James Quinn

Fannie Mae: Trading Derivatives...and Losing

The U.S. taxpayer is losing not Fannie and Freddie. We own these pieces of shit.

theburningplatform.com...

Turning Japanese: The Audacity of Reality (Part 3 of 3)

I'm tired out by our dispute. Let's agree to disagree on how things will turn out. I hope for the best.


On Feb 03 10:01 PM BS Detector wrote:

> My my, you had a productive morning, didn't you? Let's sum up your
> latest assertion: because I've been wrong in the past, I'm wrong
> now. Okay - I guess we can stop listening to anybody who's ever expressed
> an opinion or made a prediction that didn't come to pass.
>
> And everybody who's lost money in the last year? You certainly can't
> believe anything they say and should pay no attention to them. Lord
> knows you can't learn anything from them.
>
> Clearly from the two articles you linked, you know something about
> banks. Also beyond dispute is that you were ahead of the curve on
> their downfall. Which begs the question - why so defensive? You took
> liberties of hyperbole and chose some words poorly - it seems much
> of this could have been dismissed as shortcut-taking in a story telling
> a fairly complex tale. Other things were assumptions you made that
> turned out to be wrong; fairly simple to yield when a little research
> reveals the error.
>
> But instead you wouldn't yield a single thing, as if every data point
> in your piece was thoroughly researched, when clearly they weren't.
> I don't think you've helped yourself much by being so defensive about
> these things that you have yet to adequately defend. Perhaps it would
> have been wiser to just take the loss and move on.
>
> But hey, what the hell do I know. I'm just another loser in the crash
> of 2008.
>
> By the way, you still haven't explained how we'll end up with a hyperinflationary
> crash.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Yes, we know auditors always get it right (ENRON). Below is some of your best analysis from July 2008 through Oct 2008. I sure wish I had bought XLF as you urged at $20.14 so I could lose 55%. GE was a great buy at $26.53, for a 56% loss. You seem particularly fond of GS. $131 on October 2 when you were so sure of its strength. $82 today. Only down 38%. One of your better picks. The blogosphere is wonderful. Your words live on in infamy.

• Goldman Says "Trust Us"
Does anybody believe that Warren Buffett wrote a $5,000,000,000 check without seeing under the GS kimono?
Oct 02 10:17 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• How Will Freddie and Fannie's Lifeline Affect US and Asian Banks?
"both Fs have had to get government support..."

Not at all. Strictly speaking, no additional support has occurred. The news is that the government is working on changes that would provide greater support IF IT'S NEEDED. It hasn't yet been needed.

"...the last mortgage “up” cycle lasted from September 1999 (when annual growth in mortgage lending contracted by 5%) until November 2005, when it peaked at an annual rate of 44%. Back of the envelope work suggests that “down” cycles last an average of three years, suggesting that the current down-cycle will last until around the middle of 2010."

Um, if the last up cycle ended in 11/05, and down cycles last three years, how do you get to mid-10?
Jul 14 03:50 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Fannie Mae Trade Idea: For Aggressive Investors Only
$9.60? $8? You mean you think FNM is going DOWN? I don't think so, pal. Didn't you read the news? The fix is in!

Sheesh. You might as well say that we might want to buy Apple if it touches 150 on Monday.
Jul 14 03:36 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Fannie and Freddie: When the GSEs Go, So Goes the Dollar
"Unemployment is increasing. Therefore real estate won't bottom until 2010-2013 because people without jobs can't buy houses."

First off, I questioned his 2012-13 timeframe; 2010-2013 as a target for the bottom is so broad as to be meaningless. I'm going to pick the World Series winner; it will be a team that plays on natural grass.

What makes you think employment will be lower in two years than it is now? Since 1960, there have been only five years when employment declined, and only twice has there been less employment than there was two years earlier (1992, 0.25% less than 1990; 2002, 0.3% less than 2000). Even the 1981-2 recession, which was far worse than either 1992 or 2002, saw employment rise in any relevant two-year timeframe.

Also, the correlation is weak. During the 1990-1992 period, housing prices declined 4.9% (by far the largest drop since 1987); however, during the 2000-2002 period, they increased 24%.
Jul 13 02:46 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Fannie and Freddie: When the GSEs Go, So Goes the Dollar
Real estate won't bottom until 2012-2013? Why? There wasn't a spike in new housing that corresponded to the bubble; in fact, the current decline in housing starts PRECEDED the June '06 market top by a couple of months.

According to the latest Case-Shiller report, we're 20% off the market top already, two years into the decline. I expect prices to decline another 5-10% and start to recover at some point next year.

Jul 12 16:14 pm |Rating: 0 -1 |Report abuse |Link to Comment | View article
• To Have and To Hold: Why a Bailout Would Weaken the Dollar
"Further indebtedness, everything else being equal, is bad for a currency."

