Things are looking up in Zimbabwe. The Zimbabwe Stock Exchange has reopened, and $30 in stocks was traded the first day. Inflation has been running at 79,600,000,000%, so this is a major step forward.
The story has no update in it about how the cholera epidemic is going, other than a lot of people are getting drunk.
Good luck Zimbabwe!
Svedish car maker Saab (owned by GM) has sought protection from creditors. GM had previously intended to sell Saab, but apparently has decided to jettison it.
Each day, expect some comment here about the state of the world markets. In a prior life, I did computer work for several of the venues where stocks and futures are traded. I’m not a trader. Think of me as the guy at the casino quietly walking around emptying the trash cans, but marveling at the power of the human emotion of greed.
Asia is finishing up down around 2.5% Europe’s futures indicate they will open down about 3% (London is 5 hours ahead of New York). US futures are also into -2 to -3% range. It’s not going to be a pleasant day.
The FDIC normally seizes and shuts down banks on Fridays in order to switch ownership of the accounts over the weekend. Bank stocks were hammered very hard yesterday. Might another of the “Too big to fail” banks fall over today?
*** Noon Update ***
Here is who is facing the fire hose of selling today:
Wells Fargo, GE, Goldman Sachs, JP Morgan/Chase, Bank of America, Citigroup
The Federal Reserve has pushed interest rates as close to zero as is possible. While on the surface, you might think “Wow, free money!”, this policy has many unintended consequences.
One that is likely to hit you personally in the near future involves Money Market funds. These are the funds sold by mutual fund families, that are typically used to “park” investment money while people are deciding what to do.
With short term treasury bills offering essentially no interest (the rates have gone negative a few days), money market funds have a serious problem. If they invest their money in short term “safe” investments (like lending it to Lehman Brothers), they risk finding out their $1/share product is not worth $1 (“breaking the buck”), and they have very little cushion to “absorb” unexpected losses.
If they invest 100% in short term US Treasury bills, they have no risk – but also no income. The meager income would be less than what they have to charge to manage the fund, and people are unlikely to park money in a fund where they are guaranteed to lose money.
If they invest their funds in slightly longer treasury securities to get better yields, they risk being unable to deal with a surge of withdrawals without realizing losses by dumping the T-Bills/notes before maturity.
Look for money market funds to begin to shut down or stop accepting new money if this interest rate environment continues for much longer. This isn’t because they are “insolvent”, it is because there is no way to make money doing this. Unless you’re the government, you can’t afford to throw away money doing things for no purpose.
Most of the “polls” on this web site have outcomes that are not very surprising, but the one about what people believe about President Obama’s birth certificate surprised me. While this site is mostly people of the Conservative persuasion (just look at the program popularity stats), my impression was this issue was pretty much over.
A very large percentage of people voting in the poll believe Barack Obama was born in Kenya and something needs to be done about that.
One thing I would like to point out – having spent a summer of my youth shuffling forms as a summer intern at a Social Security office. Many people are misunderstanding what that green “birth certificate” presented by the Obama campaign is. Most people now understand it is not his actual birth certificate, but rather a document issued by the State of Hawaii saying that his birth was registered there.
What is setting some people off in the wrong direction is they don’t realize this was a document printed recently. It isn’t one he has been carrying around in his wallet for 40 years. How do I know that? Government forms always have a date down at the bottom that is the “revision” date of when the blank form was designed. The office person who keeps track of forms looks at that date to decide which are obsolete forms that need to be destroyed.
In the lower left corner, it says OHSM 1.1 (Rev 11/01) LASER
This indicates this form was created by the Office of Health Status Monitoring version 1.1, that has been in use since November 2001. So the ideas of “they didn’t have laser printers in 1961”, etc… are misguided. This is very different than the Rathergate document which purported to be an actual document created in the 1960s on a typewriter.
One of the unpublished “suggsted answers” to the poll was “Yeah, but what about McCain?”
There are some important differences between Obama and McCain:
I’m personally more troubled that his elementary school education occured in Indonesia, and his view of the United States and knowledge of U.S. history was learned in a country that has historically not looked favorably on the United States. His mistakes about US history and basic civics (that Presidents don’t make laws, and can’t delete items from appropriations bills) are things that could hurt the country over the next 4 years.
Contrary to what many people seem to think, and especially promoted by the companies trying to scare people into buying gold – the US dollar has been getting stronger, not “falling”.
Back before this global panic started, it took about $1.28 to buy one Euro (the most important benchmark currency). When the panic started breaking out, the US dollar got up to about $1.45 to buy one Euro, but it didn’t stay there very long. As of today, the dollar is back to $1.25 for a Euro. While the dollar may decline in the future, for now the world continues to believe that the US is the safest place to weather this storm.
It’s been coming for 6 months, so few people are going to be surprised. That doesn’t mean it won’t be unpleasant.
June 1st is Bankruptcy Day for Generous Motors. Germany and Canada are making last minute adjustments to spin off Opal. Hummer is probably going to China. Saturn is probably kaput. The “good” GM is going to start making cars that nobody will buy (unless forced to by the Obama administration, which is entirely probable).
All of the companies in the auto supply business (unless they do big business with Ford) are going to be selling off their parts for spare parts and going under.
The UAW won one “concession” that one plant that will make 160,000 tiny cars a year will stay in the U.S. and not move to China.
Companies that are owed money by G.M. will now be compelled to write off their accounts receivable. Depending on just how thoroughly Mr Geithner has “backstopped” American Business, that might cause other companies (like radio companies) to topple.
While interest rates eased on Friday, the U.S. dollar lost significant value. You can fend off one or the other, but not both.
“Bye, bye, Miss American Pie… drove my Chevy to the levee and the levee was dry… singing this will be the day G.M. died….”