A House of Cards

[deadheadskier]

It's not trading, it stopped at .16. 0 volume. Prolly already delisted at this point.

That's what I thought, but I read somewhere today a reference to WaMu, pick symbol had a Q in it though...it was near dead, but then rising. Maybe I was reading a dated article as I remember WaMu trading at 1.68 after deadline before settling at .16

 

[Moe Ghoul]

The Fund would be available for lending needs, with stipulation!
It stops right here. This is a necessary evil.
Let the markets wreck the garbage and see what emerges. Geez that sounds great idea. who is the market, traders? So they know whats best?

Yeah no thanks I think we can come up with something better

Ok. I said last week they should fund the FDIC and raise insurance limits. Sounds like they did that today. Can't wait to see what finally gets passed. Markets are willing buyers and sellers transacting/exchanging goods and services. So, yes, traders operate in many markets. I use the term "market" broadly, not limited to Wall Street.

 

[deadheadskier]

There's plenty of $$$$ out there, but they don't want to lend to each other. When does this cycle of debt end? You can't fund growth by borrowing and spending. 11.3 trillion national debt and rising.

What do you think will get that $$$$ flowing again minus a 'bail out'? I don't like the concept of a bail out and having tax payers foot the bill. I do like the things I've read about the insurance option better.

As for the debt.....I say keep income taxes just how they are, but convert capital gains into an income tax. Do that and cut spending. Of course my feelings on capital gains will slow down the $$$$ moving I asked you about it my first question.

tough situation that I have no idea what the right fix might be

I do know I've been paying a lot more attention to the market these days. I'm kicking myself as I had considered buying both Chase and Citi stocks yesterday. Could've been flipped for a tidy profit today

 

[Moe Ghoul]

What do you think will get that $$$$ flowing again minus a 'bail out'? I don't like the concept of a bail out and having tax payers foot the bill. I do like the things I've read about the insurance option better.

As for the debt.....I say keep income taxes just how they are, but convert capital gains into an income tax. Do that and cut spending. Of course my feelings on capital gains will slow down the $$$$ moving I asked you about it my first question.

tough situation that I have no idea what the right fix might be

I do know I've been paying a lot more attention to the market these days. I'm kicking myself as I had considered buying both Chase and Citi stocks yesterday. Could've been flipped for a tidy profit today

There's no easy answers obviously, otherwise I'd sell it to the highest bidder.
They should increase capital reserve requirements, raise interest rates, reward savers, reform monetary policy, freeze gov't spending at the very least, cut corporate taxes and close loopholes and allow offshore profits to be repatriated at a discounted rate, help out the local or regional banks that have maintained sound lending practices. Prevent super banks from gobbling up the smaller ones to shore up their balance sheets with deposits. I could go on and on. Regulate the OTC derivatives markets, ENFORCE the securities laws ALREADY ON THE BOOKS vigorously. What's lacking is confidence right now. It's tough to draw up a plan when the government is changing the rules willy nilly in favor of a few.

So, let's say we put a trillion dollars into the system. If 6 months or a year from now were back at square one and they need 5 trillion dollars, then what.

 

[riverc0il]

I’m not just asking about the bailout. From reading and watching the news I’m getting the impression that the real problem is credit. It seems that all businesses, no matter how successful, need to constantly barrow to stay in business. What happened to businesses being self sustaining?

It strikes me that capitalism as we know it is unfolding right before our eyes. It seems to me that government will be playing a bigger part in overseeing private businesses in order to protect the public from their unscrupulous practices.

That is kind of unfair (and I am a harsh critic of American Capitalism). Many businesses need loans to grow and expand. Businesses that don't grow (especially in the tech sector) tend to flounder. Also, many businesses need temporary loans to purchase merchandise that it will later sell to consumers during the busy season. Businesses that need to "borrow" to "stay in business" have already failed and will find a difficult time finding loans because they likely will already have bad credit. Businesses in good financial standing need access to loans for a variety of very valid reasons.

