The global financial catastrophe continues. With the Dow having Jones industrial average having lost $2.8 trillion in value since the day before investors thought the U.S.'s $810 billion bailout plan to save the world would pass, Asian markets cratered today. And the U.K. announced a plan much closer to the one that the U.S. should have been pushing. Maybe it's not too late for us to get it right.

How bad is the carnage in Asia? Japan's Nikkei collapsed 9.4% to close at 9203.32, its biggest one-day percentage drop since 1987 -- it peaked in the late 1980s at around 40,000. Australia fell 5%, South Korea declined 5.8%, Hong Kong tumbled 7%, and Indonesia shut its market for the second time in its history after stocks there plunged over 10%.

Meanwhile the UK did what the U.S. should have done to prop up its banks -- it injected capital into its strongest banks and took back preferred stock. Specifically, the UK bought $88 billion worth of preferential shares in its eight largest banks and building societies. The Bank of England will make $352 billion available for short-term loans and has created a $440 billion loan guarantee fund. And the plan seems to be working as far as boosting investor confidence -- HBOS, one of the capital recipients, saw its stock rise 58%.

Let's hope U.S. leaders get the message from across these ponds.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Freddie Mac (NYSE: FRE) announced today that it lost $821 million this quarter and cut its quarterly dividend from 25 cents a share to five cents a share, pending board approval. And it's paying the full dividend on preferred stock.

My question is why is this company paying ANY dividend? I know that dividends aren't necessarily just from profits like you might think. But this company lost $1.63 a share, so why is it giving shareholders even a nickel?

We all know this company may be nationalized eventually, however remote that possibility is under the current administration. We all know that taxpayers are on the hook for up to $25 billion or more for the bailout of Fannie and Freddie. And we know the Treasury can now buy shares in Fannie and Freddie to prop them up. But now it's appealing to shareholders' sense of value by keeping a dividend?

I was motivated to write this by a recent blog post by Jonathan Berr entitled, Iowa to Wall Street: Drop dead. In that post Jonathan made one assertion to which I take exception. Mr. Berr claims that the American voter is scared and that our fear shall rule the ballot box this coming November. With all due respect (and much is due) to Jonathan Berr, I must make this one assertion, it's not fear that we shall carry to the ballot box in November, it's anger. We as a public are very angry and we have every right to be mad as hell.

We're mad because we know that as major banks were writing off losses they brought upon themselves, they sold those debt portfolios to collection agencies and pools of lawyers who relentlessly chased those dollars until the cows came home. Yeah, it's a loss on the books but those debts are still real and collectible. Do they honestly think we don't know that?

We're angry because our government is silently allowing the sale of large stakes in major domestic financial institutions to foreign entities.

We're upset that our government is underwriting the foolishness of producing ethanol from foodstuffs for use in internal combustion engines when good sense tells us that ethanol should be made from waste and used at it's source for electrical generation.

We're mad as hell that we're potentially facing a government made up mainly of turncoat Democrats who sanctioned a war with their votes and now haughtily claim they were misled. They're liars or they're stupid... which is it?

The Wall Street Journal [subscription required] compares the estimated size of the subprime mortgage crisis with other recent financial crises. About to be taken over by Rupert Murdoch, it looks determined to underestimate subprime's magnitude in order to make those responsible look less incompetent. I've estimated the subprime crisis could cost $4 trillion -- the Journal limits it to $400 billion. But the analysis can't paper over an important point -- the subprime crisis is the first to be fueled by securitization.

There are two things I like about this analysis. First, it highlights the predictable decade long cycles in the U.S. economy based on the relationship between asset prices and borrowing. When asset prices rise -- possibly based on their makers' ability to charge a higher price for them than it costs them to make -- the bankers start to lend money using those assets as collateral. But the lending drives up the asset prices beyond what they're really worth as more and more bankers pile in. Eventually, the borrowers can't pay back the loans and the banks implode along with the borrowers.

The second thing I like about the analysis is the comparison of the magnitude and costs of five crises over the last 25 years:

Every dark cloud has a distress sale. That's the old saying, isn't it? Well, perhaps things look pretty bad for the mortgage industry, but I can guarantee you one thing. Real estate investors are eagerly awaiting for the dust to settle so they can pounce on distressed properties which will need to be liquidated for pennies on the dollar. I can hear them drooling from here.

