As luck would have it, I caught this brief interview with Rep Sherman yesterday afternoon, and was THUNDERSTRUCK.

Karl's video is an excellent recap.


http://market-ticker.denninger.net/

I have two recommendations that I'd like you to consider:

1. Keep your the fuel in your vehicle near the full mark; and,
2. Have on-hand sufficient cash for a week's expenditures. (More is better.)

Given what has come to light in the last 12 hours and the possibilities of what may come out of DC, I foresee a possible 'dislocation event' that could be highly disruptive. A bit of preparation could be very helpful.

What do you mean 'dislocation event'?

Can you shed more light on what happened in the last 12 hours? I'll be stopping by the ATM and the gas station on the way to work....

+1

+2

I Googled it and tried wikipedia - no real luck.

Please. If you really think that we are that far gone, just shut down your computer and get the heck out of Dodge while you still can.

I will not be associated with the spreading of panic. Do what you want, but leave this web site out of it.

Interesting. Three responses requesting further definition and one response full of assumptions and bile. I'll answer the first three with an apology for not having been more clear. (I do still work for a living, and my morning posts are constrained by the research time I deem appropriate to the developing circumstances.)

dislocation event - an event that results in a displacement or discontinuity; disruption; break, interruption - some abrupt occurrence that interrupts an ongoing activity; "that detour is an annoying disruption"; "there was a break in the availability of fuel, causing gas lines."

Although the term does NOT connote impending disaster as it appears has been assumed by some, a 'dislocation event' can provide circumstances from a minor annoyance to a major disaster, depending on the nature of the event and the nature of your need.

If gas is unavailable at your local station for a few hours, you have experienced a 'dislocation event' if it is your habit to wait until you're empty to fill up and you need to drive further.

The severity of that event would be impacted by the length of the disruption and the nature of your need for your accustomed service. If you have to get to a hospital RIGHT NOW, your tank is empty, and the 'dislocation event' is merely hours long, you've got a big problem, personally.

If you have your ATM card swallowed by a troubled ATM machine, need cash and have none, you have experienced a 'dislocation event'. Not a big deal unless you NEED to make that payment to Guido RIGHT NOW, and it's gonna take until after the weekend to get a replacement card.

You get the gist.

The general tenor of things don't merit panic or anything like it. Re-read the post. Consider making (very) modest preparations for 'dislocation events' that very well might affect you. The advice is gratis, and worth what it cost you.

I'll remind the meager readership of these pages that over the past four months the landscape of banking and credit has been reshaped the world over---in ways so large that they would have been (and indeed WERE) laughed at had they been forecast (as, of course, they were).

Of the five major American investment banks, the august and revered names of Goldman Sachs, Morgan Stanley, JP Morgan, Lehman Brothers, and Bear Sterns have disappeared from that fraternity. Some failed, some nationalized, some purchased by depository banks, and the others petitioning to become depository banks; the entire category that was described by our leadership as "fundamentally sound" five months ago, exists no longer. And, incidentally, the fraternity that perfected the marketing of highly leveraged derivative investments that seem now not so enticing as they once were. Enticing enough to sell to YOU, however, at the point of a gun.

The night after the lower house of congress rejected Paulson's coronation, Bernanke engineered $630 Billion in currency swaps to prevent a dollar crash. (Remember that they've pretended that $700 Billion will fix this.)

In a separate development, a very poorly covered incidence of fuel scarcity across the southeast is popping up sporadically.

Less than two weeks ago, prior to the two biggest bank failures in US History (WaMu and Wachovia), six confirmed reports of well-capitalized firms flush with capital having direct deposit payroll FAIL brought to light the fragility of the systems we rely on without thought.

Re-read the original post. If memory serves, it was a gentle suggestion to bring your level of preparedness up slightly in two areas key for most people managing busy lives. Let me rephrase it in terms I find more appropriate to the current conditions: "If you're walking around without sufficient access to cash for your immediate needs, or driving with the assumption that gas will ALWAYS be available at some price whenever you need it, you've got rocks in your head."

But you're welcome to that point of view if it serves you.

A little more flesh on the bone; from FT Alphaville:

Credit tappin’

The crisis in money markets has been a running theme here on FT Alphaville recently, particularly its potential impact on your average, run-of-the-mill corporate. Soon we may have more of a clue just what some of the effects might be.
Ford Motor has $1.5bn in debt coming due today; whether it uses cash to pay that down or part of its $11.5bn revolving credit line will be an interesting datapoint for money markets as well as a gauge of corporate confidence in the banks.

The credit line, part of a larger restructuring plan negotiated in 2006 (along with $23.4bn of borrowings), is complicated by the collapse of Lehman Brothers. Bloomberg reports:

Ford said Sept. 16 that it was assessing the effect of Lehman Brothers’ bankruptcy on $1.13 billion in lending agreements with the automaker. Two Lehman subsidiaries made credit commitments starting in late 2006, Ford said in the U.S. regulatory earlier this month. Those units weren’t included when Lehman sought court protection Sept. 15, the automaker said.

