Well, I'm out

Business Money
21

It’s hard to immagine just HOW moronic they all must be. I mean, I don’t know anything about this stuff, but I have the sense to know that if you’re signing up hundreds of thousands of people for adjustable rate home loans, and many are only paying interest in the first place, you’re going to end up upside down in hundreds of thousands of loans. Are these people really so rich and insulated from the real world as this?

I mean, this is simply not the kind of thing that occurs overnight. The mess didn’t suddenly come about, so it seems criminally irresponsible to suddenly require [color=#BF0000]seven hundred billion dollars [/color]for a last ditch effort that might or might not work and would also help the folks who allowed this mess to keep from getting messy themselves.

22

Er, it’s actually worse than that. A lot of them were on so-called “option ARMs”, which are variable rate loans which allow the home"owner" to pay LESS THAN THE FULL INTEREST per month.

In other words, your mortgage is $1652.35 per month, of which (for this month, let’s say) interest is $1489.72. You can put in a minimum payment of $100, and the remaining $1389.72 in interest will get tacked on to the loan as additional principal.

BUT WAIT! IT GETS BETTER!!!

Your bank can count the full $1489.72 as contributing to its revenue, and hence its enormous profits, in this quarter. In fact, they’re required to do so under the so-called accounting rules.

Which is where WaMu got royally fcked. And will get even more royally fcked in early 2009. Did I mention that the whole mess we’ve seen so far is just the subprime wave, and that the alt-A mortgage wave will really be hitting next Spring, and is going to be larger?

Oh, I did?

Well, never mind then.

Toodles!

23

Bernake and Paulson faced some questioning regarding purchasing 2nd liens last night…pennies on the dollar there, me thinks… :astonished:

24

I’m not sure if any currency is safe. I’d change it all into gold … or oil.

25

real gold in the basement? or a piece of paper telling you that you “own” gold somewhere in the world?

26

Er, it’s actually worse than that. A lot of them were on so-called “option ARMs”, which are variable rate loans which allow the home"owner" to pay LESS THAN THE FULL INTEREST per month.

In other words, your mortgage is $1652.35 per month, of which (for this month, let’s say) interest is $1489.72. You can put in a minimum payment of $100, and the remaining $1389.72 in interest will get tacked on to the loan as additional principal.

BUT WAIT! IT GETS BETTER!!!

Your bank can count the full $1489.72 as contributing to its revenue, and hence its enormous profits, in this quarter. In fact, they’re required to do so under the so-called accounting rules.

Which is where WaMu got royally fcked. And will get even more royally fcked in early 2009. Did I mention that the whole mess we’ve seen so far is just the subprime wave, and that the alt-A mortgage wave will really be hitting next Spring, and is going to be larger?

Oh, I did?

Well, never mind then.

Toodles![/quote]

Wait! it gets better.

and then add to that the more-or-less fraud where loan officers made it very easy for someone to get $ by fudging the application as much as possible to push the loan through. So now you are lending money to people that, by your actual standards, you would not loan money to.

27

IMO papers are good for short-term speculation but for a long-term investment or protection against a hyperinflation I would chose physical gold only. I had a closer look at the Lyxor Gold Bullion fund that does buy physical gold and stores it somewhere “safe” (if I recall correctly it is not insured), but it’s not easy to get the shares exchanged for physical gold and there are high charges, not to mention that in times of a crisis this will very likely be difficult to travel to London, redeem your shares and carry the stuff to wherever you live.
And in case of a hyperinflation you probably have to pay the charge with all your gold as money isn’t worth much then.

28

The Fed

Buy Gold chaps.

