Cramer: We Have Armageddon

In a bizarre but mesmerizing performance, best-selling author and CNBC pundit Jim Cramer goes off the deep end on live TV and admits:

"We have Armageddon in the fixed-income markets. We have Armageddon. We have it!"

While Mr. Cramer's histrionics are clearly a distraction, his warnings about the precariousness of current circumstances should not be discounted.

Comments

[Jacksoo]

You just have to love Crammers implosion. These guys on Wall Street have made billions out of their snake oil for years - the markets take a turn and they scream for help from the Fed. As someone once said, perhaps to paraphrase a little "Its not what we don't know that gets us into trouble, its what we know for sure to be true that just ain't so!" Over the last week very many on Wall Street have known for sure this is a great time to buy - time will tell if Qtr 2 performance is a pointer to future earnings or merely an historical record..

[Ron]

The ownership for all of this ultimately falls on the US Federal Reserve. They talk transparency and practice opacity. They remain in denial about the linkage between monetary hyperexpansion and inflation. They encourage bubbles with their hubris that they can 'fix' them.

Bernanke only has to step back from his thesis and recognize behavioral finance work like Vernon Smith's to know what kind of trouble he and his predecessor have wrought. But can he?

[Gary Anderson]

Cramer was such an optimist, shaking off RE blogger warnings, and subprime woes. But something happened to shake him into a defensive posture. I think the debacle of the homebuilders helped, but probably he is one who knows the extent of the credit excesses on Wall Street. While everyone was pleading for calm, Cramer and Ron Insana were clearly emotionally agitated last week. I don't view this as an act, something very serious is going on.

[Bob Copeland]

I'm out of the markets. Own Gold. Have a fixed mtg on my office building, Both 6%. Own 4 business' all growing and making money. What else should I do? I'm a simple guy who feels I never know the new rules. I plan for higher taxes and after a short decline in interest rates, I expect them to go up and up.

[Gary Anderson]

The following seems ominous, especially in the West. Here is a quote from the article:

"A broker at mortgage brokerage firm ACE Mortgage Funding LLC estimated Friday that 90% of mortgages that don't conform to standards set by Fannie Mae have disappeared in the last three days."

http://www.marketwatch.com/news/story/risky-mortgages-were-very-popular/story.aspx?guid=B164A336-A000-48C5-A9D1-FEE96F0DFD35&dist=SecMostRead

[Pier Johnson]

Is this Jim Cramer or Kosmo Cramer?

[Michael Bailey]

Ron, Excellent observation. What's the "something big"? What's got Cramer hoppin' mad? Maybe this is a clue:(Sorry for the lengthy excerpts)

"Something Very Big is Going on in the City of London"

August 8, 2007 (LPAC) -- Late in the day of Aug. 8, a source working in the City of London reported to EIR(Executive Intelligence Review) that "There is an absolutely massive market event happening today. You'll not see any evidence of it if you just look at the FTSE or DOW index numbers, but its looking like someone is liquidating a huge market-neutral stock portfolio," referring to an investment portfolio which is designed to make money irrespective of general market downturns. The sales took place across the globe, starting in Japan, then in Europe and the U.S. The source said that others in the City believe that, in order to have the market impact that this sell off is having, the size of the portfolio would have to be in the 3-6 billion dollar range.

It is not known as of this writing who is liquidating, nor why - whether it is a desperate need for cash, an intervention intended to impact the market by a central government, or something else, the source said, it is an "unprecedented event." In the dynamic global process now underway, it cannot be seen as an isolated event.(www.larouchepac.com)

"Central Bankers Say, "Let It Blow!"

August 7, 2007 (LPAC)--"The central bankers have decided to let [the system] blow up," said Lyndon LaRouche this morning... "As of now, the word is, 'let it blow!' If nothing changes in the meanwhile, it will probably happen. It will be horrible."

Consistent with this forecast, the Federal Reserve announced from its meeting today, that it was making no change in monetary policy or "outlook."

Why? LaRouche says they looked at the figures, and saw there was no way this could be bailed out. It simply could not be done. For a week or more, they counted all their fingers and toes. It's not that they were negligent; they saw that given the scale of the problem and of their resources, it would be worse if they tried to bail it out, than if they did nothing. They said to themselves, "If we throw our inadequate resources at this, it'll be a disaster!" Better save their limited resources for urgent future use. They had to say, "Let it go!"

To the question, "but what's their plan?", LaRouche responded: "They have no plan. We have the plan!"

A City of London analyst told LPAC yesterday that, "there has been no Greenspan-like bailout response from the world's central banks to the Bear Sterns and other hedge fund/investment bank disasters, and there will not be any." As the City of London sees it, recent statements by European Central Bank head Trichet indicate that it is "about time" that this blowout of the vast credit bubble took place, and the central banks will not do anything to stop it. Alan Greenspan would have done so in the past, but Bernanke will not do it now.

The central bankers are saying: "Let it happen, and the wilder investors will just have to take their losses," the source said. There will be a lot of damage, and many casualties, but, as far as Bear Stearns and their ilk are concerned, so what if they lose 25% or much more of their assets? Everything was far too inflated anyway. However, there is a real risk that the whole thing could "go over the top," the source said. There are real systemic risks, especially where the private equity control of the real economy is concerned, pension funds being threatened, and so on. But the view of many is that the system HAS to "get rid of all this stuff" before anything can function sanely again.

Along just the same lines, the lead editorial of the City's The Economist this week is that it is "A good time for a squeeze". The editorial says that "Tighter credit conditions are just what the markets need," and that whatever bankers and investors may say, "the recent sell-off in financial markets is good news. It may, at last, have brought people to their senses." While the frenzied US housing market could not be saved, the Economist says that the takeover boom might be brought under control by the tight credit squeeze. But the "big question now is how serious those consequences are likely to be." The debt markets are being hit hard." While the Economist fantasizes that bigger investors can survive, it does warn that the "biggest risk to the global economy probably lies with debt-laden American consumers." And, if the squeeze sets off a broader market meltdown, there will be trouble. "The real worry comes from a well-known source--the banks. They will face trouble on several fronts, and it is they who could turn a healthy credit squeeze into a nasty crunch." But essentially, the Economist endorses such a credit crunch, as does today's Financial Times. www.larouchepac.com (See financial articles for the past week for a bigger picture)

[E Pluribus Pecunium]

Ben Bernanke took an axe
And gave the dollar forty whacks
When he saw what he had done
He gave Jim Cramer forty-one