Wake Up, Get Angry, DO SOMETHING - Spitzer, Fed, the F. Fathers, Economy and Bush

[dak]

heh...

[Blumpster]

Originally Posted by dak

heh...

Pretty much. I'm going to buy some camping gear, loads of bullets and go live in the woods for a few years.

[rinthea]

Originally Posted by Soriak

I think some news articles are leaving people with what I believe to be the wrong impression - namely that this is a crisis of liquidity. (ie banks/investors don't have cash on hand) However, I think that's not the real issue - the real problem is entirely one of confidence.

Basically, money is available but nobody trusts the others enough to loan them money at a reasonable rate. The symptoms would be the same, but simply cutting the interest rate wouldn't do much good - and we see that it hasn't done anything so far.

If we think this is true, it'd at least rule out a hands-off approach. A lack of confidence is a huge market failure that likely wouldn't self-correct for a very long time, leaving the country (and potentially the global economy) in a strong recession/depression for years. That's really not an option. So it's only a question of WHAT can be done, not IF anything should be done. I guess there are hundreds of economists around the world working on the "what" and some progress has been made already.

I'm very worried about upcoming downgrading of AAA debt. That's likely going to lead to billions of dollars in write-downs again and cause right another crisis of confidence. The Fed seems to try and prevent this by allowing banks to offload that onto the fed itself. That could work. (the fed doesn't have to publish downgrades, banks do)

I think people need to get over the principle of fairness - who cares if it's fair? Some companies may get bailed out that shouldn't be and it's likely going to cost the taxpayer money... you could waste money worse. Fairness doesn't do you any good if unemployment rises, you spend the next 5 years looking for a job and people still get thrown out of their houses.

If it comes down to spending a couple hundred billions and getting out of this with a blue eye versus spending years in a recession (or worse a depression) it's a pretty simple choice. Oh yeah: failing banks would also mean the FDIC got stuck with a huge bill. That's going to cost the taxpayer also.

Soriak u commy bastard, theres plenty of confidence AT THE RIGHT PRICE... look at the visa IPO people, plenty of money to around when things are priced right... prices are too high, they need to go down one way or another... that simple

The whole 'yeah let us value/rate everything for more than its worth, that will fix things' idea is insanity at its best. Wont work.

[GrobbeeTrull2.0]

Rinthea - I'm glad you're confident about the business cycle, but here's the thing...

... there's not a lot of business when the bulk of the population is unhappy, angry, and/or broke and homeless.

This is not some socioeconomic experiment! These are companies and governments colluding to keep each other propped up and wealthy, at the detriment of the people.

We shouldn't stand for this.

[Scorpvenom]

Originally Posted by Soriak

You should take a look at the history of central banks (not just in the US) - there's a very good reason why it is this way in a lot of countries. (and should be that way in every country) People who set monetary policy can never be elected officials or be at risk of losing their jobs for their decisions. A central bank needs to be independent of the politics, or it stops being effective.

I agree with you here for the most part.

Originally Posted by Soriak

If it comes down to spending a couple hundred billions and getting out of this with a blue eye versus spending years in a recession (or worse a depression) it's a pretty simple choice. Oh yeah: failing banks would also mean the FDIC got stuck with a huge bill. That's going to cost the taxpayer also.

Unfortunately, even with the current Fed intervention, I do not think we are going to get out of this with just a blue eye. In fact, I think completely otherwise as does Jim Rogers. However, it should be noted that both Jim Rogers and myself are in the minority on this one. The views Soriak presented tend to be the majority opinion for how to handle this crisis. Honestly, since this is the course the Fed is taking, I hope I'm wrong and you're right. Also, expect many, many more bailouts. It's going to be much more than $200 billion and it's actually $230 billion at the moment.