29

Part of this mortgage mess was brought on by the “curb appraisal”. Banks did not want to spend the money to get a real appraisal, so they would hire an independent real estate agent to “drive by”, take a look from the outside and tell them what they thought. In my previous life, I closed many loans for banks and buyers as an independent agent. I recall numerous outrageous incidents. One, for example involved the “drive by appraisal”. My secretary knew every house in this small town. She saw the pending closing and saw the curb appraisal. She came to me and explained that she was familiar with this house and it was in terrible condition on the inside. One obvious defect was that there was a large hole in the floor of the 2d floor bathroom that was caused by leaking water. Obviously other damage was present. Yet, the curb appraisal was more than anyone with knowledge of the house would have paid, probably double. I felt so concerned about this that I called the lending bank to let them know. I was an independent closer and was out of line. My job was to get signitures, get the deeds signed and recorded. Then wire the funds. When I talked with the bank I was met with anger for pointing out the obvious bad loan. Where did the loan end up? Fannie Mae, Freddie Mac. Now my kids are paying for it.
BTW, watch out next for Sallie Mae. Student loans are administered there and they will no doubt soon jump on the “help me” bandwagon.

30

Bernanke mentioned student loans as part of the baillout last night.

31

I thought they had already. There was some concern last semester about whethere or not there were going to be student loan funds available this semester and students were encouraged to get their loan aps in asap. But I was just thinking of this last night again–thinking like you, that I’d hear the salley mae name again about the loans. Will loans already approved for spring still be available?

Couple of years ago when I was working for the AR government as a “Family Support Specialist” helping people sign up for food stamps, a family came in with a mortage of less than $200 a month. That included insurance. I sat there at my desk and thought that their great grandkids would still be paying for that house. Also thinking that whoever set up that loan for them might aught to occupy some real estate in the local jail.

And I really don’t know anything about this stuff. I just know that spending more money than I have would leave me without a roof over my head. If I can grasp this kind of logic does that make me unusually smart? I doubt it. If I had some real estate agane and loan officer talking me all up about how the government has made new provisions that actually make this home affordable and that I really can buy a home for a small fraction of rent and have no reason to worry about things because value of the home would go up, blablabla, would I be tempted to trust that they knew what they were talking about and sign the mortgage? Well. . . maybe. So it’s hard to know who’s more to blame. Those who take advantage are to blame, but so might be those who do as they’ve been trained and quit thinking for themselves.

It just seems so hard for me to grasp how so many people, at all levles, could have allowed this entire situation to exist.

32

My view as to the root cause of this mess is that the U.S hasn’t been creating real wealth the last twenty years necessary to maintain its standard of living so, in its desperation, it created two successive mass delusions of wealth to shore up its lifestyle at any cost – dot.com and real estate. The inevitable has happened though and both bubbles have popped and there isn’t likely to be another. Standards of living are going to drop now further and more precipitously than they would have twenty years ago if we’d faced reality then because delaying the day of reckoning has only made things worse.

Being poorer is a fate worse than death for a fundamentally materialistic society though so that’s why even intelligent people who should have known better refused to face the realities of the situation until they were forced to.

The downward economic spiral is only just beginning though. There’s another looming track wreck which the masterminds are even less willing to confront and deal with – one which will dwarf the current financial markets mess. That’s the entitlements locomotive looming on the horizon when baby boomers exit the productive work force in large numbers and start drawing on entitlements programs that don’t really exist because the wealth which was supposed to fund them was spent long ago.

33

[quote=“MaPoSquid”]The SEC’s ban on short selling is such blatant manipulation that I’m just saying the hell with the stock market for the foreseeable future. There’s zero point in attempting to salvage and increase one’s capital if the government is taking every opportunity to manipulate the system, pick the winners and losers, destroy value, and protect insiders.

Fuck 'em. I’m moving everything to cash, and I’m moving the cash to goddamned Switzerland, in Swiss francs.

Good luck.[/quote]

Well, looks like your time in the penalty box is up and the vultures are now permitted to come back and pick over the bloody carcasses. Welcome back Squid. How’s it looking?

[quote] Markets braced for end of short-selling ban

Stock markets were bracing themselves as US regulators on Wednesday night prepared to lift the emergency ban on short selling to allow traders to once again profit from price declines among financial shares starting on Thursday.

But the lifting of the temporary ban comes as financial stocks have been pummelled, leaving many traders wondering whether the nearly three-week ban had helped stem falls in financial stocks. “These stocks got killed even without the ban,” said one hedge fund manager.

