to say these things on TV.'

'Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now.'

Understandably, a number of people are upset over Cramer's comments. Especially those who depend on a vibrant stock market for a living. A financial adviser contributed the following on the stock market opinion and analysis website Seeking Alpha earlier today:

Financial advisors across the nation have been trying to clean up the mess that Jim Cramer made. We had clients crying because of the panic he created. Our phones have been ringing off the hook. His market call on the Today Show this week for investors to completely liquidate out of the stock market is the most irrational market commentary I have ever heard. At a time when a seasoned market veteran should be preaching the benefits of diversification and patience to overcome the tough times, this guy sounded more like a rookie — telling everyone to sell out after the S&P 500 had already dropped 30% for the year. Did he ever consider that adherence to such a strategy would collapse the entire investment system as we know it. This call might have been legitimate six months ago, but now'

His irresponsibility has no right being on television. He is doing a disservice to the very people he portends to help ' the novice investor. From his platform, he has the opportunity to instill confidence in a system that is better off now than it was a year ago. Just ask Warren Buffett. We now have the $700 billion package to prop up the mortgage security market — just like Cramer said we needed. We have interest rates down to 1.5% — just like Cramer said we needed. On top of that we have the Fed stepping in to buy billions in commercial paper. These structural changes provide a rebuilt foundation upon which our financials can actually reap the benefits of capitalism. Capitalism doesn’t work without a market. Now we have a market. And Cramer decides to bail! Over the ensuing months he must be held accountable for this one.

Hmm. Makes me wonder if the contributor was one of a number of 'advisers' who, according to Bloomberg on September 16, were telling their clients in mid-September that the downturn in the stock market was no reason to panic, and should instead be seen as great buying opportunity.

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Regardless, while I don't have much spare time (especially these days) to watch Cramer and 'Mad Money,' I appreciate the show for its entertainment value. Even more so now considering Cramer uttered the following on the July 29 airing of his show:

I am indeed sticking my neck out right here, right now, declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. And I think anyone out there who's waiting for that low to be breached is in for a big disappointment and [they're] missing a great deal of upside' My bottom call isn't gutsy. I think it's just a smart call that all the evidence points toward' Bye, bye bear market. Say hello to the bull and don't let the door hit you on the way out.

On July 15, the Dow Jones Industrial Average ended the day at 10,962.54. The S&P 500 finished up at 1,214.91.

Today, the Dow Jones Industrial Average finished the week at 8,451.19 and the S&P 500 ended up at 899.22.

Looks to me like the bear never left the building.

Sources:

'Jim Cramer: Time to get out of the stock market'
Michael Inbar
MSNBC, October 6, 2008

'Jim Cramer Should Be Suspended'
Jason Schwarz
SeekingAlpha.com, October 10, 2008

'Wall Street Woes May Offer Opportunity to Buy, Advisers Say'
Jeff Plungis
Bloomberg, September 16, 2008

'Yes, the Market Has Bottomed'
Tom Brennan
CNBC, July 30, 2008

The financial crisis is burning one big fat hole in Uncle Sam's wallet. From Bloomberg's Matthew Benjamin today:

The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.

Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger'

The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.

The Bloomberg reporter also brought up the issue of our national debt. Benjamin wrote:

Gross U.S. debt, which includes debt held by the public and by government agencies, this year reached about $9.6 trillion, or about 68 percent of gross domestic product. The rescue legislation increased the government’s debt limit to more than $11.3 trillion from $10.6 trillion.

Well, at least you can't fault Congress for not planning ahead. Further exacerbating the problem with our nation's finances, the Associated Press is reporting tonight:

Treasury Secretary Henry Paulson said Friday that the Bush administration will move ahead with a plan to buy stock in financial institutions.

Mr. Paulson said the program to purchase stock in financial institutions will be open to a broad array of institutions.

Ahead of the curve, Benjamin noted even before tonight's announcement:

Meanwhile, Treasury Secretary Henry Paulson indicated two days ago that he is considering buying stakes in a wide range of banks in coming weeks to help recapitalize them.

Such a move is allowed under the $700 billion bailout package Congress passed last week. Edmund Phelps, winner of the 2006 Nobel Prize for economics and a professor at Columbia University, said such action is necessary — and will likely turn out to increase the measure’s cost'

The additional borrowing could push the national debt well past 70 percent of GDP, the highest since the immediate aftermath of World War II, when the U.S. was still paying off war debt.

In an attempt to illustrate just how out of control the debt is becoming, the Wall Street Journal's Phil Izzo wrote in the 'Real Time Economics Blog' yesterday:

The national debt clock, the unofficial tracker of the federal deficit maintained by the Durst Organization in New York, has reached its limits. Last month, as the national debt exceeded $10 trillion for the first time, the clock ran out of digits to record the number.