But it's not equal. The debt run up over the last eight years, for example, has bought us very little in terms of real assets. The $5T of debt that FNM and FRE insure (note, they insure it, they don't hold $3.5T of it) comes with something close to $5T of real property. So while nationalizing FNM and FRE would add a huge amount of gross debt, it would add a very small percentage of net debt to the "balance sheet" of the U.S.

By the way, 99% of the mortgages backed by FNM and FRE are current. So while there is $5.2T of liabilities, actual bad mortgages are exceedingly unlikely to exceed 5% of that, or $250B. And in the worst-case scenario, the underlying property will likely be worth (out of my orifice number) 60% of the mortgage value, so the MAXIMUM loss from FNM and FRE won't exceed $100B.

The national debt, including that held by trust funds, stands at $9.5T. So the worst case scenario would add just 1% to the national debt.

The sky is not falling.

• Weekend Thinking: An Agency Recapitalization Proposal
"Compare median income to median house prices for the period 1996 to 2006 (the top of the housing market). Gather the information and calculate that house prices could decline over 50% from the top from mid 2006."

Why do you think that real estate is so massively overvalued? I mean overvalued, sure - but 100% overvalued? Are you kidding? Why do you think that the previous (low) valuations were "correct"?

You also don't seem to want to include any other pertinent factors, such as increasing home size. There is no easy linear comparison.

BTW, we're 20% below the peak as of the last report, and there are indications that some areas are improving.
Jul 11 16:30 pm |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Fannie and Freddie: When the GSEs Go, So Goes the Dollar
Agreed, bonds fall in value as rates increase. But there are two points here.

First, I think the market for MBS has overreacted. If this assertion is correct (which BAC and MS certainly think), the mark-to-market requirement has led to more write-downs than necessary, which has forced lots of unnecessary de-leveraging. Those who are able to hold these under-valued assets for long enough will see them increase as the market's valuation comes back to reality. Eventually, if a bank like BAC is able to hold all of those CFC mortgages, the current write-downs and losses will be replaced by "write-ups" and profits. Of course, it's all paper - the assets haven't changed.

But the bonds are not the underlying security; the real property is. The value of the real property, which has fallen significantly and will fall some more or be stagnant, will eventually recover and increase. Always has, always will.

I was careful to use the word "possible" to describe a potential reduction in leverage. Certainly, the government has a hefty asset base; a quick search didn't find anybody trying to value it. However, I can say that most federal land is quite low in intrinsic value.

Finally, certainly the government doesn't need to add millions of mortgages to its balance sheet. My point is that if it did so, the impact would not be nearly as large as you suggest.
Jul 10 11:11 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Fannie and Freddie: When the GSEs Go, So Goes the Dollar
I think you're missing a huge part of the story here, and overstating the effects on the dollar.

IF the government were to assume FNM and FRE assets and liabilities, it's not like the addition of debt we've incurred over the last eight years. There are substantial underlying assets. It's quite possible that an assumption of FNM and FRE, with some $3.5T in debt would actually REDUCE the leverage of the federal government in real terms.

Look at it this way; say FRE and FNM have between them $3.5T in debt, and the underlying assets have fallen to $3.3T in value. I haven't looked, but I'm pretty sure that $200B would more than make the companies insolvent.

So the federal government would take a $200B balance sheet hit by assuming FRE and FNM. So what? That's less than half of the current annual deficit, and less than 4% of the national debt.

And it's not like those underlying assets are going to continue to decline forever. No, eventually, the mortgages held by FNM, FRE, or whoever are going to regain and then exceed their original values. So whoever holds them at the end will see a potentially huge addition to the balance sheet.

Would be a very... interesting way to reduce the national debt.



Jul 10 09:44 am |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Financials: Down, Down, Down
Long term, the sector's undervalued. Which firms are in better shape and which are in worse shape? I dunno.

XLF. Add to it as we go.
Jul 07 18:33 pm |Rating: 0 -1 |Report abuse |Link to Comment | View article
• Valuing GE (It's Cheap)
g7enn wrote: "GE is virtually bankrupt. Check out it's Cash Flow..."

You might want to look up "bankrupt." Then look up "cash flow." Then, just for kicks, see what you can find on "long term." See if you can put it all together.

Here's a hint: 2007 earnings - $22.2 billion; 2006 - $20.7 billion; 2005 - $16.7 billion.

Bottom line.

"It's [sic] cash flow is coming from its borrowings."

Really? I'm looking at cash from operations, which appears to be up some 65% in the last 5 years.

"It's cash flow for 2007 was under $2M."

Right. POSITIVE cash flow. Hardly the sign of a pending failure.

"What happens to GE as the financing and credit situation worsens?"

