Conflucians Say: The Dark Side of the economic meltdown

Like there’s a good side, right?

From Market-Ticker: What’s Dead (Short Answer: All Of It)

Just so you have a short list of what’s at stake if Washington DC doesn’t change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can’t believe, and they’re showing it as an imminent event – like perhaps today imminent.)

  • All pension funds, private and public, are done. If you are receiving one, you won’t be. If you think you will in the future, you won’t be. PBGC will fail as well. Pension funds will be forced to start eating their “seed corn” within the next 12 months and once that begins there is no way to recover.
  • All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can’t earn anything off investments, and if you have a claim in process at the time it happens, it won’t get paid. The probability of you getting “boned” on any transaction with an insurance company is extremely high – I rate this risk in excess of 90%.
  • The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they’re doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.

And that’s just the first half of the list.

The President is thinking about ways to save money:

Why Would the Obama Administration Want to Make Vets Buy Private Insurance for Their Health Care?

I am not a health care wonk but some of my good friends are, so I’ll refrain from pretending I can construct a health care argument whereby this makes sense (or doesn’t, for that matter). Instead, as a moral matter, veterans deserve free, government-provided health care. As a political matter, why the Obama administration would want to squander its good will in the military community is completely beyond me. Murray calls the plan DOA, as she should. But why should it be considered seriously in the first place?

Has lying become the underlying theme?  More from Market Ticker:

“The Bezzle” Defined

Here are some examples of “The Bezzle”:

  • Liar loans: The borrower can’t possibly pay off the loan on the original agreed terms and the institution that makes the loan “passes it” to an investor fully aware that the borrower almost certainly lied about credit capacity.
  • Overly-rosy projections about growth in property values: The speaker is either incompetent (doesn’t understand exponents – a fundamental mathematical concept) or is intentionally deceiving people.
  • Overly-rosy projections about the stock market: “The market always comes back” and “over long periods of time it outperforms other investments.”  Both true, but both misleading; if you’re 18 you might be able to wait for it to come back, but the market has remained flat to down from a given level for more than 20 years before.  How long did you say it was before you intended to retire?
  • “The Internet is doubling every three months!”:  It was – for about six months.  But that got embedded into the business plans of thousands of businesses, long after the growth rate had started to slow down to something more sustainable.  Oh by the way, the fundamental lie of that claim is that in 7 years  the Internet would have gone from its original two people to covering more than the entire population of the planet, including the rice farmer in China and the starving child in Bangladesh.

In short The Bezzle is “the lie” that is always present in business.

The truth is always some degree of lying in business transactions – always has been, always will be.  And so long as The Bezzle doesn’t become the underlying theme in business, it simply bankrupts the people who try to run it when they get discovered.

But when The Bezzle becomes the underlying premise and basis for business transactions that entire segment of the market is doomed.

All this and more will be discussed tonight on Conflucians Say: The Dark Side of the economic meltdown

Conflucians Say tonight at 10PM EST

Conflucians Say tonight at 10PM EDT

Please join me (Katiebird), BostonBoomer, and Dakinikat at Conflucians Say:
Time: 10pm Eastern
Call-in Number: (347) 539-5420

Comments closed until after the show

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52 Responses

  1. Excellent show! Thanks!

  2. Dakinikat,

    I wanted to tell you about another scary blog post. It’s about the real unemployment rates.

    http://georgewashington2.blogspot.com/

    As I have previously pointed out, unemployment may actually be higher than during the same phase of the Great Depression. Specifically, as of 1930 – the year after the 1929 crash – the unemployment rate was 8.7 percent.

    As of December 2008, U-6 unemployment was 13.5 percent. (U-6 is actually more accurate, because it includes those who would like full-time work, but can only find part-time work, or have given up looking for work altogether). And PhD economists John Williams and Paul Craig Roberts – former Assistant Secretary of the Treasury and former editor of the Wall Street Journal – both say that if the unemployment rate was calculated as it was during the Great Depression, today’s figure would actually be 17.5% nationally.