The dollar sign in the clock had to be deleted and replaced with a one to record the massive number. The clock's owners say a new model ' with space for two extra digits ' will be in place early next year.

Now the debt clock will be able to reach the quadrillions. Hopefully, that's not a level that will be breached any time soon.

Wow. I didn't even know there was such a word as “quadrillions.”

I've given you a decision to make
Things to lose, things to take
Just as she's about ready to cut it up
She says
Wait a minute honey I'm gonna add it up

-Violent Femmes, 'Add It Up' (1982)

Sources:

'Cost of U.S. Crisis Action Grows, Along With Debt (Update1)'
Matthew Benjamin
Bloomberg, October 10, 2008

'U.S. Plans Bank Stakes'
Associated Press, October 10, 2008

'Sign of the Times: National Debt Clock Runs Out of Digits'
Phil Izzo
Wall Street Journal (Real Time Economics Blog), October 9, 2008

Ridicule is the tribute paid to the genius by the mediocrities.

-Oscar Wilde (Irish poet, novelist, dramatist, and critic. 1854-1900)

From Greg Barns of the Canberra Times (Australia) today:

Marc Faber, Bill Gross and Stephen Roach are household names in the world of investment, but little known to the general public. And all three predicted some years ago that we would end up where we are today.

Of course, we gave Faber, Gross and Roach air time, and their small band of followers are no doubt sitting pretty and ready to ride out these wild economic times, but the rest of us did what human beings always do when the sun is shining and we are relaxing. We refused, because we could not see it on the horizon, to believe that the storm clouds were gathering'

The forecasts by this trio of contrarians were not isolated. They continued to hammer the same theme over and over. But their voices were drowned out and their message was not what we wanted to hear. They were useful to the media as counterpoint voices swimmers against the prevailing tide and therefore good copy. But of necessity they were viewed as loners, or iconoclasts.

But now, with the cycle fully turned, their views have become orthodox. We are now realising that all along the crash was inevitable.

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Paul Heaton, 'Mermaids And Slaves' (2008)
YouTube Video Link

Source:

'Three wise men whose prophecies we ignored'
Greg Barns
Canberra Times (Australia), October 10, 2008

From our sister blog Investorazzi.com this morning:

'Jeremy Grantham On Financial Crisis And Where To Next'

'We got so good at denial. The Fed was in denial, the Treasury was in denial, the bosses of Merrill Lynch and Lehman were in denial. And yet this crisis was the most widely heralded 'surprise' in the history of finance - there were plenty of people warning that it was going to happen long before it did.'

As the economic boost from the first stimulus package wanes, Democrats are hoping to inject new life into the U.S. economy through a second stimulus package. The Washington Post's Lori Montgomery wrote earlier today:

House Speaker Nancy Pelosi said yesterday that she may call lawmakers back to Washington after the Nov. 4 elections to put together a new federal spending package worth as much as $150 billion in hopes of stimulating the nation’s flagging economy.

'We have some very harsh decisions to make and some of them can’t wait until January,' Pelosi (D-Calif.) told reporters at a health clinic in Denver. “We may have to go back into session before the next Congress.”

Montgomery pointed out that the new stimulus plan may include more tax rebates. She wrote:

Last month, the House approved $60 billion in new federal spending on infrastructure, food stamps, extended unemployment benefits and aid to state governments struggling to avoid cuts in Medicaid coverage. The new package could include a second round of tax rebates in addition to those provisions, according to a senior Democratic aide.

The House bill was blocked in the Senate, which could take it up when it returns to Washington on Nov. 17.

Stay tuned, folks'

Source:

'Pelosi Talks Stimulus'
Lori Montgomery
Washington Post, October 9, 2008

Narcissism: Self-admiration or self-love; a tendency to over-estimate one's abilities and importance

On October 3, award-winning Washington Post columnist Steven Pearlstein claimed that Wall Street's incompetence, rather than greed, was behind the U.S. financial crisis. Unfortunately for Main Street, a new study shows that such incompetence may be a common trait not only among Wall-Street types, but government policymakers as well. From the MSNBC website yesterday:

Narcissists like to be in charge, so it stands to reason that a new study shows individuals who are overconfident about their abilities are most likely to step in as leaders, be they politicians or power brokers.

However, their initiative doesn’t mean they are the best leaders. The study also found narcissists don’t outperform others in leadership roles.

Narcissists tend to be egotistical types who exaggerate their talents and abilities, and lack empathy for others. The researchers stress that narcissism is not the same as high self-esteem.

'A person with high self-esteem is confident and charming, but they also have a caring component and they want to develop intimacy with others,' said lead researcher Amy Brunell, a psychologist at Ohio State University at Newark. 'Narcissists have an inflated view of their talents and abilities and are all about themselves. They don't care as much about others.'

