The Economy: Time to Panic? (Not yet, but wear diapers)

Sure, the stock market is down 14%. That's 14% down from an idiotic high it had no business being near in the first place. But all told, a 14% pullback is peanuts. But in the mindset of the typical lumpenvestor, this is inexcusable and grounds for a massive government mobilization. What kills me about all this is the implicit assumption that consequences are for other people.

When this subprime unwinding really started to impact the market, the financial sector screamed bloody murder and demanded a bailout, the archetypical representation of the entire sector's ethos is captured beautifully by the now legendary Jim Cramer meltdown on CNBC. At around 52 seconds into the clip he says something interesting,



that something is along the lines

"he [Bernanke] has no idea how bad it is out there...I have been on the phone with the heads of all these firms in the past 72 hours and he has no idea how bad it is out there, my people have been in this game for 25 years, and they are losing their jobs and these firms are going out of business"

It is indeed a meltdown to behold and, as Bart Simpson would quip: "The ironing is delicious".

When GM or IBM or some other non-financial giant lays off thousands of workers, guys like Jim Cramer will quip that it's the way of the world and the stock price of those companies will actually bounce a bit. Who gives a crap, those workers are nothing more than cells in a spreadsheet. But when a bunch of bankers, who have been selling each other shit and calling it shinola for years finally get caught out and it all crumbles, the prospect of the consequences coming home to roost is unthinkable. That bankers lose their jobs and firms go underwater because billions of dollars of bullshit derivatives that they dreamed up themselves can't be marked to market is a bona fide crime against humanity.

Citigroup and Merryl Lynch coughed up a 20 billion dollar furball between them this week, then Bear Stearns (who kicked all this subprime mess off last year by having a debt auction that nobody showed up for) added the comedic punchline by upgrading the financial sector. With the exception of Goldman Sachs (who gave subprime such a wide berth they are being investigated by regulators, no good deed goes unpunished), the entire investment services sector looks like a bunch of financially illiterate retards and we're supposed to seriously heed their upgrade recos on the financial sector? These are the same guys who called people like me (contrarians who shunned growth stocks and bought gold in 2002) a bunch of idiots that "just don't get the new economy".

Now the US president has mobilized into action, back from the middle east where he begged the Saudi king for lower oil prices he's crafting a 150 billion dollar stimulus package to ward off a recession that no talking head in Washington will even admit is happening. Everything is fine, but suddenly a 50 basis point cut on the 30th probably won't satisfy the street, it needs an unheard of 75 basis point cut now and if they get it, somewhere some twit will in the same breath re-iterate America's commitment to a "strong dollar policy". We live in truly Orwellian times folks.

I started off last year predicting predictions for a "second half recovery" in 2008 and I haven't heard that magic phrase...yet. The R-word (recession) has only begun to be usable in polite company the last couple weeks and suddenly it's everywhere, but it's still being used in a benign, unalarming context. "Recession? Yeah, I guess there's a remote possibility that we could have a mild recession" but if you read between the lines, alarm bells are ringing, central bankers and politicians are scrambling and the people who see behind the scenes are crapping their pants. Who knew?