Damn! Why has everyone lost their freakin mind lately? Basically every where we turn the economic indicators are going absolutely insane! Let’s recap some of the horrible things that have been going on lately, shall we? Yes. We shall…
Before we get started, I would just like to send out a big “I told you so” to all the haters who didn’t believe it when I called in the recession on March 10.
First of all, we have this major housing market problem. Everyone in the US has seen their home value drop by 10-20% because there was a huge boom in housing caused by allowing a lot of people to get a mortgage who should not have. I mean it. It’s absolutely simple. People who had bad credit, or not enough credit, were given loans with freaky terms and artificially low starting payments. The banks are 100% to blame for taking all of the risk, and they have been paying the price.
Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies — Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.
All of these events have culminated in what will probably come to be known as “Gray Monday”… namely, yesterday’s record drop of the Dow Jones Industrial average by a whopping, record 780 points. According to the Associated Press:
The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.
The selling was so intense that just 162 stocks rose on the NYSE — and 3,073 dropped.
Now, if you really want to start worrying, there is a lot more to fear than just the fact that you could end up penniless and homeless. How about the new threat of running out of gas and starving to death? Here is what Fortune had to say:
Gas shortages: get ready for more
The long lines and closed pumps seen across the South this week are a warning: inventories are way too low.
By Brian O’Keefe, senior editor
Last Updated: September 27, 2008: 10:05 AM ET
NEW YORK (Fortune) — While Congress and Bush administration officials have been working to complete a bailout plan and stem the financial contagion on Wall Street, a different kind of economic crisis emerged across the South this week: A severe, hurricane-related gasoline shortage has curtailed trucking from Atlanta to Asheville, N.C., and created a wave of panic buying among motorists.
What’s going on? The immediate answer is that the double whammy of Hurricanes Gustav and Ike, which swept through the Gulf of Mexico earlier this month, caused much of the Gulf’s oil drilling and refinery production to be shut down. In particular Ike, which hit refinery-rich Southeastern Texas on Sept. 13, caused massive power outages in the Galveston and Houston areas.
As of this week, more than a dozen refineries around Texas City and Port Arthur were not operating at full capacity and, according to the Department of Energy, six refineries, with a combined capacity of 1.6 million barrels a day, were still not running at all.
In its most recent Weekly Oil Data Review, Barclays Capital pointed out that the U.S. gasoline inventory has reached its lowest level since August 1967, when demand was a little more than half its current level of 9.3 million barrels a day. At 178.7 million barrels, inventories are 21.6 million barrels below their five-year average.
Getting back to a safer level of extra capacity isn’t simple, either. Once the refineries get back up and running, they’ll drain the already low crude oil inventories. Unless gasoline demand stays low, Simmons believes, we’ll have a hard time clawing back to stability.
That’s why he worries about a top-up catastrophe that could cripple the trucking industry and disrupt food deliveries.
As he told me the other day: “If we end up having gasoline shortages, the odds are about 90% that Americans will do what we always do: We’ll top up our tanks. And in topping up our tanks, within three or four days we’ll drain the pool dry and then within seven days we’ll run out of food.”
So, all day yesterday people were asking me, “what are we supposed to do now?” Well, I’ll tell you. Now we wait.