BENOIT MANDELBROT: The theory thinks that things move slowly, gradually, and can be corrected as they change, whereas, in fact, they may change extremely brutally.

NASSIM NICHOLAS TALEB: Now you understand why I'm worried. I hope I'm wrong. I wake up every morning -- actually, I don't wake up every morning now. I start to wake up at night the last couple of weeks hoping that I'm wrong, begging to be wrong.

I think that we may be experiencing something that is vastly worse than we think it is.

PAUL SOLMAN: And we think it's pretty bad.

NASSIM NICHOLAS TALEB: It's worse. Of all the books you read on globalization, they talk about efficiency, all that stuff. They don't get the point. The network effect of that globalization, OK, means that a shock in the system can have much larger consequences.

They are "talking their books" rather than providing a specific observation about the present situation but I still find this interesting.

Chaos Theory and the Credit Crisis

One of the constant comments is that stock plunges like this are buying opportunities because markets always come back. Obviously, the people saying this are not including the Japanese stock market in their sample.

Angry Bear: S&P 500 VS NIKKEI 225

Watching the alleged “leaders” act like a bunch of kindergarteners only stokes the fear.

They really don't know what the hell they are doing. They have no idea.

Quote of the day

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

The more I learn about this bailout the worse it sounds.

700 Billion

A small antidote as the excesses of recent years come home to roost.

Laugh-Out-Loud Cats #940 on Flickr - Photo Sharing!

"Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc."

The Big Picture | Incredible Statistic: Mutual Fund Performance

We've now had so many instances of what charitably may be called artful reporting that it's beginning to undermine my faith in government statistics. Unreliable government statistics are a Banana Republic Indicator..... the integrity of that data is becoming compromised on enough fronts so as to render them suspect. And inaccurate data leads to bad business and bad policy decisions. Bad policy decisions are particularly likely since the information is massaged so as to minimize unpleasant news.

naked capitalism: GDP Release Signals Further Decline into Banana Republic Status

Growth is projected to pick up gradually over the next two years as residential construction bottoms out and begins a slow recovery and as credit conditions gradually improve. However, FOMC participants indicated that considerable uncertainty surrounded their outlook for economic growth and viewed the risks to their forecasts as skewed to the downside.

...If financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell. But in fact, available data on oil inventories show notable declines over the past year. This is not to say that useful steps could not be taken to improve the transparency and functioning of futures markets, only that such steps are unlikely to substantially affect the prices of oil or other commodities in the longer term.

FRB: Testimony--Bernanke, Semiannual Monetary Policy Report to the Congress--July 15, 2008

There is significant locational disparity in the performance of housing markets across the country. Bernanke showed a very cool set of heat maps on a variety metrics.

Very cool county by county economic breakdown.

Matrix » [Credit Spiral] Declining Home Prices Primary Cause Of Declining Home Prices

The predominant view is currently biased to commodities as an investment hedge against inflation...

Unfortunately, this thinking is a self-fulfilling prophecy which ultimately may feed into a negative economic cycle where legitimate commercials are squeezed out of business thereby reducing supply, protectionism gains traction, trade breaks down, hoarding ensues, riots occur and wars erupt over access.

This may sound alarmist, but industry insiders are not buying into the one-size fits all answer that emerging economies are the primary factor driving up prices from the demand side, reinforced by supply-side shocks and peak production fears. In a slowing global economy hit by a major credit crisis and reeling from a falling dollar, it is likely that money flows seeking safe haven in hard assets is the key driver of recent volatility.....

naked capitalism: There is an Oil Bubble