This is exactly what I've been talking about.
First, from Reuters this morning on European indices:
""We're near the cliff's edge, very close to capitulation, the mood is very gloomy," said Jean-Claude Petit, head of equities at Barclays Wealth Managers France.
"I not sure that governments and central banks are realising what's really going on," he said.
What's "really going on" is that our entire financial system has turned into a gigantic clown car. There hasn't been any recognition that the fundamental problem over the last two decades has been fraudulent lending - giving money to people on loan that the lender knows full well has no real chance of being able to pay it back.
Now, having had that happen, we have not had the Governments of the world step up to the plate, admit what occurred, pledge to prosecute those responsible (on both sides of the table - borrower and lender) where fraud occurred and drain the swamp.
On "main street" this was sent to me by email. This is a "Joe Sixpack"; an average American - who has had enough.
This is how America views our markets:
"I have absolutely NO CONFIDENCE in the stock market or ANY MARKET. I was a fool to have invested what I did over the past ten years from working hard in the computer business. I am part of the new generation that will be VERY averse to risk. Hell, I think my 401k money-market fund sounds pretty *******n RISKY right now!
If you want to borrow my hard-earned savings you are damn well going to pay a premium for it. Otherwise it will be stockpiled in mason jars in my back yard. My retirement and investment strategy going forward will be based on SAVINGS and a VERY FEW CONSERVATIVE investments. This is a God d@#@ fraud. I've been fooled once.
God d$#% it. My Grandpa was right.
That's not the only email like this I've received, and it is one of the cleaner ones in terms of language.
Policy-makers better listen up and do so soon. This, along with Rick Santelli (and by the way, CNBC ran a poll on the "TeaParty", and over eighty thousand people said they would show up!) is tapping into what America feels about all this nonsense.
Let's face the facts - 92% of Americans are either paying their mortgage or don't have one. We didn't use our homes as ATM machines. We didn't lie about our incomes. We played by the rules and do not have bone-crushing debt loads.
The rest of America is a different story.
Another fact: For every American that has a house they can't afford there is another American that wants to own a house, but can't because prices are still too high. For those of us who look at our homes as shelter, not a speculative investment, we don't care what the price is on our abode - we want a place to live, not something to use as a means of "levering up" as some grand ATM that we can tap to pay off our credit cards (which we then charge up once more!) My residence more than tripled in price from 2000 to 2007, and now it has lost most of that appreciation - being worth somewhat more than it was when I bought it. So what? My home is not a speculative investment - if it was, I would have sold it when the Realtors came knocking on my door in 2005.
The FX dislocations that we've seen over the last few days have perplexed me and in addition been cause for great alarm. This is not without foundation. After much study I think I've figured out what's going on - we are witnessing the capital flight that I feared might happen in some of my Tickers from last year.
These moves are hedge funds and others that are leaving The United States with their money. It is flowing out of the United States.
Nor is this limited to hedge funds - it has become essentially impossible to sell Fannie and Freddie paper overseas now too:
"Feb. 20 (Bloomberg) -- Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and rebuild the nation’s largest mortgage-finance companies.
The problem is that we can't guarantee these securities. If we attempt it we will literally double the outstanding debt of the United States overnight. This will in turn destroy the bond market, spiking yields higher, which in turn will crush what's left of the credit markets (including and especially housing.)
Policy-makers must understand: This is a confidence problem and they are responsible for it. The people pulling the levers of power, including Bernanke, the OTS, OCC, President Obama and Geithner (and their predecessors, have intentionally and systematically obscured the facts and looked the other way while various people within Wall Street repeatedly misrepresented the quality of the securities they were peddling and, in many cases, the health of their firms. Do I really need to go back and cite "The economy is fundamentally sound" or "I'm going to burn the shorts" again? None of these people have been held to account for their falsehoods by our government and as a consequence the market is doing the job that government refuses to do, with the result being a market collapse.
We as Americans and in fact investors all over the world have suffered trillions of dollars in harm, a consequence that accrued to us as a direct and proximate consequence of the intentional and willful acts of these government officials and "captains of Wall Street."
Now the people with the money are quite literally leaving. They're finished with the liars and games and are taking their ball and going home, voting with their wallets. The damage being done to our capital markets is reaching critical levels and threatens to stoke a positive feedback loop that is nearly impossible to stop.
Should our policymakers not step up and put a stop to the lies and fraud in the immediate future the other actions they are taking will mean exactly nothing. A "mini-crash" of another 20-30% down in the S&P 500 (which would take us into the 600s) will destroy another 2-3 million American jobs and bankrupt hundreds of midsize and large companies, along with tens of thousands of small firms. An all-on market panic, which is looking increasingly likely and may initiate as soon as today, will result in the bankruptcy of 30% or more of the S&P 500 and an unemployment rate that will exceed 15% within the next twelve months on "official statistics", and U-6 numbers above 25% - rivaling The Great Depression.
There is no more time for game-playing. Our policy-makers were not elected to protect the malefactors and fraudsters; they were elected to protect the people.
Confidence has been lost across the board. If our government does not act decisively and quickly to restore confidence, forcing the fraud into the open and prosecuting those involved, along with setting forth a concrete path of action specifically addressing the issue of "nationalization" (in any of its various forms of dress) for financial institutions capital flight will accelerate, our financial institutions stock prices will continue on their trip to zero and our markets will crash.
My personal confidence is shaken and on the verge of being destroyed, at which point I may as well take my wealth and depart the system entirely with it, buying a piece of arable land, some chickens and goats, a passel of firearms with many cases of ammo and, just in case, some horses so I can still get around if we suffer a catastrophic economic collapse.
Yes folks, I do think it could get that bad, and it could happen very quickly if our government does not step up - now - to address the above.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Leads on stories of current economic and political interest are always welcome. Our fax tip line is 850-897-9364; please include contact information with your transmission.