I think we are on a runaway train that is eventually going to crash. Do we take a hands off approach and let it crash now? Or do we let the Fed attempt to bail us out now possibly leading to a worse crash in the future? Currently, the fed has been "bailing" us out by cutting interest rates, doing a $200 billion swap program giving t-bills for mortgage backed securities (which are pretty much all junk), and preventing companies like Bear Sterns from going completely bankrupt by providing emergency financing and backing of $30 billion worth of their debt for the JP Morgan buyout.

I think the Fed should have a more hands-off approach and let a firm like bear sterns fail because I think the Fed is simply delaying the inevitable market collapse. I think fraud is rampant right now (countrywide financial is under investigation and I think more investigations will follow) and we'll see many more write-downs and possibly more hedge fund collapses. If we had a crash now (and indeed it would be a terrible crash), the ensuing recession would hopefully help the dollar deflate in value, allow companies to return to their correct market value, and send a message that corporate greed and trying to make insanely high RISKY returns (e.g. mortgage securitization market, particularly of subprime) will lead to your own companies demise..... if you fuck up, we won't bail you out. The markets would begin to regulate themselves and practice greater due diligence in the future because if you fuck up (and this crisis is a result of greed and a lack of proper financial standards), game over man, game over!

I think by bailing out all these firms, we are going to send the value of the dollar down the shitter even more (to epic levels never seen in our history), send a message (moral hazard) that it's ok for big investment banks to do this again because hey we'll bail you out with tax payer money if shit hits the fan, and no one truly learns anything from this and this vicious cycle will only repeat itself. These huge investment banks love insane profits even if they are highly risky to achieve. What is to stop them from coming up with some new risky money making scheme in the future now knowing that if they all do it and all fail, they'll be bailed out?

I think it is interesting to look at what happened to Japan during their real estate bubble. This situation is eerily similar and for those that don't know what happened, Japan entered about a decade long recession as a result of their federal reserve trying to bail everyone out from the bursting of their real estate bubble (If i'm up for it later, I'll make a post with specific comparisons). Or what if we have a stagflation type result forthcoming, where the only solution in the end is to increase interest rates to 20% thus destroying economic growth to get the value of the dollar back in line? With the fragile state of the economy, maybe these are better alternatives than letting these companies fail now, I'm just not convinced.

The next few years is going to be very, very interesting. I don't think anyone knows what is exactly going to happen...I just don't think it is going to be pretty....Also, two of Bear Sterns hedge funds collapsed 6 months ago which in a lot of ways precipitated their fall. I expect more hedge funds to collapse, especially now that we are seeing a drop in commodities (although in the long term, even through a crash and recession, these will be one of the few safe places to invest and make a killing) and margin calls will be a coming...Last I checked, hedge funds are roughly a 25 Trillion (yes, you heard me right) market. If hedge funds start collapsing, all the bail outs in the world are not going to stop the impending doom.

For some that don't know, when the Fed cut rates this week by 3/4 (everyone was expecting a 1 point cut), two Fed governors voted against the cut due to their inflation fears. AFAIK, it isn't too often that the Fed board of governors aren't unanimous in their vote especially during hard economic times like these when you are trying to restore confidence in the economy (but I haven't checked so I could be wrong).

Inflation is an ugly bitch. Corporate greed and fraud are just as ugly. No one has a clue right now how many more write downs are going to occur, if companies are being honest or the like. I seem to recall Alan Schwartz, CEO of Bear Sterns, as saying on the Monday before the Sunday (which was when the buyout was announced) that everything was A ok at Bear Sterns. How many more of these other banks and investment firms are lying (also, will he get sued for his comments)? What happens when there are no more JP Morgans able to absorb floundering companies like Bear Sterns? Sure, the fed and the treasury can keep the printing presses on until the cows come home but someone has to manage these companies as well!

I feel we are delaying the inevitable.....we shall see...

For now, enjoy the blood bath that is wall street! Rally...collapse...we've reached a bottom! collapse ...rally....the volatility in the markets is insane right now.