Short sellers had come under fire for driving down the share prices of vulnerable financial institutions and the ban was put in place last month to shore up confidence.

While the US Securities and Exchange Commission can legally extend the ban until next Friday, it was expected to stick to its schedule of letting the ban expire just before midnight last night – three days after the $700bn bail-out financial plan became law. . . [/quote]
ft.com/cms/s/0/63a6b848-958f … s01=1.html

[quote] Nearly three weeks ago, regulators abruptly banned short sales of financial stocks to protect companies that had come under siege in the stock market. Short-sellers, critics said, had contributed to the declines by betting against the companies’ shares. . .

Few expect their return, on its own, to spark another precipitous plunge in the stock market. Financial shares have plunged 23 percent since the ban was imposed on Sept. 22, suggesting that the short-sellers might not have played such a big role in the declines. . .

“If there had been no ban, would they have gone down even more?” said Mozaffar Khan, a professor who as studied short-selling at the Sloan School of Management at the Massachusetts Institute of Technology. “Normally the studies that we do are in normal times, and we just don’t know in a state of panic what the outcome would have been.” . . .

Some investors said that bringing short-selling back to the market could actually bolster stocks. Andrew Fishman, president of Schonfeld Group, an asset manager in New York, said that some of his clients wanted to exit short positions in recent weeks, which would have meant purchasing shares, but they did not do so because they feared they would not be able to borrow the stock again to short it later on.

Mr. Fishman said short-selling has been wrongly blamed. The real problem, he said, is the weakness of financial institutions.

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”[/quote]
nytimes.com/2008/10/08/busin … f=business

34

Although I favor some kind of oversight over poorly understood derivatives, I do not favor any bans on widely understood practices helping to improve market efficiency. Short selling is such a practice.

Over the slightly longer term, short sellers are a net neutral on the market, as what has been borrowed and sold, will hve to be bought and returned.

I am against down limits etc as well, as that’s also an impediment on market efficiency. I recall after 9/11 and Nari, when the Taiwan stock market stopped to work. It just stopped. Every day the stocks went down limit (7% at the time), and there was simply no buyers and no turnover. This took place for nearly 2 weeks, until some semblance of market activity returned. (The government was buying a bit every morning, I think)

I would have preferred to see the fall take place in a day, honestly. The markets would have become markets again a fair bit faster.

The idiots putting that limit in place and now re-instating it. For fucks sake, I would not give them my money.

35

[quote=“Mother Theresa”][quote=“MaPoSquid”]The SEC’s ban on short selling is such blatant manipulation that I’m just saying the hell with the stock market for the foreseeable future. There’s zero point in attempting to salvage and increase one’s capital if the government is taking every opportunity to manipulate the system, pick the winners and losers, destroy value, and protect insiders.

Fuck 'em. I’m moving everything to cash, and I’m moving the cash to goddamned Switzerland, in Swiss francs.

Good luck.[/quote]

Well, looks like your time in the penalty box is up and the vultures are now permitted to come back and pick over the bloody carcasses. Welcome back Squid. How’s it looking?
[/quote]
Nope. Not gonna play. Yeah, I fucked myself badly by pulling out THAT DAY rather than waiting a week or two to let the whole house of cards collapse. But I’ll just wait it out, let the assholes destroy the real economy through their manipulations, and when they finally are forced to give up because they’ve done too much damage ever to deal with, well, I’ll pick through the wreckage. My capital is safe, I’m positioned well for an inflationary trend, and I can react quickly if it looks like we’re slipping into deflation (and I’m watching for it).

Meanwhile, I’ve got plenty of gold (added to that on the last dip, at least), school is going well, and the thugs in Thailand are ensuring that if I really, really need to, I can always retire to a cheap place on a beach, with cold beer and hot chicks (or at least cheap hookers) everywhere. :sunglasses:

Fuck Paulson, fuck Bernanke, fuck Bush, and most especially fuck you very much Alan Greenspan. Ayn Rand disciple my national bleeding arsehole.

