Recently somebody said, “Hey, you lost weight,” and I said, “Yeah, thirty-five pounds and three and a half billion dollars.” So I’m quite a bit lighter and more flexible than I was.” – John Malone
Greetings from the metropolis of Cedar Crest, NM.
Friday evening, I was watching CNBC when the news broke out about the IndyMac Bank seizure. I was in shock. I just got to a peaceful place….well…not really peaceful…but a place of “acceptance” (for a lack of a better word) in regards to the unavoidable bailout of Freddie Mac and Fanny Mae. Now this?
Doing some quick research, this is the FIFTH FDIC failure of the year. Fifth!!! And guess what….we are not done. Based on what the experts are saying (…just pick one of your favorites), not only has the “fat lady” not started to sing yet….from my understanding….there are a lot of fat ladies and they all have a lot of singing to do.
Although this was expected (not specifically IndyMac but obviously Freddie and Fanny), the reality of it all is still surprising. I guess it is still surreal to me.
I have written a lot in my own blog about how to invest in a tumultuous economy….so I was very aware of the prognostications by many experts regarding the future of the economy. One particular opinion stood out….Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University’s Stern School of Business.
Back in February, I wrote a post that discussed Glenn Beck’s “DEFCONOMY” scale regarding the “worst-case scenario” forecast of the economy. This DEFCONOMY scale is based on Nouriel Roubini’ s “twelve steps to financial disaster.”
Based on Beck’s DEFCONOMY definitions….I think we have met the requirements of DEFCONOMY 3….and well into DEFCONOMY 2. According to Roubini, in DEFCONOMY 2, we will see “Most forms of credit become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.” Roubini also states that “…credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.”
Now…DEFCONOMY 1….according to Roubini is “A full economic meltdown.” In other words, “The Great Depression has arrived.”
I doubt DEFCONOMY will ever materialize. Too much has to happen…..but then again….what do I know?
There is my “feel-good” article for the week…..until next time……rob