Wednesday, August 4, 2010

Shopping list: hammer, nails, boards, shotgun shells

The big banks have missed internal targets for trading revenues in bonds, currencies and stocks. This has been happening in the majority of asset classes and across most exchanges and its only getting worse as disappointing corporate earnings reports come out. The problem is there just isn’t much volume being traded and the banks had gotten accustomed to taking a little slice of everything on big volume.

Corporate bond transactions are down 25% in the past month. The “flash crash” in May and the generally bad news about the world economy has driven many investors into Treasuries or they are just sitting on cash. US mutual stock funds have been hemorrhaging money for 12 straight weeks in amounts totaling $41 billion.

The big Wall Street banks are poised to slump badly. They’ve been living on trading profits, making billions to fuel their bonuses and covering even more billions in losses on loans. But July sucked at the trading desk and if August and September aren’t better it going to be “brother can you spare a dime or a trillion?”

The country is no mood for another bailout of Wall Street but just as in the fall of 2008, the turmoil the failure of the holders of 2/3 of all US banking assets would be problematic. Can you say martial law? Okay, the threats Bush made to get the bailout package at that time might be a little extreme but not for certain people. There are a lot of very wealthy people who could be sharing a hot air grate with victims of Bernie Madoff if it ever came time to do a real audit of these banks and they might be inclined to cause trouble to get their way.

In theory the Financial Reform law that was just passed allows for an orderly dismemberment of these zombie banks. Packed in barrels and shipped to a remote Army base for storage (wait, that’s the plot of scary B movie) In reality this whole mess is far scarier than any drive-in movie and could end civilization if it gets out of hand.

The ramifications of such an October surprise are troubling as well. The collapse of Wall Street, a total banking freeze and a stock market under a thousand should guarantee the defeat of every single remaining Republican since they brought us to this point. But, that would require an intelligent and well informed electorate and the townspeople have all had their brains eaten by FOX. Will the rest of get the windows of the farm house boarded up in time?


SanMigMike said...

"Well informed electorate". What the heck is that? I don't think we have had one since the Republican Southern Strategy worked for Nixon. The politicians learned that the electorate just wanted a few code words and sound bites to tell them who to vote for and the media joined in on that. Thinking is so last century and actually trying to learn about something and make up your own much easier to listen to Fox or Rush or so many other people to let you know what you need to know and how to think.

Go ahead disconnect your brain...doesn't that feel soo much better?!

I used to laugh about all the doom sayers and fear mongers but after years of Republican work they are right, the end is coming and they worked hard to bring it to us.