Points from economists

[Biggus Piggus]

Strategas says yesterday's market disaster wiped out $1.2 trillion in shareholder wealth, much more than the proposed long-term cost of the Paulson plan.  Consider that happened while one-sixth of the market is unshortable.

Some goofballs thought they were brilliant in pointing out yesterday was only the ninth largest one-day percentage decline of the US stock market.  Welcome to stupidity!  The largest was Black Monday in 1987.  Seven of the top 10 were in the Great Depression.  The other was in 1946 during the post-WWII recession.

So...yesterday was the second-worst downdraft in the past 62 years, worse than any one day after the Internet bubble burst, worse than any one day after 9/11.

The CBOE volatility index yesterday hit an extreme that surpassed the Long-Term Capital Management crisis in 1998, the resumption of trading after 9/11, and the march toward Gulf War II in 2002.  If you want to put significance of events into perspective, the market took yesterday's House vote worse than it took 9/11.  Put that in your pipe and smoke it.

You may have missed it, but five bank bailouts in Europe were announced on Monday.  Our disease is spreading to the global economy.

Multiple economists have cut GDP forecasts to negative for the second half of 2008 and Q1 2009.

According to Strategas, every single House Republican who faces a closely contested race in November voted against the bailout plan their own president begged them to vote for.

The Bush administration, in response, is poised to grant mainstream Democrats a no-veto promise on extended unemployment benefits, infrastructure spending, and expanded food stamps to get their votes on board.

That means rank-and-file Republicans and far left Democrats are forcing the president to give mainstream Democrats significant bennies right in front of the elections.

[Biggus Piggus]

As Strategas wrote:

"The effective Fed funds rate has not been close to the target rate since Sept. 18.  Commercial paper has continued to decline sharply, falling -$113 billion the past two weeks.  While this bill was presented as a 'Wall Street bailout,' the recent FDIC moves on WaMu and Wachovia suggest that the equity holders of financials (at the bottom of the capitalization scale) are still providing the cushion for the government (FDIC funds were not used).  This has changed from a Wall Street problem to a Main Street problem as borrowing has become impaired, and consumer net worth continued to decline."

Commercial paper outstanding peaked at $2.2 trillion in summer 2007, recently hit $1.7 trillion.  That's $500 billion with a B gone from corporate financing, just like that.

The Baltic dry index, of dry shipping rates, peaked above 11,700 earlier this year and has declined to 3,500.  If the index were properly tracking crude oil prices, it would be around 8,400.  Instead, it's following the S&P 500.  Inbound cargo at US ports is forecast to be down 6% for 2008 now.  I didn't just pull -5% GDP out of my ass.