It continues to lose money (mark-to-market) from certain investments, and continues to generate ENORMOUS amounts of cash from operations. And at the end of this credit problem, there will be some big winners - who's to say GE ends up worse than average?

"Debt/Equity ratio is 4, way too much debt."

And Goldman's is over 10. Do you also think Goldman's about to fail?

"Where is it going to get the money to finance operations? From Bernanke?"

Pay attention. Operations generate ENORMOUS amounts of cash.

"If you fail to understand the above then take a look at its stock price, going the way of Bear Stearns and why are investors buying so many puts on this company if it wasn't about to go bankrupt?"

Here's a newsflash for you: for every put buyer who thinks the company's going down, there's a put SELLER who thinks the opposite. Better question: why is short interest a measly 1.2% if so many investors thought GE was in such dire straits?
Jun 23 09:03 am |Rating: 0 -1 |Report abuse |Link to Comment | View article


On Feb 03 10:07 AM BS Detector wrote:

> While I don't have time right now to read your previous articles,
> I'll do so later.
>
> Regarding level 3 assets: you are correct that determining fair value
> for these is problematic (pretty much the definition of level 3),
> but I don't think you have any idea of how it's done (as I recall
> GS includes a discussion of the different processes for different
> types of asset in its financials), and I guess it doesn't matter
> to you that the processes and results must be approved by auditors.
> Given that the level 3 problem has been very public in the last year,
> I believe auditors are paying more attention to this area now than
> they have in the past few years.
>
> Now, are you done shifting your argument here? Have you found something
> you're comfortable with at this point? Because you still have presented
> nothing of substance to suggest that GS is insolvent. And have you
> given up on MS then?

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Your predictions from July 2008 are priceless. Would you like me to find a few more of your doozies? Never in doubt, often wrong.



Fannie and Freddie: When the GSEs Go, So Goes the Dollar Anil -

There are a couple of factors at work here.

For those not in dire financial straits, the value of the underlying real estate is not material. The homeowners are the ones who suffer the (paper) losses; it's only if they can't pay the mortgage that the banks face losses. The house I bought in 1994 for $142K promptly lost some value - this had no impact on my ability to pay the mortgage, because that ability was not related to the value of the house, but rather to my having a job.

The vast majority of mortgage holders are not in danger of defaulting. I heard (not verified) that less than 2% of mortgages are currently in some sort of default, whether that's foreclosed, in the process, being sold short, or more than 60 days late. Without foolish government action, I expect this number to increase modestly into the middle of next year, after which almost all of the people who do not belong in the houses they bought will be flushed out. After that, all losses will have become real (instead of paper) and the remaining mortgages will eventually regain the (paper) value they have lost. The "eventually" is the key; how long will the market continue to undervalue mortgages that have very little chance of default?

Next, real estate values. Remember, the GSEs and banks don't carry the assets, but rather the mortgages. I believe the market is significantly undervaluing these mortgages. So the underlying value of the real estate is not at issue, except in those cases where people bought more house than they could afford, or were sold mortgages that screwed them. I expect 99% of those cases to pan out, one way or another, in the next 18 months.

The rest of the mortgages will continue to behave as expected. These assets will, once the dust clears, have regained their original value based on reasonable risk assessments. And just as their undervaluation in the market has contributed to the losses we're seeing now, so will their re-valuation contribute to large future profits.

But, to answer the question, I don't think it will take too long for real estate to regain the lost value. Since 1975, the median home price has increased about 6% per year (through 08Q1). Not a world-beating ROR, but based on that I expect it will take not longer than five years to regain the peak, assuming a further 10% drop from 08Q1.

But remember, most of that drop from the peak has already happened; the 08Q1 number is down 16.2% from the peak in 06Q2, and I think most of the remaining drop will be reflected in the Q2 and Q3 numbers.
Jul 11 15:09 pm |Rating: 0 -1 |Report abuse |Link to Comment | View article


On Feb 02 11:16 PM BS Detector wrote:

> Not much BS, so little time.
>
> "Goldman Balance Sheet @ 11/28/08
> Long term Investments $564 mil
> Short Term debt $208 mil
> Long Term debt $307 mil
> Equity $ 64 mil"
>
> Now go back and look at the 11/07 numbers. Since then, GS has reduced
> its balance sheet by 24% while increasing its equity position by
> more than 97% (67% without TARP). GS exceeds the capitalization ratios
> required to be "well capitalized" by quite a lot. MS by even more.
> Do you know anything about banks?
>
> "Is the $564 mil worth less than $500 mil? Very Very likely."
>
> First off, I don't know why you left out some $260M from the balance
> sheet - I have no idea how this helps you make your point. The broad
> market's down 7% since 11/28. You're saying that GS has lost 50%
> more than that? You really think this is "Very Very likely"? I would
> put this is the "remote" category.
>
> "We shall see who is right."
>
> No, we already know. I'm right, you're wrong. The FDIC and the Federal
> Reserve are keeping a VERY close watch over both GS and MS. The only
> thing you have explaining your absurd assertion of insolvency is
> your belief in a massive conspiracy.
>
> "MS laid off 7,000 in 2008 and announced 1,500 more today. Sounds
> like a company in trouble to me."
>
> You said "insolvent," not "in trouble."
>
> "You want indisputable proof. I watch what companies do, not what
> they say."
>
> No, actually I want any evidence whatsoever, and you have none. But
> by your standards, I guess Home Depot is insolvent, right?
>
> "We shall see who is right."
>
> Again, we already know. You've provided nothing to support your assertion.
>
>
> "I'm sure AIG would admit to undercutting competitors because they
> have no worry about insurance losses because the US taxpayer is paying
> their losses. I beleive (sic) good ole Hank G knows a little bit
> about AIG. He created the disaster. You should throw in the towel
> on this one. Cutting prices by 60% is ridiculous."
>
> And again, you cite an article that doesn't even give a quote from
> an AIG source, or as I recall even from a non-competing broker. The
> thing could have been an advertisement by AIG's competitors. Oh no,
> you're not biased at all.
>
> To the FNM and FRE stuff. First you provided a link to something
> talking about the two companies' lobbying, which never had a prayer
> of supporting whatever it was you were accusing Barney Frank of.
> Now two of the links you provided have absolutely nothing to do with
> FNM and FRE, but rather with TARP and Frank's push to force the recipients
> to do more lending. The other is related to FNM's Home Path program,
> under which it's trying to sell FNM-OWNED homes for as little as
> 3% down. First - no link between the program and Frank, and second
> - would you rather they DIDN'T try to sell the government-owned inventory?
> Sorry, but I think that's three strikes on this one. Just admit you're
> much more biased than you claim and take a seat.
>
> Japan: "Massive stimulus began in the early 1990's. Read the paper.
> It failed."
>
> Sure. But since I wasn't talking about fiscal policy in the least,
> you just make yourself look foolish by bringing it up.
>
> "I'm sure glad consumer and corporate debt aren't haiving an impact
> on the economy. Only government debt matters. I'm glad we cleared
> that up."
>
> Sigh. Again, with the mischaracterization. You wrote this big article
> claiming that the indebtedness of the US citizenry will have this
> big impact on the US Government's ability to borrow. Unfortunately,
> you're unable to support this assertion in the least - that would
> require some analysis instead of regurgitation, because I doubt any
> academic has reached such an absurd conclusion.
>
> You know, this might have gone a lot better if you'd been able to
> own up to your mistakes.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

$66 billion of those assets are Level 3. Mark to whatever you want them to be. I do believe GS has lost more than 7% because many of the "assets" are worthless pieces of crap. You actually believe what the banks are telling you? Are you that naive? They have been lying to their shareholders and the public for the last two years.

I think I had the banks well pegged back in July of 2008, well before the truth came out. I don't believe what I'm told by criminals. I do my own research and come to my own conclusions.

seekingalpha.com/artic...

seekingalpha.com/artic...

Now you can get to work tearing down my logic from these articles. Please note that the first article was written months before the banking system collapse.




On Feb 02 11:16 PM BS Detector wrote:

> Not much BS, so little time.
>
> "Goldman Balance Sheet @ 11/28/08
> Long term Investments $564 mil
> Short Term debt $208 mil
> Long Term debt $307 mil
> Equity $ 64 mil"
>
> Now go back and look at the 11/07 numbers. Since then, GS has reduced
> its balance sheet by 24% while increasing its equity position by
> more than 97% (67% without TARP). GS exceeds the capitalization ratios
> required to be "well capitalized" by quite a lot. MS by even more.
> Do you know anything about banks?
>
> "Is the $564 mil worth less than $500 mil? Very Very likely."
>
> First off, I don't know why you left out some $260M from the balance
> sheet - I have no idea how this helps you make your point. The broad
> market's down 7% since 11/28. You're saying that GS has lost 50%
> more than that? You really think this is "Very Very likely"? I would
> put this is the "remote" category.
>
> "We shall see who is right."
>
> No, we already know. I'm right, you're wrong. The FDIC and the Federal
> Reserve are keeping a VERY close watch over both GS and MS. The only
> thing you have explaining your absurd assertion of insolvency is
> your belief in a massive conspiracy.
>
> "MS laid off 7,000 in 2008 and announced 1,500 more today. Sounds
> like a company in trouble to me."
>
> You said "insolvent," not "in trouble."
>
> "You want indisputable proof. I watch what companies do, not what
> they say."
>
> No, actually I want any evidence whatsoever, and you have none. But
> by your standards, I guess Home Depot is insolvent, right?
>
> "We shall see who is right."
>
> Again, we already know. You've provided nothing to support your assertion.
>
>
> "I'm sure AIG would admit to undercutting competitors because they
> have no worry about insurance losses because the US taxpayer is paying
> their losses. I beleive (sic) good ole Hank G knows a little bit
> about AIG. He created the disaster. You should throw in the towel
> on this one. Cutting prices by 60% is ridiculous."
>
> And again, you cite an article that doesn't even give a quote from
> an AIG source, or as I recall even from a non-competing broker. The
> thing could have been an advertisement by AIG's competitors. Oh no,
> you're not biased at all.
>
> To the FNM and FRE stuff. First you provided a link to something
> talking about the two companies' lobbying, which never had a prayer
> of supporting whatever it was you were accusing Barney Frank of.
> Now two of the links you provided have absolutely nothing to do with
> FNM and FRE, but rather with TARP and Frank's push to force the recipients
> to do more lending. The other is related to FNM's Home Path program,
> under which it's trying to sell FNM-OWNED homes for as little as
> 3% down. First - no link between the program and Frank, and second
> - would you rather they DIDN'T try to sell the government-owned inventory?
> Sorry, but I think that's three strikes on this one. Just admit you're
> much more biased than you claim and take a seat.
>
> Japan: "Massive stimulus began in the early 1990's. Read the paper.
> It failed."
>
> Sure. But since I wasn't talking about fiscal policy in the least,
> you just make yourself look foolish by bringing it up.
>
> "I'm sure glad consumer and corporate debt aren't haiving an impact
> on the economy. Only government debt matters. I'm glad we cleared
> that up."
>
> Sigh. Again, with the mischaracterization. You wrote this big article
> claiming that the indebtedness of the US citizenry will have this
> big impact on the US Government's ability to borrow. Unfortunately,
> you're unable to support this assertion in the least - that would
> require some analysis instead of regurgitation, because I doubt any
> academic has reached such an absurd conclusion.
>
> You know, this might have gone a lot better if you'd been able to
> own up to your mistakes.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

On Feb 02 05:10 PM BS Detector wrote:

Goldman Balance Sheet @ 11/28/08

Long term Investments $564 mil
Short Term debt $208 mil
Long Term debt $307 mil
Equity $ 64 mil

Is the $564 mil worth less than $500 mil? Very Very likely. If so, equity is negative. Sounds like insolvency to me. We shall see who is right. After firing 10,000 in 2008, they are about to announce further layoffs.

Morgan Stanley Balance sheet @ 11/28/08

Long term Investments $287 mil
ST Debt $35 mil
LT Debt $163 mil
Equity $51 mil

MS laid off 7,000 in 2008 and announced 1,500 more today. Sounds like a company in trouble to me. You want indisputable proof. I watch what companies do, not what they say. We shall see who is right.

> So for the record, you admit you have no information that even suggests
> that either GS or MS is insolvent. Okay.

But in one example of its aggressive rate-cutting, a unit of its commercial insurance division agreed to provide coverage for the Las Vegas McCarran International Airport at a price 60% below what was charged for the same policy a year earlier.

Last year the airport paid $3.54 million to a consortium of seven insurers led by Travelers Group for a property, boiler and machinery insurance policy worth $1.7 billion, an airport spokesman said.

This year the airport got its coverage from Lexington Insurance Co, a large AIG unit, for just $1.4 million. The insurer agreed to take on the airport coverage with one other insurer, compared with the seven that had been on the program the prior year, leaving fewer carriers to shoulder any potential losses.

By selling policies for less while taking on more risk, AIG is raising the chances that it will be hit by large losses. It also makes it harder for other insurers to sell policies that are priced high enough to cover potential losses.

“Cutting rates at a time when rates should be strengthening is a quick way to going out of business,” AIG’s former chief executive, Maurice “Hank” Greenberg, a frequent critic of the company’s management, told Reuters

I'm sure AIG would admit to undercutting competitors because they have no worry about insurance losses because the US taxpayer is paying their losses. I beleive good ole Hank G knows a little bit about AIG. He created the disaster. You should throw in the towel on this one. Cutting prices by 60% is ridiculous.


>
> AIG: "American International Group is slashing prices to win new
> business, industry insiders say..." The Reuters article then quotes
> AIG competitors. It doesn't include a single quote from AIG, which
> the original FW article, two weeks earlier, did include: “We are
> not sacrificing rate to retain market share. In fact, since mid-September,
> our U.S. commercial insurance operations have had several points
> of rate improvement compared to year-to-date results." Also in the
> earlier article, but not included in the one you cite: "Neil Krauter,
> chairman and CEO of New York broker Krauter & Co., said he has
> seen AIG offer reductions averaging 10% on casualty business, similar
> to the cuts being offered by many insurers nine months ago. 'We haven't
> seen AIG slashing prices or looking to do ridiculously stupid deals,'
> Mr. Krauter said." Seems to be just about as I described.