I've always been a fan of buying during recessions (and I'm very against market timing), however, I am not a fan of buying securities when I think we are going to be entering one of the longest recessions in U.S. history.

[Scorpvenom]

Originally Posted by GrobbeeTrull2.0

This is not some socioeconomic experiment! These are companies and governments colluding to keep each other propped up and wealthy, at the detriment of the people.

We shouldn't stand for this.

The founding fathers would be rolling in their graves at what is going on in this country right now. I am a patriot. I fucking love America and it irks me to no end to see what is going on right now in this country.

Spread the word. Educate people about what is going on. Run for political office. Raise holy hell. Start a movement. CHALLENGE THE STATUS QUO. The political elite are hoping you all do nothing (and have no hope) and laughing all the way to the bank...

It's time to vote these pricks out of office and hold them truly accountable. More and more, I think we need a viable third party....the Republicans and Democrats just aren't cutting it.

[Frax]

I think we are due for a meltdown in the near future, and it has nothing at all to do with Iraq expenditures. It has everything to do with an economy with ever shrinking 'real' jobs, stagnant pay scales for most people, and those same people who make up our middle class (including me!) being so debt ridden (not including me!) they'll be lucky as hell to ever see a positive cash flow before they die. More and more people are heading for a retirement of poverty when they get old due to shrinking benefits, corrupt pension systems, their massive debt, and just flat out bad management of our nation's future in regards to the health and welfare of our own citizens. Sure a lot of people are getting rich, but ten or twenty times more are working hand to mouth these days and they don't buy cheap stock during down periods because they need things like baby diapers and milk.

Yes, a substantial portion of the problem is due to their own individual misplaced priorities, but when you see gas prices skyrocketing which will drive up the cost of everything else as the foundation of our food supply and basic necessities rely on the availability of fuel to transport these things from the coasts to everywhere else. Eventually, if this trend continues, a lot of people won't be able to afford to operate a car to get to work, and due to our woefully inadequate public transport systems, things are going to get tougher for employers and employees.

It's a shame, and I agree a lot with the OP's points. The current political 'system' of two parties who both suck dominating our policy and determining how our taxes are doled out combined with the general populace's apathy are driving this country into the ground. We may not even be in the begining of the nose-dive yet, but you can almost feel something bad on the horizon at times. Maybe not in the next ten years even, maybe twenty or thirty.. or hell next year if oil hits $200 a barrel or something...

[AladainAF]

Originally Posted by Tripamang

What about all the people who lost all their money by staying in? They could just as easily sue him.

Sure they can, and they would lose. Thats no different than conversing on an internet message board (i.e. this one) and someone telling you "Dont Sell Bear Stearns!!1!!!!11". Are you going to sue them as well?

Ultimately, the responsibility of the investment of ones money is with the individual. Thats why you see a lot of disclaimers - including on cramers show - that say "Any information shared on XXXXXXX show does not constitute financial advice." Done, check mate. Game over.

I'm not really what your point is, if a stock/company is tanking everybody loses, really in the end the company should be looking out for it's investors not keeping the sham going.

Yep, if a stock/company tanks, everyone does lose. Companies should look out for their investors, and I'm sure the SEC or whomever will be investigating Bear, including the ex-CEO who sole what.. 85,001 shares earlier this year?

From my perspective the US economy has been heading towards tanksville for a long time. The Canadian government in the early 90's decided that they had to balance their budget, it was the only way that we were going to be sustainable or even survive when/if things went to shit. We now sit with a comfortable level of over taxation and a nice amount of money in reserves if shit does hit the fan.

Agree. We need a balanced budget amendment and requirement. Unfortunately, congress - who ultimately controls that fate - doesn't want to do that. (That applies to both sides of the isle.)

Out of all this the thing I'd be most pissed about as an American citizen would be the fact that the banks were allowed to usurp the laws put in place to protect you from just these kinds of situations.

No they were not. If you had money in Bears bank, then your money is insured and safe FDIC style (in other words <=100k per account). No stock is risk free. It never has been. If there is one with a decent return, sign me up.