    • really, the last rate I saw that was more in line with the traditional measurement was about 14.9% but that’s true. They changed the definitions of unemployment during the 1970s a lot.

  3. Y’know, there’s a point at which the government needs to worry about the masses being impoverished. The French Revolution comes to mind.

    • that’s why they were practicing for food rights down here last month with the army, I believe, although the had the trigger event be that a terrorist blows up something so the mississippi port closes and so food can’t come down on barges.

      • Food security is the main reason I am a local foodie. It costs more, but I want the food here.

  4. Finally, I managed to get to the PUR on time to hear almost the whole show. Thanks Dakinikat and other PUMAs.

  5. Dak- I had a question re: 401K’s that have stable funds- how do they maintain their interest rate return and can they still be wiped out, as they aren’t insured?

    • they’re locked into long term bonds so they maintain their stability and if they are in banks they are insured up to 250k

      • Thanks, but i’m referring to 401K’s related to employers- I have an old one from a hospital I worked in for years. I switched most of it to stable funds, so it has maintained its value- are you saying if the manager has bonds that are in banks or if the fund itself is in banks? Sorry if this is a stupid question.

        • the fund manager should be invested in a series of older bonds, like long term treasury bonds that hold high yields that guarantee that right. there are also some agency and state and local, municipal bonds that might guarantee that also. so it’s not held by a bank it’s held by an investment firm? because then it’s not insured

          • It’s held by a firm that administers a 401K for a church based hospital group.

          • To clarify- it is a 401K in which I can switc from mutual funds to bonds to a stable interest bearing fund that doesn’t change. I switched most to the latter, but am wondering what kind of guarantees there are for the entire account to exist.

          • you’ll have to check the fine print but it’s most likely invested in a fund held by an investment firm and it wouldn’t be insured.

            If the fund is based on a rather conservative investment profile, and it sounds like it is, it should be holding a bunch of mostly government issued bonds or high grade corporate bonds. Most of those are very long term so the return is very stable.

          • Thanks, dak! Sorry to pick your brain like that, I feel like I’m listening to EF Hutton.

          • nope, never worked for an investment firm … just the FED, banks, S&L and then all these investment seminars/classes to get the masters & phd in finance. definitely not a market/stock analyst

  6. Wow…Jon Stewart is reaming Cramer right now.

  7. OK, I know Rush L. is a total creep, but I still think it’s funny that he called Andrea Mitchell an Obama “butt boy.”

    http://mediamatters.org/countyfair/200903120015

    • To quote Jack Nicholson in “Chinatown:” When you’re right, you’re right, and you’re right. The fact that these people are tax cheats matters. Barney Frank may think it’s no biggie, but those of us who pay our taxes think it’s pretty frigging obnoxious to not pay taxes and then get a comfy government gig as a reward.

  8. A belated thank you for a great show! I keep trying to educate myself on finance and economics to the point where I can call in and ask an intelligent question, but I’m not quite there yet.

    And thank you especially, KB, for your great post and for turning me on to the market ticker. I started listening to TickerGuy for the first time tonight before your show. One of the silver linings to these dark times is discovering, as you all noted at the end of your show, that we can rely on each other and that there is true strength in this movement. I’ve learned so much from noncommercial media outlets like blogtalk radio, and you guys are the best of the best.

    • Well, I don’t know if the guy at Market Ticker is one of us — some of the things he says scare me to death (and I think he’s NOT a liberal) but, I’m willing to learn from anyone. And some of what he says (even if they DO scare me to death) have the ring of truth.

  9. Yeah, I didn’t mean to suggest that he/s a PUMA or anything like that, but he does have a perspective that I feel I can learn from. I’m probably going to listen to Monday’s show again because what he had to say about credit default swaps was fascinating and I didn’t quite catch it all the first time.

    • Oops! I didn’t nest, and I’m one of those rare fans of nesting.

    • I’ve never thought of listening to him. I think I should start putting pod-casts on my phone so I can get caught up. I’m way behind in my listening.

