axelrod608

Wall Street Breakfast: Must-Know News

Welcome back, Eli. A fine "breakfast buffet" of info, tho the news is less than rosy. Doubleguns states the overall picture well.

Regulating derivatives is critical and essential. The ONLY reason AIG had to be rescued and given $Billions of taxpayer money was their mess of stupid CDS's, for which they retained no funds to back them.

As of the beginning of 2008, the world was awash in over 1,000 $Billion - yes, that's a $Trillion - face value of derivatives, most of which had no legal backing requirement. The current financial crisis was caused by the failure of only a small portion of them. We are still at significant risk from the rest.

As for "Cetinist" optimism, the truth is that there's money to be made in EVERY market, all the time. I made money last year (barely) and I'm well ahead this year. That says exactly nothing about the underlying economy which is still swirling in the bowl.

Some people made fortunes in the Great Depression in the markets. That doesn't mean the economy is good. It means they are good traders.

Wall Street Breakfast: Must-Know News

More "Greenspin"... glad I missed it.

Wall Street Breakfast: Must-Know News

Why can't I borrow at 1.2% interest from my government ? Why is it only available to (mostly) insolvent financial institutions ? Pouring money into finacials that were weakened by thier own stupidity is throwing good money after bad.

My portfolios are still up year - to - date. Why can't people who have proved to be good money managers get some funding ? Why give it all to the foolish and incompetent ?

I'm mad as hell at our incompetent Congress and incompetent administration bailing out incompetent financials. Why keep the ignorant and foolish in business to screw up what's left of our nation's financial sector ?

Now I feel better. Needed that.

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.