pkscottx

Wall Street Breakfast: Must-Know News

Here's a link that explains derivatives in plain english:
cbsnews.com/stories/20...

Wall Street Breakfast: Must-Know News

I paid 25% down on my house and bought within my means.

I pay my mortgage and my bills and save what I can. Who's going to "rescue" me from the bailout?

Do not believe for one second that this is caused by the evil sub-prime borrower. There is a root cause for all of this and it is DEREGULATION, which like it or not is a Republican mantra. There is however, enough blame to go around.

The thing they are just now starting to talk about that has the Big Boyz soiling themselves are "Derivatives." These are "complex financial instruments" created out of smoke and mirrors by WALL STREET.

You need to know these things. Derivatives have ZERO underlying assets. They have a notional "value" of tens of TRILLIONS or HUNDREDS of trillions of dollars. Nobody knows for sure because they were completly UNREGULATED and they are opaque as MUD.

It wasn't the collapse of the Securities backed by sub prime mortgages (bad as that was) that brought down Banks and AIG, it was the failure by said intitutions to reserve enough capital to pay off if these "side bets" went bad. Nobody knows how much or who holds the liability but ALL the financial institutions, some insurance companies, and most all the hedge funds have a MOUNTAIN of this toxic garbage swept under the rug. That is the "counterparty risk" everyone keeps yacking about.

THIS is what has banks hoarding cash and eying each other with distrust.

Even if you take the lowest estimate of 50 trillion (or 50 thousand billion) you can see that the "bailout" of $700 billion is like trying to bail out the ocean with a soup spoon.

If you take the higher estimates of hundreds of trillions, you are talking about more than the entire annual GDP of the entire freaking planet!

Lest you think I exagerate, look at Iceland. Ponder on the fact that some nations in Europe have guaranteed all deposits in their banks, to the tune of 3 times their annual GDP.

Either we let the institutions and the investors who took the risks fail and go bankrupt or we bankrupt the whole planet.

Banning Shorts Works in Fancy Restaurants, Not the Marketplace

Maybe instead of protecting the Financials from short sellers we should protect the companies that have a smaller pool of stocks. Those are the truely vulnerable companies that hedge funds can aggressively short and do real undeserved damage to.

A Magic Multiplier?

Houston we have a problem!

We have a financial system that is run by "economists" like this one who believe the absurd notion that you can build a prosperous economy out of a mountain of debt.

This is a classic Ponzi scheme that works really fine untill you stop shoveling debt into it.

Unfortunately this mountain of debt is built on the back of the American consumer and we are TAPPED OUT!

This truely awfull "bailout" is an end game ploy to force the US taxpayer to take on more debt and confiscate it using the force of law through taxation.

The banks get the money right now. The tapped out taxpayer gets a deeper hole and an intergenerational transfer of wealth.

It won't work.

Do you see the FLAW? This is a Ponzi scheme, it doesn't matter how much money your pour into it, unless your resources are infinate, it will inevitably fail.

Theoretically can you pour infinate "money" into it, but in the real world that didn't work out so good for Zimbabwe.

Bailout Talks Lose Sight of the Cost Question

The National Australian Bank wrote this garbage off 95%. They valued it a 5 cents on the dollar. No sane institution or investor is buying this crap at any price. The underlying assets are still in freefall and forclosures are excelerating. Paulson wants to use US taxpayer dollars to buy what granny would have called "a pig in a poke."
Part of the problem is that nobody knows what they are "worth" but as the saying goes "it's only worth what someone is willing to pay for it" so mark it to market!
I certainly won't be loading up my portfolio with this junk and I resent the hell out of being forced to purchase it by the government.
Oh yeah, the so called "financial rescue" won't work on any terms that don't cost the taxpayer a bundle.