Lehman Commercial Paper Inc. committed $890 million of the $11.5 billion revolving credit line and Lehman Brothers Bank provides $238 million of $16.3 billion in “liquidity facilities'’ for Ford Motor Credit, the automaker said.

Tapping credit lines, in normal times, was something of a major warning sign (along the lines of “bankruptcy imminent”) to investors.

Today, with the increasing importance of cash and the fear of counterparty collapse, it’s becoming more common.
Companies including Carmike Cinemas and General Motors have used their facilities recently, accessing cash while it’s still available. US office supply store Staples has managed to shift its credit agreements (a $750m revolving line and a $400m term loan) with Lehman Commercial Paper to Barclays.

From the Wall Street Journal last week:
As of June 30 last year, the latest period for which data are available, banks had pledged to finance about $2.3 trillion in big corporate loans - those more than $20 million and syndicated by multiple banks, according to the Federal Reserve’s Shared National Credit Exam. Of that, borrowers had drawn down about $835 billion - meaning that nearly $1.5 trillion remained untapped but available. A caveat: Banks reported that loan data before the credit crisis hit in August last year, and analysts say it’s likely that companies have drawn down many of their credit lines since then.

A rising tide of credit line taps would be worrying for banks, as Clusterstock notes:

Unlike bond issuances and syndicated term loans, banks cannot easily hand the credit risk and capital requirements onto other investors. In short, when borrowers draw down revolvers that money comes out of Wall Street’s coffers. With banks still highly levered and under tremendous balance sheet pressure these days, the threat of corporations drawing down their revolvers could exacerbate the situation. In a worst case scenario, banks could be forced to sell assets or raise money to cover the loans.

In fact, that might be a bit of an exaggeration. The loan commitments on revolving credit lines, once agreed, count against the banks’ capital ratios from the get-go.

It’s actually more of a liquidity problem — bank managers may not necessarily count on the facility being fully drawn out. If that happens, on a mass scale, it could impact banks abilities to make new loans to other borrowers. In short, excacerbating the current liquidity crisis.

FLB, I think Admin was responding to a part of my post that I subsequently deleted. I had asked a question, but in retrospect, it was poorly worded and implied something I did not intend nor did I initially foresee. Therefore, after reading it again, I decided to immediately delete the remainder of the post - possibly while Admin was responding to it. I could be wrong, but I don't think he was referring to your post specifically.

Thanks for the clarification, Waterdog. Admin responded via PM that way as well.

There's a LOT of 'noise' on the 'net on any subject you care to engage. Let's all continue to be responsible reporters of facts as they emerge, and bear healthy skepticism of stories designed merely to instill fear. We get enough of that through 'official' channels...

For my part, I will endeavor to clarify in advance language not in common usage.

Yep, agree completely with the fear mongering - especially as it applies to the shoving of the bailout package down our throats.

With regard to the Senate vote on the bailout (or, now it seems to be aka "the rescue package"), I just wanted to pass along a summary of two phone conversations I had with staffers of the GA state senators. I called both Senators' offices last night to register my opinion.

After introducing myself and telling where I lived, I said, "I'm calling to register my opinion regarding the federal bailout bill about to be voted upon".

The response from both office staffers? "Ok, I'll let the Senator know."

Me: "Uhhhh, I didn't tell you whether I was in favor or opposed to the legislation."

Staffers: "Ok, thanks for calling. I'll definitely pass that along to the Senator." Click.

Based upon the vote, it didn't seem to matter this time. They obviously know what's best. A NONrepresentative government in action.

Since the Senate vote last night has been brought up, I will make a comment that I did not think worthy of starting a new thread. In the revised bill there is a lot of other crap, as usual. I have read that what started out as a 3 page bill has now reached over 450 pages.

What I wanted to comment on, which doesn't seem to concern anyone is the increase in the FDIC coverage from $100,000 to $250,000. I am sure this was pushed by the community bank lobby which is losing deposits to larger institutions. My concern is that taxpayer exposure has just multiplied significantly should the bank go under.

This pork barrel bill just increased from 700 billion to 850 at least... with perks to 'wooden arrows for children' manufacturers (yup, you read that right... from a rep in OR) to something to do with bicycle riders!!!!

One of our wonderful senators, feinstein, admitted her office had received over 91000 emails and calls, and 81000 of them were for a 'nay' vote... she voted for it anyway.... senator boxer didn't say how many or which way, she received.

Now it's time to write your congress rep and have them vote no..

The bill has more riders than a commuter rail in Bangladesh. If this experience doesn't prove to the American people why our government is more useless and bloated than your uncle chubs after thanksgiving dinner, I don't know what will.
For awhile I figured the Reps were doing what was right in voting NO. But now it more comes to light that it is all about adding to the bill to get more stuff from the People.

"Government On The People
Beyond The People
Too Costly For The People"

First of all, go back and read the text of the bill. There is NO LANGUAGE limiting the bailout to $700 Billion. It's a $700 Billion line of credit that can be washed, rinsed, and repeated as many time as Hank can manage in two years. This will cost Trillions of dollars.

Nasty, nasty stuff. And the actions of your elected representative should tell you all you need to know about the state of representative democracy in the world.