Correct me if I'm wrong, but last time I checked, commercial banks aren't especially fond of holding title to single family dwellings. Given the possibility that nearly 2 million homes are slated for foreclosure in the next year, that could make for a lot of motivated selling. Many of those distressed homes are in highly desirable areas and I'm sure that there will be plenty of duplexes and quad unit apartment buildings caught up in the fray. The board rooms of large real estate holding companies must feel like war rooms right about now.

If you would like to get a feel for our government's official position on the matter, have a look at The Real Estate Realist. You will find insight there into what has been officially declared by the Joint Economic Committee as its position on the matter. The committee press release, peppered with words such as loss, destroyed and catastrophe, does little to ease national concerns about a real estate scene in flux. In fact, what I read of the release could be characterized as an astounding declaration of the obvious. I will concede however that the report did make nice use of a tsunami metaphor.

If you have a lump of cash that you'd like to invest in something that you can set your feet on, now is the time to begin your research. It's time to begin surveying the field but don't be too eager to move in for the kill just yet. The massive real estate devaluation that seems to be impending has not yet gotten up to speed. I have a feeling that there will be absolutely astounding regional real estate bargains beginning to surface going into the second quarter of 2008 as cash strapped banks scramble to unload real estate they have no desire to hold on to.

There's much speculation today about the possibility of yet another interest rate reduction by the Federal Reserve. Some people indicate they think another rate cut would be a good thing. Pardon me while I ask: Are they nuts?

The dollar is already devalued to the point that our trading partners are getting edgy about their export values, and you can forget about foreign investors sticking their money into American companies to help spur development. Low level municipal bond issues could soon become a thing of the past, and that concept of placing money into conventional savings accounts? Yeah okay, I'll get right on that.

Jim Cramer sings a gloom and doom song about 7 million home owners becoming renters, and declares that the nation will be required to swallow $500 billion in losses. He alludes to a wholesale crumbling of major banks. I see no mention in his blog about possible alternate solutions to the trouble that sloppy bankers have caused themselves. Personally, I don't think that ruining the dollar with yet another round of artificially created economic stimulation based on cheap credit is a good long-term solution for our country, although it might allow some of those sloppy bankers another breather before they have to face the music. The thinking that cheap bank credit will help the economy by infusing borrowed money into the stock market and loosening up spending habits is nothing short of a sucker's bet.

AOL Money & Finance recently provided us with an insightful article regarding the current and future condition of our nation's government-administered retirement system. That article, written by Richard Wolf for USA Today, was as good an explanation of the current state of the Social Security funding horror that I've ever read. What Mr. Wolf failed to hammer home was the fact that this situation isn't really news. I officially entered the manufacturing work force in 1979, and I'll tell you what folks, I knew at that time that the Social Security system would most likely be nothing to me but a tax on my income. I didn't expect I'd ever get a dime from SS then, and I still don't.

Honestly now, why not just stop howling about it and accept the reality of the whole mess? Those clowns in DC have tangled our courts, hamstrung our unions, disemboweled our public schools, castrated our military, flattened our industrial base and they're doing a fine job of bankrupting our retirement system. Did you really expect any different? Did you think that a government riddled with millionaire businessmen and back-room lawyers would vote themselves a wage freeze until they got things straightened out for the rest of us? HA! I'm just glad that I'm able to work two jobs so I can afford to pay my full state and federal tax burdens and still have the $2,000 it will cost me to heat my tiny home this winter. Life is good.

Until and unless there are some drastic changes in our nation's capital, in the form of an independent president with stones, nothing is going to change. We'll hear the same old tired rhetoric from the same old twisted mouths with the same pantie-waisted results and all the while they'll take a couple percent more from your hand each year. We're a once-great nation that's been diluted with government lies in pursuit of global socialism and they're not going to stop the carnage until we're a cashless society with every virtual dollar passing thorough government hands between the time you earn it and the time you spend it in a government-accredited manner. Yeah, it's an ugly picture, but it's the picture they're painting in the chambers of our government right now.