She added, 'It’s not surprising that narcissists become leaders. They like power, they are egotistical, and they are usually charming and extroverted. But the problem is, they don’t necessarily make better leaders.'

The results, which will be detailed in an upcoming issue of the journal Personality and Social Psychology Bulletin, come from three studies, two with students and the other with business managers.

According to MSNBC, narcissists are drawn to this country's political and financial power centers. From yesterday's peice:

“Many people have observed that it takes a narcissistic person to run for president of the United States,” Brunell said. “I would be surprised if any of the candidates who have run weren't higher than average in narcissism.”

Wall Street traders could also have a high dose of narcissism, she suggested. “There have been a lot of studies that have found narcissistic leaders tend to have volatile and risky decision-making performance and can be ineffective and potentially destructive leaders.”

Brunell does hedge though, saying that not all troubles in Washington and Wall Street can be blamed on narcissists, and of course, you can’t boil everything down to personalities.

Maybe so, but I have a feeling some Americans would like to see a number of 'personalities' boiled right about now'

Source:

'Narcissists more likely to be leaders'
MSNBC, October 8, 2008

' and in other news, a new milestone was reached by Boom2Bust.com last night when post number 666 was published.

22 days to Halloween, Halloween, Halloween. 22 days to Halloween, Silver Shamrock.

Don’t pay full price for your home. Visit RealtyTrac for homes at half price.

More bad news on the retirement front. From William M. Bulkeley of the Wall Street Journal yesterday:

One in five middle-aged workers stopped contributing to their retirement plans in the last year, and one in three has considered delaying retirement, according to a new survey by AARP, an advocacy group for older Americans'

The survey, which covered 1,628 employed people over 45 years old, found that 20% had stopped participating in their retirement accounts in the past year, and 34% contemplated putting off retirement. Twenty-seven percent said they were having trouble making rent or mortgage payments.

Bulkeley pointed out the significance of these findings. He wrote:

About 60% of U.S. workers in the private sector have 401(k) accounts, holding about $3 trillion in assets. Earlier surveys have shown workers don’t put enough into 401(k)s to support their retirements, even as such plans have become the main source of retirement support, surpassing traditional fixed-benefit pensions. Labor Department statistics also show more Americans over 55 years old are staying in the work force, a sign that many can’t afford to stop working.

There is a silver lining to all this. Regarding all those middle-aged workers who stopped contributing to their 401k's— at least their hard-earned money didn't get swallowed up in the recent carnage on Wall Street.

Source:

'One in Five Baby Boomers Cuts Retirement Saving'
William M. Bulkeley
Wall Street Journal, October 7, 2008

From the Associated Press yesterday:

The head of the FDIC is asking for an increase in premiums that will double the average paid by U.S. banks and thrifts next year to replenish the deposit insurance fund.

Federal Deposit Insurance Corp. Chairman Sheila Bair is making the proposal at a meeting of the agency’s board. It calls for higher-risk institutions to pay bigger insurance fees than others.

The proposed increase is based on a projected $40 billion loss to the insurance fund from bank failures through 2013. It would reduce the industry’s average pretax income by 5.6% next year, according to FDIC estimates.

Question: if higher-risk institutions have to pay larger fees than others, wouldn't that make them an even higher-risk' Just curious.

Source:

'FDIC chair asks banks to pay more'
Associated Press, October 7, 2008

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A couple of days ago I came across a piece by Washington Post columnist Steven Pearlstein in which he tried to determine if it was excessive greed on Wall Street that was behind the ongoing financial crisis. In case you aren't familiar with Pearlstein's work, this year he received the Pulitzer Prize for Commentary for 'his insightful columns that explore the nation's complex economic ills with masterful clarity' at the Post. Anyway, on Friday Pearlstein wrote the following.

The big problem with Wall Street isn't that it's greedy'it's that it keeps making the same mistakes over and over. Each cycle, the masters of finance start out with reasonably good products and good intentions, only to get swept away by their success. They become arrogant, take too many risks and begin to believe their own marketing spiels. Then, when the cycle turns against them and the risks turn sour, they try to cover it up and begin lying to their customers, to regulators and to each other. Trust erodes, and the whole thing collapses.

In the populist 'greed' fantasy, it is ordinary people who are the losers while the Wall Street bigwigs walk off with all the loot. But in the real life version, most of the bigwigs lose as well. They lose their jobs, their stock becomes worthless, their reputations are ruined. They spend the next several years shelling out $700 an hour to lawyers to defend themselves against lawsuits and regulatory inquiries and $250 to psychiatrists to help figure out where they went wrong. Bottom line: They wind up worse off than they would have been if they had simply done their jobs well, put their customers first and managed their companies for the long term.