“I think this is a case where Freddie Mac and Fannie Mae are fundamentally sound. They’re not in danger of going under. I think they are in good shape going forward.” — Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008

online.wsj.com/article...

On September 10, 2003, Bush Treasury Secretary John Snow testified in congress that something had to be done to confront the growing storm at Fannie and Freddie. Democrat Barney Frank, now Chairman of the House Financial Services Committee, reacted by saying “Fannie Mae and Freddie Mac are NOT in a crisis...” completely rejecting Bush administration calls for reform.

Frank went on to say that Fannie and Freddie should do even more to get low-income families into homes. “The more people, in my opinion, exaggerate the threat of safety and soundness, the more people conjure up the possibility of more serious financial losses to the treasury, which I do not see, I think we see entities that are fundamentally sound financially, and withstand some of the disaster scenarios, and even if there were a problem, the federal government doesn’t bail them out, but the more pressure there is there, then the less, I think we see, in affordable housing.” Said Democrat Frank

Congressional Democrats then killed the 2003 bill put forth by Republicans, intended to head off financial crisis.

www.prlog.org/10175241...

www.topix.com/forum/us...

If it walks like a duck and quacks like a duck, it is probably a duck.
>
> FNM and FRE: You link to an article from July that describes their
> lobbying activities in years past. Since their lobbying stopped with
> the conservatorships, that really doesn't seem very relevant, now
> does it? Could you find nothing to indicate that Frank or any other
> Congressman is doing anything now? I mean, you seemed so sure of
> yourself, surely you had some basis for that, right?

No response needed. Greenspan caused the crisis with 1% rates.
>
> The Fed "keeping interest rates too low for too long": This is clearly
> a topic on which many people expound quite a lot without ever doing
> anything but repeating what they want to hear. While I haven’t yet
> read the paper you linked to, I’m guessing you haven’t either, or
> you‘d be able to find some words to explain your contention.

Massive stimulus began in the early 1990's. Read the paper. It failed.
>
> Japan: You provide a link to a Mises article written in 2002. Skimming
> it, it doesn’t even appear to address the “quantitative easing” which
> began in 2001. This supports your assertion how?

I'm sure glad consumer and corporate debt aren't haiving an impact on the economy. Only government debt matters. I'm glad we cleared that up.
>
> Now, the dollar figure. Hey! You got one! I thought you were talking
> about the various bailout efforts to date, counting them all as spending.
> But here you’re talking about the government’s actual debt. Great!
> Now why didn’t you rely on this when talking about how much the government
> can borrow, since it’s clearly much more applicable that the combined
> debt of all the citizenry?

WE still await your article, but you seem to be delaying the imparting of wisdom that we all look forward to.
>
> At this rate, you’ll effectively address my legitimate questions
> by… about the same time the recession ends.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

I agree. It can't be one-sided free market against the other side state supported. I think this is the biggest threat to further downside. Social unrest will make politicians even more protectionist.


On Feb 02 12:09 PM dpro0102 wrote:

> Ya Jim - I think your comment is correct - I'm not advocating protectionism.
> My point is - do you really want to argue about Free Market Capitalism
> in your market when your domestic companies are competing with others
> that are protected? Death to the domestics while the protected Japanese
> prosper? How does that help the U.S.A?

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Bankruptcy would allow the US car companies to come out debt free and right sized to compete in the global marketplace. They wouldn't go out of business. If the entire world decides protectionism is the way to go, this will be THE GREATEST DEPRESSION.


On Feb 02 10:15 AM dpro0102 wrote:

> Good article - but I think you've missed an important point. You
> want GM and Ford and Chrysler to fail - but you also point out just
> how much of our GDP depends on consumer spending. It seems that the
> Japanese car makers currently have the competitive advantage - is
> this perhaps a by-product of 2 decades of Japanese Government protectionism
> via currency manipulation? Cars are one of the last things here in
> the good ole' USA that contribute to the GDP outside of consumer
> spending. You really want to keep giving those industries away under
> the guise of 'free market capatilism'? You're headed for 90%+ consumer
> spending for the GDP - and that (in my opinion) makes you a 3rd world
> country. It sure isn't free market in Japan! (The #1 importer of
> cars in Japan (heavily taxed and tarrifed) is Mercedes Benz - and
> their Market Share in Japan is a 'whopping' 1.6%!) Give up our domestic
> industries under the arguments of 'free trade' and 'capitalism' to
> countries that don't play the same way - and you may as well be losing
> a ground war to them. Wake Up!!!

Turning Japanese: The Audacity of Reality (Part 3 of 3)

I have given up trying to win this argument. You have changed my opinion.