Good night.

36

But, mate, we tried to tell you that several years ago. :laughing:

Good to hear it’s not all bad for you.

HG

37

If you’ve enjoyed being sodomized by George Bush and clowns then it’s bend over for John McCain time.

“The issue of economics is not something I’ve understood as well as I should. I’ve got Greenspan’s book.”
– John McCain

38

But, mate, we tried to tell you that several years ago. :laughing:

Good to hear it’s not all bad for you.

HG[/quote]
Hah. Yeah. Thanks.

But for entirely different reasons, and reasons are important.

I still maintain that Bush was absolutely correct in invading Iraq and removing Saddam Hussein, and I applaud him for it. Unfortunately, he completely messed up the subsequent occupation of Iraq by trying to “play nice” with the fanatics and the Democrats, and he retained Bill Clinton’s chief money-manipulator, Alan Greenspan, who is the real architect of the current disaster.

If he had shown some spine, told the Dems to fuck off, crushed Sadr under his bootheel, and so on, Iraq would have been a lot better a lot sooner – just look at how well things worked out after he increased troops and let them do what they needed to do.

And if he had shot Greenspan for high treason back around 2004, well . . . ok, maybe Bush would have installed someone even easier on interest rates to be his little puppet. Hard to say. But at least there would have been a CHANCE of finding someone with a spine, like Volcker, who would have prevented the catastrophic bubble-and-bust.

39

That must have been it.

[quote]First, the appearance in 2006 of the various “Awakening” movements, in which Sunni tribes once allied with al Qaeda turned against it.

• Second, the implementation of the Sons of Iraq program consisting of some 100,000 Sunni militants, many of whom used to be shooting at American soldiers, who are now on the U.S. payroll. Now that’s a surge!

• Third, the previous ethnic cleansings in Iraq and the millions of Iraqi refugees who have fled their homes, meaning there are fewer potential targets of sectarian violence.

• Fourth, the large size and increasing efficacy of the Iraqi army and police, some 550,000 strong, who are now beginning to operate with some level of professionalism.

• Fifth, the increasingly nonsectarian approach of Nuri al-Maliki, the Shia prime minister, who has taken on Shiite militias in Basra and Sadr City, an important signal that the government will act in something like the national interest.

• Sixth, the cease-fires ordered in the past year or so by the leader of those Shia militants, the cleric Muqtada al-Sadr, whose position in Iraq has weakened significantly since 2007.[/quote]

Yeah, Obama just can’t admit that 30,000 more troops was the sole reason for the decrease in violence.

Sorry, didn’t mean to interrupt your ranting. Please continue.

40

That must have been it.

[quote]First, the appearance in 2006 of the various “Awakening” movements, in which Sunni tribes once allied with al Qaeda turned against it.

• Second, the implementation of the Sons of Iraq program consisting of some 100,000 Sunni militants, many of whom used to be shooting at American soldiers, who are now on the U.S. payroll. Now that’s a surge!

• Third, the previous ethnic cleansings in Iraq and the millions of Iraqi refugees who have fled their homes, meaning there are fewer potential targets of sectarian violence.

• Fourth, the large size and increasing efficacy of the Iraqi army and police, some 550,000 strong, who are now beginning to operate with some level of professionalism.

• Fifth, the increasingly nonsectarian approach of Nuri al-Maliki, the Shia prime minister, who has taken on Shiite militias in Basra and Sadr City, an important signal that the government will act in something like the national interest.

• Sixth, the cease-fires ordered in the past year or so by the leader of those Shia militants, the cleric Muqtada al-Sadr, whose position in Iraq has weakened significantly since 2007.[/quote]

Yeah, Obama just can’t admit that 30,000 more troops was the sole reason for the decrease in violence.

Sorry, didn’t mean to interrupt your ranting. Please continue.[/quote]
Thank you. Yeah, absolutely none of that had anything to do with the surge, nor with the fanatics coming to the realization that the U.S. wasn’t going to give them free rein/reign forever. :raspberry: