Beginning on Friday night, I let my emotions sway with the US presidential debate, seeing a seasoned Senator smirk and condescend towards his younger, much newer, and more naturally warm opponent. I felt good at the end of Friday night, and the night ended very late after watching some of post-debate analyses. By the end of that I had not forgotten but put well aside another week of cataclysmic events in financial markets. Armageddon was still not here. US politicians indicated that with their willingness to work over the weekend do whatever it took to get a plan passed that, come Monday or soon into the coming week, a deal would be on the way.
Saturday began with difficulty, worn out from the week and the debates. My customary fish cutter and cappuccino breakfast was much later than usual, and I sat alone as my family snuggled under covers. Later in the day, my daughter had another birthday party to go to, this time at Drill Hall Beach, where she celebrated with her class mates in good Caribbean family picnic style. Everything was simple and nice. We had fried chicken, pizza, buljol, and golden apple juice. Children played on boogie-boards, and shared two boards between 20. Boys threw rocks and found brain coral. A heavy shower of rain came to drive everyone from the sea: Caribbean people are afraid of rain, even when they are already soaking wet. My wife taxed herself with some buff-up treatment for her feet.
My neighbour-landlord celebrated her birthday during the evening, kicking off at 9pm, and having a fete that was just really a great bash. She got a gift of party decorations for her house, that left her veranda festooned with balloons. She had food that was a feast of international dimensions: doubles, rotis, pork cutters, shark and bake, sushi, corn soup, and more.
We love our drink but we don't go crazy with the liquor, and there was plenty of coconut water for those who did not want wine or rum. But the best of it all was that the birthday girl looked fabulous as she showed off her new trim figure. I would love to include her picture but you're not going to see my "Auntie" on this blog. You just have to imagine. In the wee hours of the morning, my wife and I took our weary danced out pre-baby boomer bodies home, with an armful of left over food.On Sunday, no one could move very well. My daughter was pooped. Her papers had not been party poopers and were pooped too. God would have to excuse us all today. I had business to tend to as I got to put the last few weeks' financial turmoil into context for a wider audience, when I appeared on Voice of Barbados' "Brass Tacks" (see Nation report). I was surprised during the afternoon when I got some phone calls from people who had heard me live and then on the news, offering me congratulations. I guess I had not sent anyone into panic.
My working week started as usual on Sunday evening, when financial markets opened in Asia. I did not stay to look as I knew that some bad things were already in the works. Some of the issues I had flagged on the radio started to hit people between the eyes squarely as the British government announced an effective nationalisation of a bank, Bradford and Bingley (which is a major lender to landlords; see Times report). News was filtering out that Belgian-Dutch banking and insurance giant, Fortis, was partly nationalised by the Netherlands, Belgium and Luxembourg governments (see BBC report). Wall Street's problems are also evident world wide. So, no surprise that Asian and European stock markets took a pummelling.
But I did not care because I was having my own pummelling. My dear wife had sought to raise the romance quotient by arranging joint massages. No, not massages together, but having my joints massaged after she had hers twisted, folded, and slapped. My masseuse, whom I will call "Charming", seemed to attack me with a vengeance befitting someone who had seen her pension plan go up in smoke last week and thought that it was my fault. After whacking the daylights out of my back, arms and legs, to "warm me up", she told me to turn over. I give her a McCain-like smirk. But after a couple of hours of manipulation and kneading, I needed nothing more than water and my bed. The markets could handle themselves.
Then day broke in America and here. My easy weekend left me unconcerned about trading as I ate breakfast with my little daughter, and she told me how she had heard me on the radio. "Daddy. How did you get inside the radio?" She is my number one fan, and told me that she had also seen my picture in the Nation newspaper: "I know that's you, Daddy, because you are bald." (Actually, my head is shaven.) The warm feeling she gave me passed over me again during the day, as I got some back-slaps and outstretched hands from some parents I met in the school yard: "I heard your speech on the radio..." one said. Maybe they mistook me for Obama. I could get used to this "celebrity" status, though. But that's another great thing about living in a small island or community.