Regarding government oversight, there is a delicate balance. We saw what no oversight did to our country and its people during the industrial revolution and robber baron eras. Too much oversight is problematic for business reasons. A fine balance can and should be struck. If a bailout package is required to sustain industries, then the businesses don't feel the pain of doing things wrong so that justifies increased over sight, IMO. Which should come along with the bailout package. Doubtful tax payers will ever truly see this money earned back but that doesn't mean that the financial industry still shouldn't suffer somewhat for its excesses.

 

[Moe Ghoul]

Speaking for myself, for all the screaming about a credit freeze, I get daily solicitations and blank checks for all the money I can gorge myself on from a variety of credit cards offering 0-3% teaser rates and a transaction charge. I'm pretty sure I'm not the only person.

 

[RootDKJ]

Since the old saying goes, buy low and sell high, after talking with my FA, I bought into another mutual fund today that complements my portfolio and fits my long term plans. Year to date, I will have this at it's 2nd lowest price and the lowest it's been since August 2007. I feel pretty good about it. Time will tell.

 

[deadheadskier]

Curious where some of you learned what you have. What are your continued go to resources to stay informed?

 

[Moe Ghoul]

Curious where some of you learned what you have. What are your continued go to resources to stay informed?

Self taught, avoiding brokers, FA's, and subscribing to a few very smart guys that understand the macro issues, markets and economics. Staying current on legislation, mostly foreign news because you don't get too much real news about financials in the US anymore. Case in point: Wachovia's CEO 6 weeks ago claimed the bank was in good shape and only had 10 billion in bad loans. Turns out it was over 40 billion and they're toast. Case in point: Bernanke and Paulson claimed that the Bear Stearns bail out was an effort to prevent further problems in the financials. We know that was bullshit now. Truth: they prevented Bear Stearns from going into bankruptcy because they had paid out BILLIONS in bonuses several weeks before the failure. All that bonus money (Maseratis, Hampton homes, titty bar expenses) would have been taken back in bankruptcy court. So, They gave JPM a sweetheart deal and 30 billion to take it off their hands. But they didn't mention that on Faux Noise or CNBC.

 

[mondeo]

Here we go...

Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?

Looking at the Dow Jones, I see 5 out of 30 companies in the financial sector, counting GE. 6 last week before AIG was swapped out for a blue chip.

The deal with credit markets is that the 25 other companies on the list are hostage to credit to do major projects. Take, for example, UTC. Right now they're developing a radically new helicopter design and a radically new jet design. Even massive multinationals don't have the cash lying around to take on projects at that scale. It's constantly being invested.

What it comes down to is, if the company can make sufficient ROI to cover the interest and the future value of the money invested, everyone wins if they take out the loan. Bank makes money, they make money, and consumers get a better mouse trap.

I know I'll get blasted for this.. But we need regulations..

Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...

I don't like the whole idea of bailing out at all. That is our money, hardworking taxpayers money. I think I'll stop their.:smash:

Even though I don't like the package, taxpayers won't necessarily lose money. Same with AIG, which from most accounts I've heard, we stand to actually make money on.

This might not be the best way to go, but sometimes I think that we should let things be...maybe the economy needs to tank for a while so that Americans will learn to live within their means.

For this and other reasons.

When our exports started being more financial and service related products than actual goods.

Manufacturing has a tendency to produce lower wage jobs and lower profit margins. The key is specialization and expertise. It's harder to gain specialization and expertise in fields like financial analysis, science, engineering, etc. than manufacturing. More difficult field, lower supply of qualified workers. Lower supply, higher prices. Services (like financial analysis, and I would argue, engineering, doctors, accounting, etc.) are where we want to be on the world stage. If we don't do it, some other country will, taking money we could've had. And then we'll be back to manufacturing, but at a lower standard of living.

Unless there is some sort of assistance this credit crisis is going to create problems that most people can not even imagine yet. It a horrible spot that we are in. To sit and do nothing is the wrong answer.
You thought yesterday was bad. It was a game of chicken with the gov against wallstreet. If somethig does not pass the true problems are really going to arise. Me you and everyone you know are going to be pinched.

