He was a novelist before he was a radio personality so his daily posts, for many weeks now chronicling the financial debacle and how it's intersected with the U.S. presidential campaign, are gems of composition. They're packed with valuable information but also convey in an evocative way the utter eeriness of this era in American history, which began around September 15 with the Lehman Brothers bankruptcy, the largest in U.S. history.
I'm going to add my two cents to the lively debate in one of his comment sections about whether the financial debacle can be considered a Black Swan event. While it is true that some observers predicted the mortgage and credit market crises, nobody could foresee the U.S. Fed and Treasury response. That was the Black Swan event.
Everyone understands that scared money will flow toward safety. So the only way to avert a global disaster would be an immediate coordinated international response, as I noted many weeks ago and which I assumed would happen.
But the Fed and Treasury dragged their feet on the eerie argument that the differing sizes of economies made a coordinated response unfeasible. Honest to God, French and American and Irish electronic signals are all the same size. EFTs don't take up space on the world map, so money flooded to whatever country quickly threw together the safest banking practices, which exacerbated the banking crisis in other countries, and that set off a domino effect.
Nobody's that stupid, though, and least of all Bernanke and Paulson. So we have to ask the same kind of question I asked about Ukraine's government, in today's first post.
You just don't send a ship loaded with battle tanks and heavy weapons into pirate waters without sending an armed ship to escort it -- not unless you have something serious to hide about the shipment.
In the same manner, when intelligent financial experts talk gibberish in the face of a global markets meltdown, you have to ask what they're hiding.
Check out John's two October 21 entries: Laughing Gunslingers post and his Super Spike; the latter studies another eerie and interrelated situation, which was the huge jump in oil prices.
Visit John's website to pick up the links and photos accompanying these posts from October 23 and 24:
Another "The-Brokers-with-Hands-on-Their-Faces Blog" DayBy John Batchelor on October 24, 2008:
By John Batchelor on October 23, 2008
Boat Deck of the Titanic
Speaking Sunday 26 with all manner of front-line reporters around the globe who will document that we are in the same existential position as the first-, second- and third-class passengers of the Titanic staring at the steerage mob rushing up from below. Who gets in the too-few lifeboats? What happens in that very black ocean? From Indonesia, Patrick Barta, Wall Street Journal, will report on the South Sea Seaweed Bubble collapse -- no kidding, China used it for toothpaste before the commodities crash -- and from Southern California Michael Corkery, Wall Street Journal, will report on the collapse of the Rancho (Fill-in-the-Blank) Bubble. The strange news is that California house sales are up because of the last year's foreclosures coming on the market.
Then there is Kevin O'Rourke, TestTube.tv, who will detail the TV Studio/Hollywood Movie Bubble collapse, since the same banks that won't lend to each other certainly will not lend to a movie company unless its name is Harry Potter, and even that phenomenon was delayed; and recall last summer how Paramount had to scramble for cash for the new Star Trek?
Bankers in Lifeboats
Also Eric Umansky, ProPublica, will report on how Hank Paulson and his Orcs at Treasury decide which bank collapses and which gets cash to eat another bank, and which little piggy goes wee-wee-wee all the way to the FDIC. When you say, "Women and children first," to bankers, do they bother to put on dresses and wigs or do they just ignore you and take a seat in the lifeboat along with their $10 million exit package?
There will also be reports from my market watchers, Larry Kudlow, CNBC, Aaron Task, Yahoo Finance, Jim McTague, Barron's, in re the possibility, introduced by Charlie Gasparino last week, that Hank Paulson thinks he is Alexander Hamilton reinventing the national bank.
Jim McTague and the gallows humor crew at Barron's have been clear that after the penury of Citi was exposed last fall, and after Bear, Sterns was miniaturized last winter, there was no future, there was just numbing gloominess to be followed by cheerless doubt. Even romance will fade in the fog. If you have a job, it's a recession; if you don't have a job, it's the Great Depression Personalized.
My favorite new site to match the moment is the mordant "The Brokers with Hands on Their Faces Blog." No need to explain the genius of this diary as it records the Crash of '08 (all these pics are from Tuesday 22 October, Dow down 512). This gallery will stand for the century, or until the next Black Swan.
Do we touch our faces when we believe there is no room in the lifeboat, or rather when we believe there might be room in the lifeboat? It is strangely comforting. Like the cheap drugs you can no longer afford in quantity. Waiting for the photos of our major candidates to be caught touching their faces. Does the first candidate to touch his or her face signal the awareness of defeat, or does it signal that he or she has figured out how to get in the boat without wearing a dress? Wait. One of the candidates has a reserved a seat in the lifeboat. Smart. Because who wants to be the captain of this ship?
First Class Passengers Lethargic
Early word for Wed 23 (along with the sell-off in Asian markets, left) arrives with some astonishing numbers in the Wall Street Journal re the richest of the rich and their losses in this sinking ship. Warren Buffet is down $9.6 billion just in Berkshire Hathaway. Oracle's Larry Ellison is down $6.6 billion. Microsoft's Steve Ballmer is down $4.8 billion. Amazon's Jeff Bezos is down $4.2 billion. News Corp's Rupert Murdoch is down $3.9 billion. See them there huddled in Boat #10 portside. Sable collar coats turned up, top hats tied down, good cigarettes, plenty of lap blankets, picnic baskets of breads and cheeses, plenty of wine. Are they also touching their faces?
Election Smoke Signals
Early Indicators from the Warpath
Speaking Sunday 26 with Devin Nunes, 21st California (R) re the credit crisis in Tulare County and the San Joaquin Valley and how it is altering the way he campaigns. Young, passionate, farm-boy Devin was a double no vote on the uncooked Hank Paulson stew, and is one of 111 Republican House members who stood up against the their own devious, confused leadership to reject Paulson's folly on Monday 29 September and then again on Friday 3 October. At first Devin didn't know how he would be received in his country, and he was surprised, flattered and stumped that when he attended a parade his first weekend back after the vote, there was spontaneous applause from the voters. Now, three weeks later, the attitudes about the bailout package are hardening.
Back in Washington, my best congressional source tells me today that GOP House members who voted for the bill either both times or the second time are "running in a buzz saw" about the vote. It's a rally killer if you are a surging incumbent or a challenger and you have to defend the bill. That first week, September 29 to October 3, the emails and calls on Capitol Hill against the bill were from ten to one against to one hundred to one against.
No one has forgotten. It does matter to people that since the bailout vote, Hank Paulson has changed the plan at least twice, has claimed extraordinary powers, has turned the whole bill into a blank check that he can spend at will on his cronies, peers, rivals, pen pals, and their acolytes. And it does matter to voters that since the bailout the market is down nearly twenty percent, we are clearly plunging into a deep recession, the banks are no less opaque, no less obtuse, and that there is no evidence of abundant lending, of healthier bank balance sheets, or of any penalty paid by the big bankers for their profligacy and denial and plain old knuckleheadness. Where is the law? All that money vanished, all those properties were turned to trash, and no one cheated?
Those are the questions that House GOP members are reporting from back in their districts, and I will ask Devin (right, shoveling sand on Route 99) what he hears. More telling, there are smoke signals from the House that the double no vote may be transforming the race. The projections are for the GOP to take a beating in the 111th Congress, declining from the present 199 as far as 175 and perhaps as far as 165. Will the 111 double nos signify? And will the eight-eight who voted yes once or twice pay a penalty? There is a very early indicator that the double no is boosting the most vulnerable members in the most purple districts surround by deeply blue states.
No Warpath for McCain
On another trail, the smoke signals for John McCain are more likely burnt out villages and abandoned ranches as he drives by the disillusioned red states. I hear no love, no respect, no yearning from the professional Republicans toward Mr. McCain or his camp. The judgment is that Mr. McCain has botched his relations with his own party to the point that there is some glee at his desperation. The fact that the Obama Biden campaign have out raised and outspent him with astronomical sums is regarded as justice for the disgrace of the 2002 McCain Feingold bill on campaign finance reform. Not just the professional opinion-makers and the professional politicians but also a deal of smart folk who regard Mr. Obama as unqualified and ideologically sneaky also regard Mr. McCain's campaign as inept, empty, stupid, contrived and too often just absent.
The post op is a week away, but right now I can hear the yelling from behind doors. On November 5th it will start in open forums. The best outcome would be for those 111 House GOP members who fought the Paulson Folly to be returned with a boost, and for the young guns in the House to storm the offices of the minority leadership and show it the door. Or as my best Congressional source says, "Throw the bums out."
I don't care about the Senate of either party. Feckless, vain, rude, deaf, slow-footed, inflexible goats, and those are the young senators.