      And I totally agree about him having a useful perspective. Plus a fascinating writing style.

  10. Guys, vote on MSNBO poll, now Obots flooded the site and gave Bambi an A by 40% while F 39% (it was 59% this morning).

    http://www.msnbc.msn.com/id/29493093

  11. I’m re-posting this from previous thread in case anyone missed it & want to thank Pat J & taggles for signing. And then, I’m off to bed (yes, I’ve been up this late preparing a bankruptcy petition!). Good night all!

    URGENT

    Please sign this petition (it’s free) to ask the Senate to approve the bill to allow judicial modifications of mortgages. I will be doing a post on this to be posted shortly (by Monday) but I want to quickly say that judicial modifications (’cram downs”) are not what are being represented by the propaganda being spread by the media — only debtors in a chapter 13 bankruptcy (which is a repayment plan bankruptcy where you pay back a certain % of your unsecured debts, depending on your disposal income) are eligible for cram downs. People in chapter 7 bankruptcy (or ‘clean slate’ bankruptcies — where you do not pay any % of your unsecured debts — they are just wiped out) are NOT eligible for cram downs. When you cram down your mortgage the “crammed down’ amount becomes part of your unsecured debt — thus, if your mortgage is $200k and your house is worth only $150k, that $50k that is crammed down becomes part of your unsecured debt & you pay a % of that $50k through your chapter 13 plan. So it is not the ‘give away’ that people (NH — I’m looking at you) are trying to misrepresent. Further, chapter 11 plans (which are only for businesses) have always allowed crammed downs for secured debts — it is only the consumers who are not allowed cram downs. As I said, I will have more details in my post. Please sign & pass the petition around if you can.

    http://www.petitiononline.com/JMM2009/petition.html

  12. http://news.yahoo.com/s/ap/20090312/ap_on_go_co/obama_economy_17

    “A smidgen of good news and suddenly everything is doing great. A little bit of bad news and ooohh , we’re down on the dumps,” Obama said. “And I am obviously an object of this constantly varying assessment. I am the object in chief of this varying assessment.”

    The guy doesn’t have a clue and certainly can’t relate to the millions of people who have lost their jobs and their savings. He’s too busy creating his own image to care about anyone else.

    • I wonder who is saying things are doing great? Maybe they’re whispering that in his ear, but I haven’t seen or heard it anywhere. If he didn’t want to be the object of criticism, he shouldn’t have run for President.

  13. and all of this, ecession, job loss,impending disaster… because Obie wanted to be president.

    • ‘Twas all worth it–nobody will ever be able to take our commemorative plates away from us.

      • Or our commemorative fake gold-plated coins with Obama’s face on them. Yes, it was a historic moment, and if we now have to watch the entire economic and politcal system burn down, well….we had that historic moment.

    • Well, to be fair, it’s also because those guilty of the disaster wanted a figurehead to preside over their continuing looting.
      But it’s all good! Pollsters now boast he is more popular than Rush Limbaugh so his legacy is assured

  14. http://online.wsj.com/article/SB123690358175013837.html

    Obama’s Poll Numbers Are Falling to Earth

    “By DOUGLAS E. SCHOEN and SCOTT RASMUSSEN
    It is simply wrong for commentators to continue to focus on President Barack Obama’s high levels of popularity, and to conclude that these are indicative of high levels of public confidence in the work of his administration. Indeed, a detailed look at recent survey data shows that the opposite is most likely true. The American people are coming to express increasingly significant doubts about his initiatives, and most likely support a different agenda and different policies from those that the Obama administration has advanced.

    Polling data show that Mr. Obama’s approval rating is dropping and is below where George W. Bush was in an analogous period in 2001. Rasmussen Reports data shows that Mr. Obama’s net presidential approval rating — which is calculated by subtracting the number who strongly disapprove from the number who strongly approve — is just six, his lowest rating to date.”

  15. There has been a whole lot of talking and not a whole lot of doing anything different.

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