Marcap

Derivatives: Just One Reason to Short the Banks

I think the question should really be: What happens if 10% or more of C's derivatives default (a very likely possibility)? What would that do? What about a 20% default? or even a 30%? I think the answer is a simple one. If C falls, a lot of other financial institutions, companies and perhaps even governments will fall with it.

On Mar 31 01:53 AM GtownMetal wrote:

> C has $35.6 Trillion in derivatives and only $1.20 Trillion in equity,
> if 3.4% of their derivatives default it totally wipes out their $1.2
> Trillion in equity. Is that a chance any of you would take in this
> market?

Bonus-Tax Stocks Get Whacked

"We're obsessed with picking up the nickels and dimes that were dropped, while huge stacks of $100 bills are burning."

You are absolutely right, Tetrapod.

Sadly enough, I suspect that some of our politicians actually believe that we are all gullible enough to believe that if they go after even a tiny percentage of those abusing the system, then they can't be all that bad. Nonetheless, I equate what they are doing with a fleeing bank robber (no pun intended) who stops to toss a few coins to a beggar on the street, in the hopes that his good deed will somehow overshadow his crime.

Bonus-Tax Stocks Get Whacked

It is indeed very sickening. But we are only hostages if we choose to be. We are the people. We too have a voice. We need to come together now and make certain that our voices are heard by making them much louder than those of politicians and lobbyists, who sadly while we were sleeping, are now reshaping America at the expense and detriment of this and future generations. It is time to stand up, and speak up.

On Mar 20 04:25 PM User 380030 wrote:

> This concept that America is hostage to continuing to pay bonuses
> to the scumbags who sold, marketed, and pushed these toxic assets
> is ridiculous. So far, the morons at the head of these businesses
> who absolutely proved that they are incapable of managing a safe
> level of calculated risk of assets, have been given an advantage
> over the companies that were better at managing their business, and
> thus didn't need a government bailout. If doing the right thing
> means that we lose some of the government bailout money, I think
> I speak for the American people in that we are ready to accept that.
> This mantra of "good people have to deal with the devil to recover
> from the mess created from greed and ignorance" is sickening.

Bonus-Tax Stocks Get Whacked

Unfortunately this is quite often what happens when politicians get involved in the economy. While their actions many indeed fix one problem, if only temporarily, they lack the ability (or desire) to see their actions though. As a result, more often than not such actions bring on problems far greater than the ones they tried to fix.

Sure there should be full accountability for any and all money which government pays out. But in my opinion, the best solution to that problem would be to not provide bailout money in the first place, but rather let the marketplace decide on what happens to companies, which either through decreased interest in their products, or through poor management, cannot make it on their own. If anyone disagrees with that, perhaps they would like to try and explain to a dying woman who cannot afford her prescription drugs, that there is will be no help for her because her tax dollars went to pay AIG, GM, and others such poorly run companies, hundreds of billions of dollars so that they can continue to enjoy their million dollar salaries and bonuses, lavish lifestyles, vacations, parties, etc. This is completely wrong, and it must be stopped. Wake up America! It's time for a revolution.

On Mar 20 01:23 PM ED K wrote:

> I totally agree with your thoughts,this is just the start of another
> distraction from the real issue of solving our economic woes.I can
> only hope that this proposed legislation does'nt in some way discriminate
> or violate any rights of the bonus reciepients,if it does, expect
> a legal response from the financial sector and it could get ugly.

Privatize the Banks, Already

You are quite right in your thinking. Any banking system in which depositors are protected by government insurance, to an extent is already nationalized.

So the question really becomes... If government is expected to protect depositors against potential bank failure, just how much control should government reasonably be expected to have over those organizations, in order to not only protect against such failure, but to protect against potential insurance losses? The answer to that is not an easy one.

There are those who will argue that the entire banking system should be nationalized, since it is already partially down that road. Doing so would completely eliminate the need for insurance of any kind. It would put a limit on the drain from the system by over-paid bank execs and other expenditures quite often not in the best interest of the organization, and it would also be able to significantly reduce interest rates for everyone as this new system would not be based on a "profit" model, but rather more on a "not-for-profit" model. Such a system would no doubt still have some loopholes and abuses, but I wonder how worse it would be, if at all? The downside of course for some would be the fact that loan applications, deposits, and so on, could then all be tied directly into IRS records thus taking a big bite out of loan-application misrepresentation, income tax cheating, and so on, which while abused by some, does indeed cost us all. That no doubt is a debate in itself which could fill several other threads.

And then of course, there are those who appear to promote a 100% privatization of banks, in which government would have no control whatsoever over those organizations. Unfortunately, if that were to happen, then I think it fair to assume that without any government control, there would also be no insurance protection for depositors, short of depositors being able to obtain private independent insurance for their deposits. I believe few depositors would think that a fair option, and many simply would not purchase such insurance. And of course that is not to even address the fact that few private organizations, if any, would be able or willing to offer such insurance in the first place, especially without having full internal access to and potential control over bank records and procedures. And unfortunately, this is where the line would become very blurry to say the least.

