False BO

[hokahay]

Facing the truth, finding what's real, is perhaps easy as a logical rational task.  But often the emotions that come up when one faces the truth are so painful and overwhelming that we immediately run away and hide again.  That's why people are not opening their financial statements.  That's why people can't face what our  political or economic leaders are doing. It's too frightening, hurtful, enraging, shame-inducing insecurity-causing etc.  Once people find ways to endure the emotional distress, then we can face difficulties and solve problems.  It helps a lot to surround oneself with people like Stoolies who can look economic reality straight in the eye, and can support one another in doing so. 

 

Who among us has never ignored some fact that we didn't want to be true, or hoped something or someone would go away if we just ignored it/them?  It's only human.  But it's not a characteristic that's good to have in the current circumstances.  It's a trait to be gotten over and beyond.

 

No use in inducing more shame in people.  No use in shaming them for not seeing the realities before.  It's more socially useful to just welcome folks to the reality club whenever they are able to get themselves over here, and invite them to contribute their ideas and work in problem-solving.

 

Americans have a lot of ingenuity.  And folks in lots of other places do too.  If there was ever a time when we needed to use that trait, it's now.

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A buddy of mine from work IM'd me the other day asking what the 401k plan web addy was. I gave him the correct addy. Later I IM'd him and asked if he was going to be shopping for wine or ammo. "Ammo", was the reply.

[4shzl]

Perp walks needed -- URGENTLY:

 

Just when we thought executives of A.I.G., the insurance giant bailed out by taxpayers for $123 billion, had been shamed into stopping their post-bailout Marie Antoinette spa treatments, luxury sports suites, Vegas and California posh resort retreats, we were dumbfounded to learn that some A.I.G. execs were cavorting at a lavish shooting party at a British country manor.

 

London?s News of the World sent undercover reporters to hunt down the feckless financiers on their $86,000 partridge hunt as they tromped through the countryside in tweed knickers, and then later as they ?slurped fine wine? and feasted on pigeon breast and halibut.

 

The paper reported that the A.I.G. revelers stayed at Plumber Manor ? not the ancestral home of Joe the Plumber, a 17th-century country house in Dorset ? and spent $17,500 for food and rooms. The private jet to get there cost another $17,500, and the limos added up to $8,000 more.

 

In an astonishing let-them-eat-cake moment, the A.I.G. big shot Sebastian Preil held court at the bar and told an undercover reporter, ?The recession will go on until about 2011, but the shooting was great today and we are relaxing fine.?

NYTimes

 

[lineup32]

like him or not, denninger has been saying things along this line for a couple of years now

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and others!

To understand why, one first has to understand the nature of the current "credit market disturbance," as Ms. Schwartz delicately calls it. We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads -- the difference between what it costs the government to borrow and what private-sector borrowers must pay -- are at historic highs.

 

This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. "The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."

 

So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."

 

http://online.wsj.com/article/SB122428279231046053.html

"

[cwd]

BTW, I believe that suspending foreclosures will be the worst thing the gov could do. Banks will have no choice but to tighten lending standards even more to ensure a good loan.

 

This will drive prices lower as the pool of applicants with the income to legitimately qualify for loans will continue to shrink. As values decrease more people will give up or resets will be triggered.

 

This will be a classic feedback loop. Growing louder and louder until someone cuts the mic.

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I don't mean to exprees a political view, but I believe BO has made that point.

[MrHanky]

I locked in a few CD's the day the fed lowered rates.Since I locked them in,rates on medium and longer term CD's have dropped 40-50 BP at the banks I used.

 

I was afraid to lock them in,but so far it was a good move....I have one more batch of cash to put to work,I am waiting to see if we get a rate spike.

 

I believe we will have much higher rates in the future,but it might take a year or 2 for rates to start moving up considerably.

 

Short term CD's did not make any sense since they were only about 25 or 50 BP above a savings account.I have no idea where else to put my cash that is safe and still get decent yields.If anyone has any better ideas,feel free to make suggestions....I am currently averaging about 5.65% average on the CD's I locked in last year or so.

 

I doubt it's possible to get any more yield without considerable risk

 

[Pretzel Logic]

BTW, I believe that suspending foreclosures will be the worst thing the gov could do. Banks will have no choice but to tighten lending standards even more to ensure a good loan.

 

This will drive prices lower as the pool of applicants with the income to legitimately qualify for loans will continue to shrink. As values decrease more people will give up or resets will be triggered.

 

This will be a classic feedback loop. Growing louder and louder until someone cuts the mic.

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You're absolutely right. In fact, one state already tried this (NJ, I think?) by placing a moratorium on foreclosures, and it played out exactly as you envision. New loans vanished.

 

I suspect this may just be one of the steps that ultimately leads to mortgages issued directly from the government, though.

[capitall]

I locked in a few CD's the day the fed lowered rates.Since I locked them in,rates on medium and longer term CD's have dropped 40-50 BP at the banks I used.

 

I was afraid to lock them in,but so far it was a good move....I have one more batch of cash to put to work,I am waiting to see if we get a rate spike.

 

I believe we will have much higher rates in the future,but it might take a year or 2 for rates to start moving up considerably.

 

Short term CD's did not make any sense since they were only about 25 or 50 BP above a savings account.I have no idea where else to put my cash that is safe and still get decent yields.If anyone has any better ideas,feel free to make suggestions....I am currently averaging about 5.65% average on the CD's I locked in last year or so.

 

I doubt it's possible to get any more yield without considerable risk

 

 

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Congrats, Mr. Hanky. You have won the prize for the highest safe yield. I think you're right that it's not possible to get any more yield without considerable risk.

You are doing better than 99.999% of the people out there.

 

One thing some folks here on the Stool may not be aware of completely is how much people are hurting out there. To have lost 40% of one's net worth, or of one's 401K etc. has got to sting. For some folks perhaps their pain will not be in vain, because it may motivate them to learn about how this happened to the economy and the stock market. And they will work with others on finding and implementing economic solutions. But many folks will just be lost in the pain, or in the numbness of attempting to block out the pain, at least for a while. The current situation makes me think of those guys in the Great Depression jumping out of windows. Did anyone see the New Yorker cover this week? Here:

 

http://www.newyorker.com/magazine

[byhiselo]

AIG execs unrepentant, bloody den of thieves:

 

"Just when we thought executives of A.I.G., the insurance giant bailed out by taxpayers for $123 billion, had been shamed into stopping their post-bailout Marie Antoinette spa treatments, luxury sports suites, Vegas and California posh resort retreats, we were dumbfounded to learn that some A.I.G. execs were cavorting at a lavish shooting party at a British country manor."

 

http://www.nytimes.com/2008/10/19/opinion/...gin&oref=slogin

[capitall]

Perp walks needed -- URGENTLY:

 

NYTimes

 

   

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If this misuse and abuse of taxpayer funds by AIG, or any bailed-out company, is not illegal, it certainly should be made so immediately.

 

There needs to be zero tolerance of this "Let them eat mortgage-backed securities" behavior.

[cwd]

This chart is at least a year out of date.  Its still valid in concept but maybe not in detail. But I can't find a more up-to-date chart.

 

I just don't trust the numbers shown on it anymore. How many of these loans have already reverted to the banks via foreclosure?  How many have been refinanced into conforming loans or been modified by banks.

 

I'm not saying the chart is completely wrong. I have no way of knowing. I just wish somebody would publish a recent update rather than have us rely on one-year-old data.

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I think Fannie and Freddie changed the conditions under which they declare a property in default. If the home owner is making an attempt to get current, a property won't be placed in default. I don't know if there is a time limit.

[cwd]

Schiff is right about the history, and very possibly about the implications for our current meltdown.    If you need confirmation of what Schiff is saying, pick up a copy of The Forgotten Man - A New History of the Great Depression by Amity Shlaes.  Yes, Shlaes worked for the WSJ and is something of a free market ideologue, but her research is excellent and fully annotated, so you are free to draw your own conclusions based on documented facts.

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In the 1920's the US had assumed the role as the leading manufacturer and creditor from the UK. The depression and the stock market selloff were less severe in the UK than in the US from what I remember.