Absolutely. But the problem is with the bailout, we're setting ourselves up for even bigger problems.

The problem is that everyone is only seeing one side of the issue, ad only in the short term. It's either we need to save the market or we can't hurt me. But nobody is really looking long term. We do the bailout, and massive regulation follows. Bad long term. The bad debt is still there. Bad long term. Stock market stagnates, as it hasn't dropped enough to create real opportunities and nobody's actually made any money to pump back into the system. Bad. Supply of housing is kept artificially low, keeping people who can't really afford houses in them, and those who are looking to buy a house out because prices haven't readjusted to where they should be (which, at the peak, was about 2x a very steady historic level, going back about 100 years.)

Yes, without the bailout there will be a lot of pain in the next few years. But, with pain comes gain. Every recession creates opportunities for the people that were playing the bubble cautiously. And because of that, the markets, after a deep fall, will regain their footing and climb back out, and be healthy again. And stronger for learning that some risks are actually bad to take. With the bailout, none of that happens. Instead, Japan-like stagnation.

 

[RootDKJ]

Curious where some of you learned what you have. What are your continued go to resources to stay informed?

Also mostly self taught. There's tons of information out there. I got some good starters from folks over the years. I do use a FA, mostly because I don't want to deal with the "paperwork" on some things and make sure I stay balanced. It doesn't "really" cost me anything because my dad's account pays for almost everything.

Mostly I just work with mutual funds, but I'd like to start investing in ETF's. I'd also like to do some short term quick gain moves with stocks, but don't really have the time to do the additional research necessary.

 

[RootDKJ]

Self taught, avoiding brokers, FA's, and subscribing to a few very smart guys that understand the macro issues, markets and economics. .

Care to share who you subscribe to?

 

[RootDKJ]

But they didn't mention that on Faux Noise or CNBC.

That's pretty funny. LOL

 

[Moe Ghoul]

Care to share who you subscribe to?

Bill Fleckenstein and Marc Faber. You can find Fleckenstein every monday on MSN money for free. They both have subscriber sites. Faber used to post a monthly commentary on AME info, but I don't think he contributes anymore.

 

[RootDKJ]

Cool thanks, I'm always looking for new experts to read

 

[ComeBackMudPuddles]

Hey Moe Ghoul.....Is adding a big tax cut to the bailout/rescue plan, while leaving the core legislation intact, the answer???

(I think I know your response.... )

 

[ComeBackMudPuddles]

Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...

[. . .]

The problem is that everyone is only seeing one side of the issue, ad only in the short term. It's either we need to save the market or we can't hurt me. But nobody is really looking long term. We do the bailout, and massive regulation follows. Bad long term.

[. . .]

Just to say, these observations are pretty political........

 

[riverc0il]

Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...

Unless Mom and Dad step in and resque the fully grown kid after making a big mistake. The bailout wipes out the worst of the consequences and sets us up for a kid that hasn't learned his lesson and will be back at the bad stuff again after a short period of licking wounds. I don't disagree with the bailout. But I don't think it is going to help teach any hard lessons because those lessons would be too hard on everyone.

 

[ComeBackMudPuddles]

Unless Mom and Dad step in and resque the fully grown kid after making a big mistake. The bailout wipes out the worst of the consequences and sets us up for a kid that hasn't learned his lesson and will be back at the bad stuff again after a short period of licking wounds. I don't disagree with the bailout. But I don't think it is going to help teach any hard lessons because those lessons would be too hard on everyone.

Reduced executive pay + congressional oversight + upcoming regulations (if they're good) should help a little, no?

 

[Moe Ghoul]

Hey Moe Ghoul.....Is adding a big tax cut to the bailout/rescue plan, while leaving the core legislation intact, the answer???

(I think I know your response.... )

That's a whole other can of worms. I do support a Huckabee style tax system or Forbes flat tax and burn the existing tax code which is a disaster. I woulda thought that would be a bi-partisan no-brainer.