Thus we are where we are. But regardless of how the current problems are addressed, either by allowing bank failure, providing bailouts for failing them, or ending up with some form of nationalization, one thing should be perfectly clear...government will pay now, and the taxpayer will pay later, either through taxes or through the loss of freedom and privacy. It's a tough choice, I know, but it was quite predictable that it would eventually come to this. It's just that so many chose to ignore the signs.

On Feb 24 07:20 PM Bundee wrote:

> The author overlooked one thing- FDIC.
>
> If a real privatized bank goes under its depositors are wiped out.
>
> If a nationalized bank (FDIC insured) goes under, Uncle Sam makes
> good on the deposits (courtesy of taxpayer dollars IF the FDIC funds
> run out.)
>
> I may be wrong in my thinking, but it seems we have had a form of
> FDIC nationalization of banks for decades now.

Slow Down Mr. Roubini

Too bad there were not a lot more Nouriel Roubini's out there. It there were, we would more than likely not be in the financial mess that we are now in, as the voice of things to come would have been much louder, and necessary action would have been taken to correct them much sooner. But as it was, we were left with the voice of one man with just a few followers, to try and convince the rest of the world, of what was inevitably in store for those who ignored the signs. I am quite convinced that history will speak very kindly of Mr. Roubini, and will do so long after those who oppose him have been forgotten.

Slow Down Mr. Roubini

Too bad there were not a lot more Nouriel Rubini's out there. It there were, we would more than likely not be in the financial mess that we are now in, as the voice of things to come would have been much louder, and necessary action would have been taken to correct them much sooner. But as it was, we were left with the voice of one man with just a few followers, to try and convince the rest of the world, of what was inevitably in store for those who ignored the signs. I am quite convinced that history will speak very kindly of Mr. Rubini, and will do so long after those who oppose him have been forgotten.

36 Stocks Going Ex-Dividend in Early March

Yes there are. Just Google "dividend fund" and you will find several of them.

On Feb 19 03:38 PM User 352293 wrote:

> Are there mutual funds that focus on dividend yield equities?

36 Stocks Going Ex-Dividend in Early March

Indeed! Unfortunately a dividend is something which far too many investors place too much weight on. They see a relatively high dividend, and then tend to ignore everything else, such as an extremely over-inflated balance sheet, the lack of cash and thus the need to take on more debt in order to actually be able to pay the dividend resulting of course in a reduction in share value, and not to mention the potential of dividend suspension at any time. In fact these days a dividend should only be looked at as an extra bonus to help in the decision making process to buy, and as you say, in no way used as the sole basis for purchasing a particular stock.

On Feb 19 06:34 AM ED K wrote:

> Although the dividend is one of many factors to be considered in
> the purchase of equities it should not be the sole determining factorThe
> method described above breaks this generally accepted investing rule.

America's Insolvent Banks

Apparently the $400 trillion number is even low. According to the Market Oracle, it is actually over $500 trillion.

Quote: No one has any idea of the magnitude of the deleveraging ahead or the size of the debts that will have to be written down. That's because 30 years of deregulation has allowed a parallel financial system to arise in which over $500 trillion dollars in derivatives are traded without any government supervision or accounting. End Quote

www.marketoracle.co.uk...

On Feb 17 11:34 PM ArtfulDodger wrote:

> Sentinel:
>
> "There was 400 Trillion dollars of derivatives..."
>
> Surely this figure can't be right. Perhaps you meant $40 trillion?
>
>
> 400 trillion is such an astronomical amount that I don't think we
> can even fathom it.
>
> Just checking.

America's Insolvent Banks

Anyone who invests in an "investor", but only those who actually pay taxes can be considered "taxpayers".

On Feb 17 09:20 AM vreporter wrote:

> What's the difference between a US investor and a US taxpayer? Please
> enlighten us because I get tired of the separation!

America's Insolvent Banks

Excellent Article! I think Hempton is quite right in saying that the concept of "solvency" is not well defined. It isn't.

I would agree with you 100%, that with very few exceptions, so-called assets such as Goodwill and other Intangibles, should perhaps have no place on the balance sheet, but regardless, should have no place in calculating a company's true share value or solvency, because more often than not, such "assets" have no real value. Quite often they serve little purpose other than to pad assets, and hence S/H equity, in an effort to misguide the reader in making the assumption that a company's shares are worth far more than they really are.

But this litmus test should not be applied just to Banks. On the contrary, it should be applied to virtually any company, in any sector of the economy. Of course many of us also realize that if GAAP were changed so as to no longer recognize intangibles on the balance sheet and/or in the calculation of share book value, we would likely be looking at a DOW at a level much lower than it now is.