The role as major manufacturer and creditor have now shifted to China. and Asia. I wonder how the coming bust is going to effect Asia and the rest of the world.

[psyche doctor]

Not sure if this has already been discussed, but isn't Tuesday the day when those holding Lehman's default swaps need to settle? Anyone with expertise in this area have any idea how this will effect the equity markets?

[DrStool]

From fundamental point of view I just don't see how the current economy could be compared with 1929. We are firmly in the 1930. The first credit shock and first margin calls happened in August of '07 and this January. We are already in second wave of the recession.

 

There was no recession and no government intervention in 1929. The problem came out of blue.

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I make no pretense of trying to link the market with the economy on a cause and effect basis. The discovery of the unemployment correlation was an accident. The cycle pattern comparisons are based on price cycle patterns.

 

The thing that terrifies me more is that all this worthless debt is now being replaced and/or backstopped with US Government paper. So we now have close to a trillion in Treasuries backed by... NOTHING,, no highways, no tanks and warships, no educated babies who will grow up to become taxpayers, and little chance of recovery upon maturity or sale of the asset.  It will have to be paid off by future government revenue streams that will be inadequate to meet debt service.  We cannot pay this bill, and it will only get worse as the economy weakens. Every rescue package, every stimulus plan, every government program that adds to the Federal Government's debt load will only make the situation worse and worse and worse.

 

Doc, many times you have said something like this and I understand and agree. So what will happen? The way I see it we have two choices 1.) print money or 2.) default on our obligations. Maybe you have another alternative but I would appreciate it if you share your thinking here. It is a very important question to answer. It makes the difference between wether we have a hyperinflationary depression or a deflationary depression. I personally think helicopter Ben already told us what he would do...PRINT.

Weimer Germany's answer was printing because of their heavy war reparations. Those ReichMarks can back into Germany and caused hyperinflation like no other.

 

It seems a lot of folks on this board are thinking a deflationary depression. I always thought hyperinflation because of the Baby Boomer Social Security obligations and there was no other way to meet those payments without printing. Who will buy another $2 Trillion dollars of Treasuries each year for the Boomer SS payments and Medicare? After reading John Williams on hyperinflation, it seems like a done deal. Add Peter Schiff and a few others and the opinion seems pretty broad.

TIA

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The Fed has already started printing. Big time. They just aren't doing it in the ways we are accustomed to.

 

How will this offset the deflationary collapse that is under way? Isn't it pushing on a string? Japan tried the same thing. Didn't stop their deflation, and didn't help the prices of commodities or precious metals.

 

I have said many times that I have no idea how this will turn out. I can't say it any other way. I just don't know. I just follow the charts and try to interpret them. I don't think that they can tell me whether we will end up with deflation or inflation. Sometimes I have intuitive flashes from looking at the charts, or from something that one of you has written. But nothing has led to an intuitive flash that we will have a hyperinflation. Seems to me we already had it.

 

The Japanese just went through this. Doc, let me help you by pointing out that all this is a normal cyclical K-wave.

 

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Japan had an enormous pool of domestic savings.

[DrStool]

For those who are unaware, I was a commercial RE appraiser and RE market anal cyst for 15 years. But before that I worked as a stock broker for 5 years, including 4 in the institutional end, briefly as a trader with an options house, but mostly in institutional sales. Before that, I had an intense interest in the markets since I was a kid. I have followed the markets closely pretty much every day since the late 1960s.

 

We need to disabuse ourselves of this silly notion that pigmen benefit from bear markets. The vast majority do not. Pigmen firms generally only fail in bear markets. As I have said many times, they are the ones now on the floor bleeding out. And believe me, they ain't that bright. They are bigger herd runners than the public at large. Hubris tends to blind people to reality and Wall Streeters have more than enough hubris to go around. Remember, the bigger they come, the harder they fall. This market has been an unmitigated disaster of the highest order for the Wall Street dealer community. It will take a generation or more for a complete recovery.

[psyche doctor]

Doc, weren't you the one who turned like 9K into something like 750K trading options for a firm? I remember the entire story but can't remember if it was, indeed, you.