This won't come as a big surprise, but uber-investor Jim Rogers doesn't like the Paulson plan:

"It's astonishing, devastating, and very harmful for America and American citizens," he tells me. "It means we're in for the worst recession since World War II, as well as higher long-term interest rates, higher inflation, higher taxes, a weaker dollar and substantially lower stock prices."

... Addressing the explosive two-day Dow Jones Industrial Average rally of nearly 779 points, Mr. Rogers ridicules the buying binge, insisting that investors "were foolishly sucked in by hysteria and a buying panic. I wouldn't buy now because it's insane." Describing the rise as artificial and unsustainable, he contends "it's only a matter of time before reality sets in and the market heads down again." Making matters worse, he says, it's "embarrassing to see how little the presidential candidates know or grasp what's going on, just like the current administration."

... The 65-year-old manager presently owns some dollars and says he thought the recent greenback rally would continue. "Now I'm not so sure, that rally may be over," he says. Mr. Rogers has covered his short sales — a bet stock prices will fall — on Fannie Mae, Citigroup, and some companies in the homebuilder sector. On the buy side, he recently began to acquire stocks in China and Taiwan.

More here.

Very nice new John Mauldin missive out (okay, done by a guest, but still good), so read it in its entirely. Here is a quote from the conclusion that should be required by knee-jerk equity buyers:

... what would you rather own? Equities which currently trade at 15-20 times earnings or credit instruments trading at a fraction of that cost? Deutsche Bank has calculated that senior secured loans are now trading at an implied price earnings ratio of about 5 - less than a third of the cost of equities. There is no question that the real value is to be found in credit instruments. This is where most of the damage has been inflicted and it is where the big bargains are in today's market.

If my head was shaking any stronger in agreement, you could hear it rattling.

According to new data from TransUnion, U.S. auto loans 60-days past due rose 11.5 percent in the second quarter. Blame a slowing economy and seasonal trends, says TransUnion, but this quote struck me:

"In some states there's a lack of home equity," he noted. "Folks have less access to home equity to finance auto purchases," which has led to more people taking out car loans.

Lower home equity so more money from car loans.  Does no-one have, you know, savings any more? Apparently not. Then again, I'm so old-fashioned that I cringed and veered wildly today while driving when I heard U.S. Bank's ads on California radio where they extol the virtues of using your house as a bank to pay for your second honeymoon. Say what? Have you people checked the calendar?

[via IHT]

Some quick links to things others may find interesting:

• At least two short-sellers (GLG and Och-Ziff) are on the no-short-selling list. Isn't that some sort of wormhole in the space-time-SEC continuum? (NYTimes)
• If i-banks cut leverage ratios from 30 times (or recent levels) to 20 times, this would trigger $6,000bn worth of asset sales (FT/Tett)
• CEO murdered by angry laid-off workers (Times)
• Blog with interesting current short-selling data (Short Stories)
• Naked shorts need to consider that failures to deliver are no higher than ten years ago as a percentage of trading volume (DTCC)
• Paulson needs to pay more attention to the Norwegian bank collapse and remedies (Bronte)
• A survey of government intervention in housing (Cafe Hayek)
• Last week outside New York's Federal Hall everyone was in full panic mode (Wall Street Fighter)
• Judging by Google search trends, the average person doesn't care enough about the bailout to dump their diet of celebs, cars, and TV crap (Google)
• Amusing art piece showcasing junkyard dog replacing Wall Street bronze bull (Craigslist)
• Limited Attention as a Scarce Resource in Information-Rich Economies (Ingenta)
• Monitor web pages automatically with Google Docs (labnol)

No big surprise, perhaps, but the U.S. dollar has hit a wall with respect to most other major currencies. The inflection point can be nailed pretty much spot on, as the following figure shows: September 10, 2008.

[via Pacific]

I am in unsurprised dismay watching the Senate Banking Committee hearings this morning with Bernanke, Paulson, et al. Doug Kass gets it right in a comment moments ago:

It reminds me of a bunch of school kids who turned in their homework too late.

Spot on, Doug. Spot on.

Relatedly, Barry has 14 questions for Paulson & Bernanke. Agree or disagree, they're worth reading.

Some people out there need to spend more time in remedial finance. There are two things going on in the financial sector, and while they are linked, they can and should be usefully separated, at least for discussion.

We have illiquidity and we have insolvency, and they're neither always in the same places, nor necessarily at the same time. We have illiquid paper -- CDOs, RMBS, etc. etc. -- that is being marked to a non-existent market, thus creating damaging prices. There are various ways of dealing with it, one of which is goosing the market into action by purchasing some of that paper from balance sheets where it currently languishes.

Turning to insolvency, we have institutions that do not have a strong enough balance sheet to fund operations. Fannie, Freddie, AIG, Bear, Lehman, etc. Pick your favorite FDIC list failed bank of the week. These institutions are insolvent. They are, in a parrot sense, no more. Now, illiquid paper can make banks insolvent -- via the wonderful feedback loops of credit rating agencies, default swaps, etc. -- but they are not the same thing.

So, could you have a bailout in which some toxic paper is bought from some (currently) healthy banks? Of course you could. Get over it already and let's be adults about this stuff. We're trying to deal with illiquidity and insolvency, and intelligent people should be able to tell the difference, and act accordingly. We are going to have to deal with both issues repeatedly, so let's get on with it.