I guess how many people have to lose their home before people start freaking out and taking to the streets saying "Why the did this happen to me?"

Most people losing their home got in "bargain" mortgages with teaser rates. If they used half of their brain and took about ~30 minutes of internet web searching, you could tell that its very possible that home mortgage rates could hit >15% (see early 80s), and the price of homes could go down. No, instead, they took a risk too, and they lost. They, just like companies, are responsible for that fate. When I bought my home in the height of this situation (Feb 2005), I knew damn well to get a Fixed rate, even if I am only going to be here for 4-5 years. ARMs are not worth the risk. If people have "unexpected bills", I'm sorry. That happens, and anyone can fall on hard times. I feel sorry for them. But if we get locked in this mindset that we have to bail everyone out that makes a financial mistake in this country, then we're going to be a country full of citizens who just don't get it.

You just can't borrow forever and never balance the budget and expect things to work out, US government after US government has been making it the next persons problem to sort out the financial situation and no one has stepped up.

It was balanced during the late clinton years and got fucked up early bush years. We need a balanced budget amendment badly. Your quote is exactly why - even though Bush was a horrible prez - I do not feel comfortable voting for a democrat. Universal healthcare is going to cost an absolute fortune, among other things. One thing I hope we have all learned from Iraq is that NOTHING the government says in respects to how much something costs is true.

There is going to be a major correction, Canada is probably going to tank with it but maybe not as bad.. it was coming.. it was in the works. You can't borrow money from thin air and inflate at your own discretion and expect this not to happen. I'm pretty sure I read an article just shortly after Canada balanced it's budget with Alan Greenspan using Canada as an example of what would have to happen in the US if they wanted to stay in their current financial power house position, I guess nobody was listening.

Nope, no one was.

[Ronne]

wru Ron Paul?

[Blumpster]

Originally Posted by Ronne

wru Ron Paul?

Ignored by the media and thus most of America.

[AladainAF]

I did my part for Ron Paul ; ;

[Scorpvenom]

Some articles that shed a bit more light and offer some different / similar opinions...

Greenspan to blame for economic woes? - Washington Post - MSNBC.com

Making sense of this bizarre market - MSN Money

Why Exxon won't produce more oil - MSN Money

========================
Something that I haven't talked about much is oil...what a fun topic, more later, it's sleepy time

[IronKeeb]

How much money did you make off of "calling the recession over a year ago" ? Did you invest and become rich off of your predictions? Cause I mean, as I'm sure you're awesome finance professor told you, stocks and other investments either go up, or down. That means if you randomly choose its a 50/50 chance. So, given that you had this huge wisdom of the US entering a recession I'm sure you invested all you had and more into the USD declining, thus making you more than wealthy enough to retire.

Right?

Or didn't you? And you are just one of thousands of business and economic students who keep an eye on the market and believe that they can "call" where its heading, and yet never invest enough to back up their claims.

Just as Charles Dickens wrote so many years ago, "It was the best of times, it was the worst of time" or as Archie Bunker said so often "This is the big one" and etc.. The list goes on. Every age is the end times, every plight of the people is the worst. The question isn't how to fix it as a society, because thats not how we do things. Its how to profit from it personally. How can you make it big off of this one. Else you are just contributing to the decline by doing nothing. If you think this is doing something, then you are part of the problem.

For how much you say you think and aren't part of the mass herd or whatever the fuck you want to call it, you really seem like the stereotypical person here, as you're a dime a dozen at every college and city in the United States. Use these skills you say you have to be different. And get rich doing it. This is oppurtunity, clean and simple.

[Arbitrary]

At least he's out there making claims about how he thinks things are and defending them.

Your post is broad, boring, recycled, relativistic nonsense.

[IronKeeb]

Originally Posted by Arbitrary

Your post is broad, boring, recycled, relativistic nonsense.

His isn't any different.