axelrod608

Market Falters: RTC 2.0 Not Working

My suspicion is that this tells us more bout these institutions' balance sheets than they want us to know. Based on the amount of derivatives in world markets - 1,000 trillion dollars - and the likihood they are concentrated in the American market, the probable reason for banks to still be reluctant to grant loans to others is that they either know or suspect the others have far more bad paper under their kimonos than they care to admit or want others to know. .

What Paulson is proposing is a blind bailout - first we shovel a ton of money into these institutions, then they show us what they're hiding in their level 3 portfolio. If Paulson were still running Sachs and another bank came to Sachs wanting to be bailed out, would he agree to give the other bank a ton of money on these terms ? No way.

Granted, the Federal government hasn't made a single decision based on sound business principles in a very long time, but isn't it about time to start ?

As for Paulson's "for my eyes only" pitch, if my government wants to dump a few trillion dollars into some poorly run, failing businesses, I want to know who's getting how much and what they are doing with it. 700B is just the beginning. They created this mess with a lack of transparency. Public policy should demand a thorough examination of all assets and liabilities, not just the ones they are willing to show us.

The more reluctant they are, the more it makes one wonder if these firms have really flat out illegal transactions buried in their unreported assets. Who says they have no "Enron" accounts ?

Finally, good public policy would also require different management. It makes no sense whatsoever to pour the greatest amount of public money in history into failing businesses and leave the management in place that created the situation. Let them flip burgers, not CDO's


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Market Falters: RTC 2.0 Not Working

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Wall Street Breakfast: Must-Know News

Kinabalu - long before the latest "bailout", the Fed opened its "discount window" splashing a tsunami of cheap credit on an inebriated, hung over financial industry. I call that "bailout", and Lehman sucked up a wholse bunch of that money. It was reported that Lehman paid midyear bonuses using some of that money. If they did, in my personal opinion they should be PROSECUTED.

There's way too many fast buck artists, casino gamblers and just plain con men on wall street these days. They make Gordon Gecko look like a choir boy. And that our Congresscritters are even considering bailing these immoral, unethical "financiers" out is unimaginable. How about a little jail time ?

Hopefully they'll get Tyrone as a cellmate. He''ll give them what the Congress won't - payback.-

Wall Street Breakfast: Must-Know News

Yes, Garya, but "leverage" is just another term for "debt" , which is the cause of this crisis. People, companies and governments need to be NOT borrowing. We have this mess because the "markets" were awash in a tidal wave of liquidity. Adding liquidity only worsens the mess.

Too many people in positions of responsibility are educated far beyond their intelligence. This is not rocket science. You don't solve a financial problem caused by too much cheap money by adding more cheap money to the market. Throw out the delusional economic theory. Leverage is only a good thing when you're on the right side. And we have an entire financial industry on the wrong side. Let them FAIL. Close their doors. Let their successors fix it. Will it hurt ? Yes. I will hurt the perps and the investors that bet on them. Why make innocent taxpayers pay for their perfidy ?

Wall Street Breakfast: Must-Know News

Follow the money. If you can. Not only is the trail opaque, one cannot even find out how much bailout money the Fed &Treasury have outstanding and to whom. Are they using the funds to pay off the CEO's yacht, jet, Aspen condo ? It was reported that Lehman used bailout funds to pay officer and employee bonuses. Or are they buying MORE leveraged "investments" in a frantic attempt to get back in the game ? This is casino gambling, not finance.

Before giving any company a penny in bailouts, they should require the resignations of the officers, directors and supervisors of the product areas that got them in trouble. Why give anything to the irresponsible people who ot them into this mess ?

The assumptions are that this mess can be fixed. That fixing it will have a positive outcome. That the folks who created the mess can run their companies better after a bailout than before . That the American economy is strong enough to withtand the stress of a bailout. That America's pension plans, etc. can be saved. I see little evidence that any of the assumptions are valid. Worse, I suspect most of the actors in this off Broadway play have even considered them.

This appears to be the epitome of "throwing good money after bad".

The British never conceived that it was possible that the Empire would ever end. Same for the Egyptians, Romans etc. The American balance sheet says "this is not going to work". And our "leaders" are, yet again, not paying attention.

Wall Street Breakfast: Must-Know News

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Armageddon Postponed

Correct word choice - postponed. When the house of cards finally does fall it will take an additional couple $trillion of government bailout money with it.

Idiots do not learn from history. The World Bank economists studied every financial crisis for a 30 year period. They concluded that in EVERY case, the length and depth of the ensuing recession was directly proportional to the amount of money the government threw at the problem to try to fix it. Our "leaders" are ignorant.

I believe it was Warren Buffet who said something to the effect that the most cosly words in the English language are "This time it will be different".

What we have here is the ignorant leading the blind.

Going to Hell in a Handbasket: The Rush To Protect More Stocks

Hey, pay attention. The idiot financiers that ruined the nation's financials gave millions to the campaigns of the idiots in DC. OF COURSE the Congresscritters are going to bail out their buddies. Heck, it's not their money..

If You Think the Dow Did Well Today, You're Wrong

Dow ? Who trades anything on the Dow ? Unless you're one of the casino gamblers masquerading as a "portfolio manager", "investment banker", or "hedge fund trader" chances are you rarely trade any Dow stock. And if you do, you lose money. Oh, I forgot. Shorting Dow companies has been very lucrative the past few years. Does that count ??