But what of America's problems? First up, Citigroup announced a buy out of Wachovia--once the fourth largest bank in the US (see Times report). Great start to the day. Then, all the focus was on Congress, as markets hoped that the US politicians--who were supposed to have gone on holiday and start campaigning--would give their support to a plan to deal with some of the problem assets on the books of financial institutions. All looked good at the start. Then tension rose as the noon time for the vote came and went, and then tension rose to ridiculous levels as the vote started around 1.30 in the afternoon. The bottom lime: the proposal was defeated. Market reactions? Run for the hills! Today was a tragically historic day in the US equity markets. The Dow Jones Industrial Average registered its largest single day point loss in history--down 778 points, over 7 percent (see Bloomberg report). The NASDAQ 100 index lost 10.5% of its value in today's session alone. The Volatility Index (VIX) registered the highest reading as far back as data have been recorded since 1990--reaching 48--that suggests the greatest ever level of fear for two decades. Gold prices soared above US$900/ounce again, but people fled from oil, which dropped by about $10 to $96/barrel, on fears that the world would really see much slower economic activity.
The numbers show that although more Republicans voted for (65) than seemed likely, their heavy vote against (133) is what killed the plan, which was not passed by 23 votes (by a vote of 228 to 205). Why did the legislators vote against? Ideology? I don't think so. My own suspicion at the time was that the fact that all face re-election in November meant that a vote against would better protect prospects with local voters. In fact, some analysis later showed that those Congress-persons who had or faced close contests in their districts voted against. Blame is flying around now like confetti.
Presidential candidate Senator McCain piled on his blame on his opponent, telling the press: "Senator Obama and his allies in Congress infused unnecessary partisanship into the process.'' Democrats are ridiculing Republicans who appeared to get upset that House Speaker, Nancy Pelosi, criticised the Bush Administration's economic policies in a speech she gave in the afternoon. Oh, Diddums! Bottom line is that Republican in Congress rejected the solution put forward by their administration. Divided they stand. Divided they fall? President Bush was "very disappointed" and will work with members of his Republican Party: his appearances now like the dog on His Master's Voice Records tend to make markets plunge but this time the damage was already done.Politics reared its head in a clear and ugly manner. Many US politicians had been stricken with the anger of their constituents over the past days as many people heard about a bailout of Wall Street financiers. The "fat cats" were going to get more fresh milk while ordinary citizens had to deal with Melamine-tainted Chinese powdered milk. What about bailing out home owners...or those with car loans...or student loans. No saving Wall Street; punish them. Main Street needed saving.
Well, tomorrow is the end of September and the end of the quarter and financial year for a lot of companies. The fall in the Dow wiped US$ 1.2 trillion from the value of shares. Congress declined to give its assent to a bill that may have a US$ 700 billion tag. When voters see their statements for money market funds, pension funds, share holdings, or almost every other asset, the large dip through to the end of September should be well understood by them. While I don't favour bailing out financial firms, and may see this as an awful outcome from too much loose monetary policy, the problem being faced is one that is frightening people and fear and logic don't mix. Credit has dried up and that means that the essence of the economy is missing. Wall Street allows Main Street to function--and taking that for all countries, we see that the current credit crisis is seizing up the world's economies. The 1987 stock market crash was a rapid plunge, while the current problem has been much slower in enfolding, but it's still seeing markets move to worryingly low level.
Today's fall out from Wall Street led to a pounding in Latin America, and Brazil's stock exchange had to close temporarily. Now the effects are just coming to Asia's new trading day. Australia's equity markets are already in turmoil and will see a delayed opening. The central banks in Japan and Australia have pumped large amounts of credit into their financial systems this evening, similar to the US$620 billion added by the US Federal Reserve. I don't know if any Republicans can see across to Asia from their west coast locations, but maybe they can tell us what they see as credit conditions are pailing into insignificance
We have a few days in which more attempts will be made to come to an agreement. The Jewish holiday, Rosh Hashanah, will be observed. When another vote can be taken, which should be Thursday, October 2, the temporary banning of short selling will be removed. OMG!
I really don't like Mondays.
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