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To: anyone

Anyone out there speak-ie the Finance language fluently who might interpret this report for Freepers not in business?


4 posted on 10/23/2009 12:55:16 PM PDT by Coyote Choir
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To: Coyote Choir
Anyone out there speak-ie the Finance language fluently who might interpret this report for Freepers not in business?

How about this. "WE'RE DOOMED!"

5 posted on 10/23/2009 12:56:14 PM PDT by dfwgator
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To: Coyote Choir

Banks are desperate for cash, and contrary to public statements( lies ) of Treasury Secretary Geithner, Bernanke, Obama and others, these banks/firms are bankrupt. Toast. Tapioca.

They are selling anything on their books for anything they can get because they desperately need it now....and...they think that prices will crash in the future. It is a race for the door before the whole thing crashes, only they all know it, and we are being spoon fed big bowls of shinola and told it is sunshine. ( I know it’s hard to believe that our political and financial elites would do such a thing, but what can I say? )


11 posted on 10/23/2009 1:12:08 PM PDT by Leisler (It's going to be a hard, long winter)
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To: Coyote Choir

Sure. I’ll try to boil it down to the important stuff and keep it simple. Some of the points made in the article are right, others a bit off but I’ll explain those.

1.) As the nation deleverages and lowers its overall debt levels, credit card companies are getting hit hard by rising defaults as people lose their job. Seeing this, the credit card companies can’t issue enough commercial paper and other short term debt to fund all of the outstanding credit lines (Capital One, for example, doesn’t actually have tens of billions of dollars in paper cash sitting around in bank vaults - it issues 24 hour IOU’s to insurance companies, banks, and investors to fund its day-to-day operations). Without the ability to raise these short-term funds in the market, they are “unwinding” a substantial part of their business because they couldn’t actually come up with the cash to fund credit card purchases if customers were to suddenly begin using cards as they lost their job. Their response is to do one of a two things:

A.) Cut credit limits or close accounts

B.) Drastically increase interest rates to attempt to get sane consumers to move their account elsewhere (in effect, getting the consumer to close the account)

In layman’s terms: Imagine if you had promised to loan $1,000,000 to your friends, family, and coworkers. Suddenly, you find yourself only having $600,000 in available cash and borrowing. That means if everyone approached you about the loan you had promised, you would be $400,000 short. To fix the situation, you would either cancel your loan promises, or raise the interest rate drastically so your friends and family would cancel on you, getting you off the hook. Your goal would be lower your total potential exposure to no more than the $600,000 you had available to you.

2.) There are still a lot of foreclosures in the pipeline and no one is certain what that will mean when they hit the market. Will they lower comparable sales and cause another round of write-offs? (The answer: It depends on your community. In places like Texas, where unemployment is at a 20+ year LOW or Missouri where the average home price has fallen only 9% from peak to trough, it’s not going to do a lot of damage.)

3.) J.P. Morgan’s cash position isn’t a problem. Buried several hundred pages into the most recent filing to the Securities and Exchange commission, you see that the reason they’ve blown through $25 billion in cash is because they paid back ALL of the money they borrowed from the government bailout, in full, plus interest and dividends EARLY.

Here’s the actual text if you are interested:

***Pursuant to the Capital Purchase Program, on October 28, 2008, the Firm issued to the U.S. Treasury, for total proceeds of $25.0 billion, (i) 2.5 million shares of Series K preferred stock, and (ii) a warrant to purchase up to 88,401,697 shares of the Firm’s common stock, at the exercise price of $42.42 per share, subject to certain antidilution and other adjustments. On June 17, 2009, the Firm redeemed all of the outstanding shares of Series K preferred stock, and repaid the full $25.0 billion principal amount together with accrued dividends. Following discussions with the U.S. Treasury regarding the warrant, on July 7, 2009, JPMorgan Chase notified the U.S. Treasury that it had revoked its warrant repurchase notice. JPMorgan Chase understands, based on the U.S. Treasury’s public statements, that the U.S. Treasury intends to pursue a public auction of the warrant. The U.S. Treasury has advised JPMorgan Chase that the Firm will be permitted to participate in any such auction.***

In other words: They were so confident in their profitability and the position they are in for the recovery, they parted with $25 billion in cash so they are no longer part of the bailout. The government MADE money off JP Morgan and, as tax payers, we should be proud of how they handled the situation.

4.) The dollar is going to trash. The article is correct on that - with $9+ trillion in projected deficits, the United States cannot maintain its status as the reserve currency of the world.

This doesn’t have to be bad for you. Companies such as General Electric, Coca-Cola, and Johnson & Johnson make 50% or more of their profits from overseas. A falling dollar could make them BILLIONs in earnings, and their stockholders rich.

It also means there’s a good chance gold and some other limited commodities could do well, as well as distressed real estate.

There are ALWAYS intelligent things to do. Even in the apocalypse, you can do right by your family and make money.


19 posted on 10/23/2009 1:20:24 PM PDT by WallStreetCapitalist
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