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To: AllansAlias who wrote (46506)	7/19/2002 9:13:39 PM
From: NOW	Read Replies (1) \| Respond to of 209892

you gotta learn to listen to yourself more often....g/ng The other refrain i am hearing besides its too late to sell is: "what else can i do with my money?"

To: AllansAlias who wrote (46506)	7/19/2002 9:23:46 PM
From: patron_anejo_por_favor	Respond to of 209892

FWIW, Doug Noland agrees with you that THIS is the phase where the credit bubble implodes. The Credit Bubble Bulletin is always a must-read on the week after banksters report earnings. Tonight's is destined to be one of the most prescient, IMO. Here's a taste: prudentbear.com It is difficult to know what to write tonight. Everything I look at – the things that I believe are the key determinates for the soundness of the financial system – signal to me that we are basically witnessing an unfolding implosion of the U.S. Credit system. This sounds extreme, but I am convinced of the acute fragility of underlying debt structures – I am convinced the crisis that has been held at bay for so long has now commenced. I am very fearful of systemic financial dislocation and a plunging dollar. It is time to have one’s house in order. The run on U.S. financial assets has commenced, although so far financial stress has buttressed the key Treasury, agency and mortgage-back markets. We continue to look at this as an unfolding dislocation in the “risk” market, with distress at the fringe having now clearly made it to the core of “structured finance.” This is an enormous problem. A WorldCom bankruptcy would be a problematic development for the impaired CDO (collateralized debt obligations) and Credit default swaps markets. Yet, the implosion of the stocks of some major borrowers such as AOL Time Warner leads us to fear we haven’t seen the last of major bankruptcies. At the same time, recent developments at the fringes of the consumer Credit Bubble signal that consumer lending problems must now also be factored into the equation. It appears the worst-case scenario is unfolding right before our eyes. In the past, we have often used flood insurance as an analogy for the derivatives market. Inexpensive and readily available flood insurance led to a building boom along the river. A long drought made writing flood policies extremely profitable, and speculators rushed into the marketplace. The building boom along the river paralleled the Bubble in writing flood insurance. There were a few instances when rain started to come down pretty hard, and the speculators watched nervously as the local authorities constructed makeshift levees that held the floodwaters at bay. But as soon as the weather cleared the emboldened speculators became only more aggressive, and more luxurious structures were built, only closer to the waterway. The authorities were determined to do whatever necessary to sustain the building boom, and liked to trumpet how good it had become in building levees. They were ready to move into action with the first raindrops, and were adored by the insurance companies, speculators and homeowners. Well, today torrential rain is falling, the dikes are giving way, and everyone is getting very nervous – homeowners and those that have been peddling insurance. The authorities maintain a brave face. The speculators always planned on going to the reinsurance market when the heavy rains began to fall, but that market now has a deluge of buyers and no willing writers of flood protection. The flood insurance market is “dislocated,” with players basically stuck with the exposure they have written. Various parties are all the sudden very interested in the financial wherewithal of the cadre of marketplace participants (counterparties). The “conservative” bankers that lent against the homes on the river are in a panic and won’t be financing anymore riverfront building. Confidence in the marketplace is waning rapidly, which only exacerbates the rush to dump exposure to a potential flood. With the flood insurance market in taters, the building boom is doomed. The closer the scrutiny, the more apparent that, in the event of a flood, there is going to be a very serious problem – economic and financial. The bottom line is that incredible amounts of inadvisable building (“risk creation”) have occurred over the past few years, and there is nothing that can be done to reduce risk at this point. Unfortunately, the insurance “industry” has little in the way of the necessary financial resources in the event of a flood, and there is little that can be done about this either. It’s a severe structural problem – both for the financial system and the real economy. At the same time, the local authorities have continued to throw additional sandbags on top of fragile levees, with no one wanting to ponder the dire consequences if this frail structure gives way. They say everything is fine, as it always has been. The nervous homeowners are somewhat comforted, but those in the insurance market know otherwise. They are left to pray that it stops raining.

To: AllansAlias who wrote (46506)	7/20/2002 10:14:04 AM
From: reaper	Read Replies (2) \| Respond to of 209892

AA -- now let's be careful out there.... You and I (and most of the other members of this and its sister thread) know what the real problem is. The press is all focussed on capital spending on tech or the mis-deeds of corporate executives, but the real, underlying issue here is the credit bubble. all the rest of it is just small sideshow manifestations. And I have a very great fear that the credit bubble is coming un-wound, and quickly. If you read Minsky or even some recent op-ed pieces by George Soros he/they describe how a leveraged economy, especially one that comes to rely on what Minsky calls "ponzi finance" (where finance units are not repaid out of cash flow of the asset they finance but instead out of the creation of new finance units), is an inherently UNSTABLE system. a stable system tends toward an equilibrium point; i.e. vascilating within Myth's "range". unstable systems, on the other hand, are characterized by multiple equilibria, i.e. huge overshoots to the upside and massive overshoot to the downside. in a stable system movements in one 'direction' feed back through the system and cause a tendency to move back in the other direction. in an unstable system movements in one 'direction' feed back through the system and actually accelerate the move. while you say we are at the point of "recognition", i am quite fearful that the point we are at is the point of acceleration. Bobcor posted earlier about MBIA (which i have been short for going on 2 years); Patron responded about how he is (i) short; and (ii) expecting it to go to zero (a sentiment i agree with). but we should all just think for a second about what it would REALLY mean if MBIA (and its evil twin ABK) really did go to zero. money market funds, which people have come to believe are CASH and probably think in the back of their minds are insured by the US gov't via the FDIC, will 'break the buck', and they won't break it by a penny or two; it will be measured in dimes and quarters. municipal finance as we know it will be hamstrung (since most municipal bonds are insured by MBIA or ABK), which will dis-able an important "automatic stabilizer" to hard times. heck, credit probably won't even be available to you and me. anyway, this is why i am thinking there may not be a "bounce". if i remember right, from October 1998 to March 2000 we went basically STRAIGHT up, with nary a play-able decline; this was the manifestation of the unstable economy/credit bubble to the upside. i am deathly afraid we are on the verge of witnessing the brother move. re: my earlier post. i did not mean to say that i wouldn't be posting; its too much fun and you guys are all too smart for me to not hang around. what i meant to say is i am considering closing out my stock positions. it has been kinda fun to make money off of scumbag bullshit companies like Metris, Providian, Enron and Mutual Risk, but frankly i'm getting less and less comfortable profiting from the misery of others. i don't really WANT MBIA to go to zero (as you said in an earlier post, "be careful what you wish for") as the chaos that would ensue is nearly un-speakable. so i'm thinking of just getting out, and biding my time until a true, durable bottom shows itself (likely in 6-10 years). also, feeling better after Pedro beat the Yanks last night (though we still have two to go). all bets are off, though, if Armstrong and Heras go up the Ventoux 1/2 tomorrow. Cheers