Where are Ross Perot and Jimmy Hoffa when you need them?

Volatility Index S&P 500 Options-VIX up 6.30 to 36.97; 10-day average is 26.78

E-Trade (NASDAQ: ETFC) put volume & volatility at Panic levels on sell-off. ETFC is recently down $3.28 to $10.60. SBSH said on 8/12 "Disclosure in 10-Q short on substance from our viewpoint. Mgmt provided minimal new information on the composition of its $28 billion mortgage portfolio."
ETFC call option volume of 37,882 contracts compares to put volume of 87,399 contracts. ETFC September option implied volatility of 210 is above its 26-week average of 37 according to Track Data, suggesting large price fluctuations.

Countrywide Financial - (NYSE: CFC) put volume & volatility Spike; indicating Crisis. CFC, a home mortgage lender, is recently down $4.18 to $17.13. CFC announced "it has supplemented its funding liquidity position by drawing on an $11.5 billion credit facility." Moody's Investors Services downgraded CFC rating to Baa3. CFC call option volume of 204,765 contracts compares to put volume of 412,286 contracts. CFC September option implied volatility of 210 is above its 26-week average of 56 according to Track Data, indicating larger price fluctuations.

More Countrywide Financial news

Peter Cohan: What the mortgage meltdown means to you
Eric Buscemi: George Bailey, meet Angelo Mozilo
Kevin Shult: Analyst downgrades: AN, CFC, DRI and RARE
Peter Cohan: Countrywide (CFC) meltdown continues
Michael Fowlkes: Countrywide Financial (CFC) adds to subprime panic
Peter Cohan: Could Countrywide Financial (CFC) be put down?
Sheldon Liber: Buy on fear today? Bear Stearns (BSC), Countrywide (CFC), IndyMac (IMB), Popular (BPOP), Washington Mutual (WM)

Goldman Sachs (NYSE: GS) volatility increase suggests greater Crises. GS is recently down $7.62 to $169.99. GS September option implied volatility of 57 is above its 26-week average of 30 according to Track Data, suggesting larger risk.

Bear Stearns (NYSE: BSC) implied volatility increase suggests greater Crises. BSC is recently down $2.31 to $107.41. James E. Cayne is chairman of the board and CEO of BSC. BSC has been a board member since 1985. BSC call option volume of 7,419 contracts compares to put volume of 10,103 contracts. BSC September option implied volatility of 78 is above its 26-week average of 38 according to Track Data, suggesting larger price movement.

Lehman (NYSE: LEH) September volatility of 73 above 26-week average of 33. LEH is recently down $2.55 to $54.79. LEH call option volume of 18,902 contracts compares to put volume of 33,956 contracts. LEH August 55 straddle is priced at $4.60. LEH September option implied volatility of 73 is above its 26-week average of 33 according to Track Data, suggesting larger risk.

Do traders have souls?

That's a question that always springs to mind when I watch the market buzz surrounding any disaster. Whether it's Hurricane Katrina, the great Tsunami, or this week's coup in Thailand; you'll always see articles like this one in the Wall Street Journal [subscription required]. Teaser: "Analysts React to Thai Coup: 'Bargain Opportunity'"

Lovely. It reminds me of a piece I heard on This American Life, Ira Glass' gripping radio show. A commodities trader recounts his education in chaos after the Chernobyl accident. He got to work late, a little stunned by the news, and was amazed to see the energy level was nearing giddy on the trading floor. "That disaster made more money, in one day, that I had made my entire life up 'til then," he said, chuckling uncomfortably.

Michael Kurtz at Bear Stearns has obviously restrained himself greatly, using words like "regrettable" and "political frictions" and "toll." But you can almost feel a teensy bit of glee sparkling through from the Bear Stearns trading floor (you know those traders are known for their distinct lack of polish, don't you?) when he writes, "Investors have heavily penalized Thai stocks since last year amid deepening political uncertainty, with the benchmark SET Index having gained just 9% in U.S. dollar terms since January 2005; as such, the SETI now elicits some of the region's deepest valuation discounts."

There you have it: scoop up the bargains in Thailand, enjoy the chaos while it lasts. If your soul can handle it.