The Financial Crisis Explained

19 years ago, the most expensive real estate and stocks in the world were in Japan. Years of "irrational exuberance" and a flood of money had pumped up an enormous bubble. Perhaps not identical to 2008 USA, but very similar circumstances. !8 years ago, the bubble in Japan popped. Japanese banks and financial institutions were suddenly facing bankruptcy. Japan's leaders felt that the banks were too big, too important to fail, so the government stepped in, flooded them with money so they wouldn't fail. At the same time, the Nikkei stock exchange tanked. They"saved" the banks. But at what price ? Today, after 18 years, you can still buy real estate and stocks in Japan for half or less than you would have paid 19 years ago.

Was this an unusual outcome ? No. Economists at the World Bank studied all national financial crises for a 30 year period - over 100 events. Their conclusion was that in EVERY case, the amount of money the country poured in to fix the problem was directly proportional to the length and depth of the ensuing recession. So why are Bernanke, Paulson, the Fed, the Treasury all pouring massive amounts of money into a bunch of insolvent companies ?? One reason - the underlying assumption is that while individual companies are "too big to fail", the US government is not. The assumption is that our economy is unbreakable. Personally, I think it is very unwise to test that assumption.

At best, if the Japan experience hits us, and the World Bank study says it will, we will have a flat economy for the next decade or two, real estate prices will end up at about 50% of what they were in 2005 and we will have a bunch of inefficient, overstaffed, bureaucratic banks and financial institutions still run by the same irresponsible folks who got us into this mess. Worse, the financial sector will be run by the government which has proved for decades that it is incompetent at everything it touches.

What the US government is doing is nationalizing the financial sector of the economy. Bernanke and Paulson are protecting and rewarding their incompetent buddies on Wall Street with no regard for "we the people" on Main Street. Anyone who thinks this is all going to work out swell had best take off the rose colored glasses. We are on the yellow brick road to ruin led by people who are going to repeat the disasters that history predicts for those who are paying attention. Our "leaders" just are not paying attention.

I hope I'm wrong. But if I were betting my money on it - and we all are - I'm buying gold.


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Wall Street Breakfast: Must-Know News

"investing" these days is like playing russian roulette. It no longer has much to do with valuations, it all depends on what one part of the government or another is doing. Here I sit with stocks and options I;ve researched, done my due diligence, and it all goes out the window on a tidal wave of liquidity, a change in the rules, a whim or a whisper.

It would be different if the federal government had a track record of fixing or solving ANYTHING. Heck, they're the worst run "financial" in the world. Pouring trillions of dollars into insolvent companies run by greedy idiots is not a solution. It is foolishness.

Wall Street Breakfast: Must-Know News

I assume one can still buy puts, so is there such a huge volume of short sales to make a significant difference ? Where can one find numbers on short sales ? I've read in numerous places that "short selling is a problem" but so far nobody backs that up with any numbers.

Wall Street Breakfast: Must-Know News

Ditto. Yesterday I suggested buying gold and my long calls grew fat.

And I repeat, the domino effect in the financials has just begun. With over 1,000 trillion dollars of derivatives around the world, some of which have sold for 25 centys on the dollar, the losses reported so far are the bare tip of the iceberg.

And with central banks pouring in additional liquidity the problem cannot be fixed. Heck, the problem grew because of excess liquidity. Too much money chasing questionable derivative "investments".

And yet again, the World Bank studied all global financial crises over a 30 year period - over 100 incidents. They concluded that in every case the crisis was prolonged and deepened prportionately to the amount of money the country threw at the problem to try to fix it. Anyone who expects this crisis to work out differently might try the view sans the rose colored glasses.

What Paulson and Bernanke are doing is pouring gasoline on the fire. This is, pure and simple, corporate welfare, financial socialism."Free" market economy my youknowwhat. This will end badly. Worse than if the meddlers in DC had stayed out of the fray.

Ultimately, credit default swaps must be outlawed. The only reason companies would buy such opaque "investments" as there are in the heap of dubious derivatives, is because somebody would insure them. Markets need to go back to "caveat emptor" where buyers do their due diligence to determine the true worth of something before they "invest" billions of shareholder or investor dollars in it.

Wall Street Breakfast: Must-Know News

The underlying assumption of all these bailouts is that the US government cannot fail. It's beginning to look like that assumption may not be correct.

The derivatives problem is rather simple. There now exist worldwide over 1,000 $Trillion - yep, a QUADRILLION - in face"value" derivatives. Some (much ?) of that face value is based on real estate values, which in most parts of the world are in decline. Best case scenario is probably somewhere around a 12% reduction in "value" of derivatives and 12% of a quadrillion is an exceeedingly big number. Even if it were 2% it would be huge. And some derivatives have been sold at 25% of face value. Do the math.

The domino effect is in play. EVERY insurance company, brokerage, financial institution, REIT, pension fund, money market fund, bond fund, annuity fund, hedge fund, etc is holding derivatives. Therein lies the problem. First, they do not know the the market value of the derivatives they hold and second, those that have foreclosures, bankruptcies, etc, are producing less income. The net effect is that assets are less than face value and income is less than planned fior. Together they are a double edged sword affecting both capital and income stream.

Finally, Bernanke, Paulsen and the other bailouters are NOT looking out for the well being of the people. They are looking out for their buddies in financial businesses. The World Bank did a study on every national financial crisis for a 30 year period. Their conclusion was that in EVERY case, the crisis was proportionately lengthened and worsened by the amount of money the nation poured in to try to fix the problem. What the Treasury and the Fed are betting on is that this time it will work out differently. Which is what Albert Einstein said was another definition of insanity.

I hope I'm wrong. But if I were betting with my money - and we all are - I'm buying gold. Y'all might consider doing the same.

Wall Street Breakfast: Must-Know News

The criteria for getting any and all Fed subsidies should include removing the officers and directors who got the company into trouble and requiring repayment of any bonuses paid in the past, say, three years.

It is the height of insanity to reward the very same people who pursued the disastrous policies that put their companies in jeopardy.