I now believe that all of our financial institutions have come totally clean regarding what is on their balance sheets. None of them have misled the public thus far. Goldman Sachs and Morgan Stanley are so strong that I'm sure they will refund the TARP money to the American taxpayer.

AIG wouldn't dare use TARP funds to gain an advantage in the insurance market. They are too moral for that.

financialweek.com/apps...

Fannie & Freddie are the bastions of excellent lending standards who would never be influenced by politicians.

www.usatoday.com/money...

The Federal Reserve has saved the country. Thank God for Alan Greenspan and 1% interest rates. We owe him an eternal debt of gratitude.

www.dailyreckoning.com.../

www.business.cch.com/b...

The Japanese clearly didn't print enough money to try and get out of their financial doldrums. That was the problem.

mises.org/story/1099

I apoligize for making up the $10.7 trillion national debt number. That can't be verified anywhere.

zfacts.com/p/461.html

You are the master. I bow down to you. And WE continue to await your words of wisdom.



On Feb 02 09:12 AM BS Detector wrote:

> Quinn wrote: "I guess your not making much progress on your ground
> breaking article that will show us the way out of our financial crisis.
> We breathlessly await its publication."
>
> First, I never indicated that I would write anything that would have
> all of the answers. I think I'll probably write something about past
> and current monetary policy, since there's so much misinformation
> on this floating around. Second, why do you suddenly believe you
> speak for anybody but yourself? Or is that the royal "we"? Third,
> have you given up on trying to win this argument? Let me remind you
> of something you wrote:
>
> “I'm not biased. I back up my statements with facts. You should try
> it.”
>
> Now let’s see…
>
> “Goldman Sachs (seekingalpha.com/symbo...), Morgan Stanley
> (seekingalpha.com/symbo...) and any other insolvent banks
> need to be wiped out.”
>
> Any facts supporting the contention that GS or MS are insolvent?
>
>
> “AIG is using these funds to undercut other insurance companies in
> pricing insurance policies.”
>
> Any facts supporting this?
>
> “Fannie & Freddie are being pushed by Barney Frank and his distinguished
> colleagues in Congress to provide more 3% down loans to people who
> won’t pay them back."
>
> Anything?
>
> “Despite the fact that this crisis was caused by the Federal Reserve
> keeping interest rates too low for too long...”
>
> Anything at all?
>
> “The Japanese tried to inflate out of the crisis and failed.”
>
> No? No timeline of Japanese monetary intervention?
>
> “You are gung ho for spending $1 trillion that we don't have after
> we've spent $10.7 trillion we don't have, and $53 trillion we've
> committed to spend with social programs.”
>
> I asked you what went into the $10.7T figure. Any idea?
>
> “My BS detector senses an ultra-liberal Obama disciple who believes
> government can cure all of our ills... Let me guess - you're an aid
> to Barney Frank or Nancy Pelosi... In you warped world, any and all
> spending is good, especially by the government.”
>
> I threw in those just for kicks, to show how “unbiased” you are when
> it comes to responding to those who dare question you.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Thanks. I do have a real job. I do commute two hours per day, so the articles write themselves in my head while I'm on the Schuykill Expressway.

The effect of free market forces will not be pleasant. We definitely risk a depression. Trillions of debt need to be paid off or written off to get our country back into balance. Our standard of living will decline. But you have to realize that our standard of living for the last 28 years has been built on a false foundation of debt.

By spending $1 trillion and printing money, we may push off the inevitable reckoning, but it will end up being worse. I think is time to take our medicine now. I think we should boost funding for food stamps and unemployment to keep a net under those who are most affected.

There is no easy solution, just tough choices. Sorry.


On Feb 01 03:07 PM beenburnedtwice wrote:

> As usual, very well written. How do you have time to produce such
> a logical treatise? Don't you have a job?
>
> Like One Eyed Guide above me though, I'm still looking for your perspective
> on the effect of allowing free market forces to dominate the next
> 10 years.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

I guess your not making much progress on your ground breaking article that will show us the way out of our financial crisis. We breathlessly await its publication.


On Jan 31 11:29 PM BS Detector wrote:

> Quinn wrote: "Regarding your contention that 70% to 80% of newly
> issued debt is not bought by foreigners, please go... [wikipedia.]
> Foreign holdings increased by $750 billion from November 2007 to
> November 2008. Total US debt grew by $1.017 trillion. $750 billion/$1.017
> trillion = 74%"
>
> 1. Wikipedia? Are you serious? Do you find Wikipedia to be a more
> reliable source than the ones I GAVE YOU, which come from the Treasury
> department? The debt increased from November 07 to November 08 by
> $1.5T according to this www.treasurydirect.gov...
> and this www.treasurydirect.gov....
> Care to run your math again?
>
> 2. "Foreign holdings" of US debt and "newly issued debt" are not
> the same thing, so even if your statistics were correct (which they
> don't appear not to be), they would not support your claim.
>
> But please, do keep trying.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Regarding your contention that 70% to 80% of newly issued debt is not bought by foreigners, please go to this link.

en.wikipedia.org/wiki/...