To some, that may be a story of greed. To me, it looks more like old-fashioned incompetence.

Personally, I think it's a healthy dose of both. And I'll bet a good portion of Main Street could probably come up with a number of additional negative character traits that could be thrown into the mix…

Hubris'

Source:

'Greed Is Fine. It's Stupidity That Hurts.'
Steven Pearlstein
Washington Post, October 3, 2008

Along with Fed Chairman Ben Bernanke, U.S. Treasury Secretary Henry Paulson has quickly become a household name in recent days. As one of President Bush's top economic advisers, Paulson has helped spearhead the movement to rescue Wall Street and the financial system on behalf of Main Street and the U.S. economy. His efforts to date have resulted in the $700 billion bailout legislation that was signed into law by President Bush over the weekend. The bailout authorizes the Treasury Department to buy bad mortgages and other troubled securities associated with them from banks and other financial institutions. It is hoped that these purchases will allow credit to flow more freely throughout the financial system.

Earlier today, Dean Baker, an economist and co-director of the Washington, D.C.- based Center for Economic and Policy Research, questioned whether or not Secretary Paulson presented all the available options to the White House. He wrote in the Huffington Post:

According to the Washington Post, after the initial defeat of the bailout package in the House last Monday, Treasury Secretary Henry Paulson went to see President Bush in the White House. The Post reports that President Bush asked Paulson about 'Plan B.' According to the Washington Post, Paulson told Bush 'there is no Plan B.'

Of course this was not true. Paulson could have easily designed a bailout plan that was centered on the direct infusion of capital in the banking system, as was suggested by George Soros in a Financial Time column later in the week. Virtually every economist who has written on the bailout argued that a direct infusion of capital is a far more effective approach to dealing with the financial crisis than the approach outlined by Paulson.

Clearly Paulson had not invested a great deal of time in crafting the initial proposal he submitted to Congress since it was just three pages and few of the details of the plan had yet been decided. This means that Paulson easily could have switched gears and developed a plan along the lines advocated by economists.

Baker, who has been warning of an economic crisis for years now, added:

If the Post accurately described the meeting between Paulson and Bush (there is no source given for this account), then Secretary Paulson badly misled President Bush on the most important economic decision of his presidency.

Do you think it's possible Hank Paulson may have had an ulterior motive when he allegedly told President Bush there was no other option available'

'If there is anything that a public servant hates to do it's something for the public'

-Kin Hubbard (American humorist/writer. 1868-1930)

Source:

'Post Claims Paulson Misled Bush on Bailout'
Dean Baker
Huffington Post, October 6, 2008

I don't watch too much 'Saturday Night Live' anymore, as my nostalgic tendencies make me yearn for the comedic genius of the writers and 'Not Ready For Prime-Time Players' from the late seventies. However, I did manage to catch the following SNL skit from this past weekend, which pokes fun at those behind the financial crisis we now find ourselves in.

Too funny, but for how long'

Note: As of Monday night, the skit has disappeared from the NBC video page. Glitch' Or something more sinister, perhaps…

As of Tuesday morning, it looks like NBC did indeed pull the SNL Bailout skit from their website. From Ed Lasky over at the “American Thinker” blog this morning:

NBC has pulled the video of the Saturday Night Live skit satirizing the role of George Soros and the Sandlers in the collapse of Wachovia Bank off the internet and is deleting comments on its message boards asking about it. This skit reflected information first brought to light by me on AT’s pages.

Once again the media covers up information that proves harmful to Democrats. Were the party in question the GOP, there would be a major row right now over this suppression.

Update: a bootleg copy (apparently) lives on YouTube (for the moment) watch it while you can:

Oh well. Looks like the Nazi Broadcasting Corporation pulled the plug on the YouTube video a couple of minutes after I posted the Tuesday morning update.

Can’t start the morning without my daily fix of fascism you know…

As of Friday night, this is the explanation according to Brian Stelter of the New York Times on October 9:

NBC has taken the unusual step of editing the online version of a 'Saturday Night Live' skit. In a sketch about the government's financial bailout package that was broadcast Saturday night, two characters identified as Herbert and Marion Sandler were labeled with on-screen words that read, 'People who should be shot.' Those two characters represented real-life business managers who had sold their savings-and-loan company (and its mortgage-backed securities) to Wachovia.

NBC removed the skit from its Web site, nbc.com, on Tuesday; the video reappeared on Wednesday with the label removed. Explaining the change, NBC said in a statement, 'Upon review, we caught certain elements in the sketch that didn't meet our standards.

Which leads me to ask, so whose attorney(s) crafted the above language'

The obscure we see eventually. The completely obvious, it seems, takes longer.

-Edward R. Murrow (American journalist. 1908-1965)