Foreign holdings increased by $750 billion from November 2007 to November 2008. Total US debt grew by $1.017 trillion.

$750 billion/$1.017 trillion = 74%




On Jan 31 06:34 PM BS Detector wrote:

> Ricard wrote: “The American agriculture industry has been propped
> up for decades, yet no one complains about inefficient capitalism
> or unfair market practices, because everyone at the supermarket aisle
> thinks they benefit from it.”
>
> I think this is explained better by the ignorance of the American
> consumer. First, because the costs of these policies are hidden from
> the consumer (as opposed to sales tax, for example), it’s not clear
> how much they cost. Also, there’s the matter of being used to it
> - we can’t understand how poorly we are treated if it’s all we know.
>
>
> Me, I complain about agricultural subsidies every chance I get. It’s
> the biggest American market intervention I can think of, and it costs
> consumers billions of dollars every year.
>
> “…most foreign buying (especially Chinese buying) took place SINCE
> 2004.”
>
> I used the most recent data I could find, so it's certainly possible
> that the composition of buyers has shifted to foreigners. But from
> 12.5% in the first half of the decade to 70-80% now? I'll believe
> it when I see the data.
>
> But your source here is no good for this. It’s China’s foreign currency
> reserves, which is much larger than U.S. debt holdings; it also includes
> other sovereign debt, US agency debt, corporate debt, equities, and
> cash holdings. Treasury tracks the holdings of foreign countries,
> not differentiating between governments and citizens, of all types
> of U.S. securities.
>
> By the way, the Chinese hold 6-7% of all US debt.
>
> There’s not necessarily anything sinister here. China’s been running
> a big trade surplus with the ROW in general and the U.S. in particular
> for years. Rather than convert all of its dollars and euros and yen
> back into yuan, China instead grows its holdings of foreign currencies.
> This tends to keep the yuan valued artificially low, which keeps
> Chinese exports from becoming less competitive, with the tradeoff
> being foregoing a faster increase in domestic wealth. The tradeoff
> seems to make sense with an economy growing as fast as China's has
> in the last decade (whether that continues is certainly a matter
> for debate). In addition, holding foreign reserves provides protection
> from exchange rate fluctuations. Rather than hold cash and make no
> return, China holds much of its reserves in various securities including
> sovereign debt, corporate debt, and equities. That most of these
> investments are in sovereign debt seems to me appropriately conservative.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

The average 401k balance is close to $50,000. An the median is $18,000. When there is this big of a dscrepancy, it means that there are the few with $500,000 skewing the average upwards. I think the median is a better representation of the retirement situation for the many.

If you want doom and gloom, just factor in the $53 trillion of unfunded liabilities that I didn't even mention in the article. Read David Walker for a full detail of that situation.


On Jan 31 01:47 PM Ricard wrote:

> Yikes! Just in case, here are some of my sources:
>
> www.caseyresearch.com/...
>
> For the ramp-up in China treasury buying since 2004.
>
>
> latimesblogs.latimes.c...
>
>
> This article cites that for those who know HOW to save, the balance
> is much higher:
>
> www.financialweek.com/...
>
>
> Not everything need be gloom and doom these days...

Turning Japanese: The Audacity of Reality (Part 3 of 3)

It's not rising versus gold. It is just declining at a slower rate than the pound and euro because they are in worse shape than the US.

We are the best looking horse in the glue factory.


On Jan 31 10:59 AM redsea wrote:

> Why is the dollar rising?

Turning Japanese: The Audacity of Reality (Part 3 of 3)

If you are such a good researcher you can find total credit market debt on the federal reserve website.

www.federalreserve.gov...

I can divide, can you? $51.8 debt/$14 gdp = 370%




On Jan 30 03:13 PM BS Detector wrote:

> The author wrote: "Now I recognize you. You are one of the Great
> Deniers. The debt remains like a ball and chain around our neck.
> The substantial assets aren't so substantial any more and getting
> less substantial by the day. THE DEBT REMAINS."
>
> Again with the personal attacks. And your response to my questioning
> of your statistics? No support for your assertions. I never said
> the debt was not bad. I said your statistics are a load of crap.
>
>
> "You should do a little research and write your own article. I'd
> love to proof read it for you."
>
> Good idea.
>
> "Let me guess - you're an aid to Barney Frank or Nancy Pelosi."<br/>
>
> Sigh. Can't you defend yourself at all?
>
> "I'm detecting something, and it doesn't smell too good."
>
> It's your upper lip.