Posted on 09/19/2008 5:52:08 PM PDT by politicket
When government officials surveyed the flailing American financial system this week, they didn't see only a collapsed investment bank or the surrender of a giant insurance firm. They saw the circulatory system of the U.S. economy -- credit markets -- starting to fail.
Huddled in his office Wednesday with top advisers, Treasury Secretary Henry Paulson watched his financial-data terminal with alarm as one market after another began go haywire. Investors were fleeing money-market mutual funds, long considered ultra-safe. The market froze for the short-term loans that banks rely on to fund their day-to-day business. Without such mechanisms, the economy would grind to a halt. Companies would be unable to fund their daily operations. Soon, consumers would panic.
(Excerpt) Read more at online.wsj.com ...
If you understand the concept of "credit default swaps" in the derivatives market then you might want to follow those as well. A lot of games are being played with these.
Exactly my point and I agree except for the "ponzi" part.
Amen!
“My best advice though to anybody that it could be financial suicide taking advice from anybody on any forum”
Well..I have my own background to rely on - but I do like to gather as much info as I can from people and weigh it against what I already know.
I’m not completely without a rudder, but I do find freepers to be a good place to meet some healthy brains.
I am always eager to see what the opinions are here.
I disagree. Allowing the markets to fail is a perfect technical solution and may ultimately prove to be the only solution. It eventually clears all of the excess debt from the system and does it in a minimal amount of time. The problem is, it is exceedingly painful for those out of work. For those who maintain employment all through the deep, massive correction, life is not that bad. You scale back but not horrendously.
I hope and pray that we can avoid clearing out all the excess debt, which MUST happen, in one sharp correction by allowing markets to crash. I can only hope that RTC II® will do the trick. It is VERY unlikely that the excess debt will be wrung out of the system if RTC II® is successful. If it is successful, I would expect it to allow us to return to business as usual — too much credit and debt — ending in the necessary market crash to clear the excess debt. RTC II® may buy us 40 years time for all I know, but it seems to me that at some point in time the markets will have to fail in a crash in order to reset the credit/debt game and start over where we need to be.
“If you understand the concept of “credit default swaps” in the derivatives market then you might want to follow those as well. A lot of games are being played with these.”
Thanks for the info!
OK...time to turn in for the night.
Good night everyone!
Everybody who can afford to do so should have several thousand in cash stockpiled in the safe for an emergency. Or in the mattress if you don’t have a safe, but then a burglar could get it. You just never know when, for any number of reasons, the bank will tell you “sorry” when you most need money. I can’t believe everyone who has the means doesn’t have at least $2,000 hidden at home and $5,000 is better. Bank interest has been 1% for some time, so the mattress pays nearly as well as most banks.
Some gold and silver coins would do as well. I don’t have any gold or silver but have access to a ready supply if I ever needed it in a genuine money-burning crisis.
And there lies the problem. Buyers are still asking $150,000 for $100,000 homes. Only the random foreclosure is going for below market rates. Most banks are only just now beginning to sell foreclosures at below market rates.
If you have a ready supply of $100,000 houses for $40,000, I suggest you buy them all and become an instant millionaire. But then, if $100,000 homes were routinely going for $40,000, we wouldn’t have massive inventory and slow sales.
My point is, there are damn few correctly prices homes for sale today, let alone priced below actual market value. Those that are priced below market are getting snatched up, but most sellers still want way, way too much money for their homes and some still want near bubble prices.
I'm pessimistic on this simply due to the following reasons:
The Democrats are already wanting to put home loan guarantees into the upcoming legislation.
An RTC style entity would take too long to create given the current financial problems. The only hope would be to give the "power" to an existing organization - probably the Fed (which would be bad news since it is what they've been striving for).
The "fix" that they are going after is only the tip of the iceberg. The real problems lie in the derivatives market and involve a whole lot more things than mortgages. What about credit? That's a whole nightmare in and of itself.
I can understand your desire to be optimistic, but I just don't see how they are going to keep the duct tape working much longer.
The masses are not following this closely and have no clue how close we came to launcing into GD II, the Sequel™. “What time the big game start? Got enough beers. I’m buying a 60-inch TV to watch it. Is Britney’s sister pregnant again? Who won American Idol?”
The VAST VAST majority of breathing human beings walking the streets of America have absolutely no clue what is really happening in the economy or how painful the future could or will be. Absolutely no clue.
I agree. I was baffled by the ramp up in stocks on this news. Anybody with half a brain should have been scared enough by the revelation of the crisis in the markets and the uncertainty over any fix to sell equities and find something safe to invest in. No, I don’t mean sell 100% of equities, but people were aggressively adding to positions on bad news. I would have expected them to reduce positions in equities.
Good thing I am used to seeing a lot of idiocy in the markets, not only from small investors but among the “experts” who you would think would know better.
We have become a “consumer debt” economy. Burger flippers buying luxury cars and McMansions on heavily leveraged debt.
I am a little shocked to hear you say that the USA was the largest creditor nation in the world as recently as 1980. It just seems so long ago that were were not in hock to our eyeballs to Japan, China, the Saudis and the rest of the world. 28 years from solid gold to a pile of rust. Sad.
You and McGee seem to agree that we have already hit critical mass and there is no stopping the implosion. I haven’t made up my mind yet but I can certainly appreciate your view.
Fed is a central bank, with its 2 most important responsibilities being stabilizing the currency & money supply (that is, preventing runaway inflation and deflation), and acting as lender of last resort in times of catastrophic danger. I’ve critized Greenspan & Bernanke for quite some time, and we’re not out of the woods, but I don’t know what else they could have done to have kept today from being another 10/29/29.
I’ve had a queasy feeling about the market and have been mostly cash in the US since summer 2007 and then serendipitously we had a good size bear walk by our kitchen door last July (Pretty exciting!LOL) and that tripped my unconscious on the market, I took it as a bad omen or sign and that it was time to act. It took me 3 weeks and some pretty significant fights with my wife to get the money moved.
“”Well..I have my own background to rely on - but I do like to gather as much info as I can from people and weigh it against what I already know.””
I agree forums are great resources and I can pick the brains of people allot smarter than myself or more experienced but ultimately everybody should make their own best educated guesses as to what they do in a crisis and not panic and make an ill advised decision.
Chopper Ben is doing exactly what he said he was going to do. He warned us in no uncertain terms. Drop money from a helicopter and that is what he is doing. The funny thing is, many have accused him of pumping since the day he became Chairman but in reality, he hasn’t, not until now.
The rumored plan is announced. The Dow gets a 1000 point assblast. You conclude that you “may not be able to get stocks this low” after the plan is finalized.
Now, what has changed? Has housing found a bottom? No. Have foreclosures halted? No.
Are banks liquid? No. Are they lending money freely again to people, to businesses and to other lenders? No. Are banks solvent that have massive losses on their level 3 assets? No.
Damn, we haven’t even seen much from the unraveling of the real economy from the current damage in the markets. LEHMAN IS GONE. THAT LIQUIDITY IS GONE. AIG IS GONE. FANNIE AND FREDDIE ARE STRUGGLING.
So what changed to cause millions of Joe Six-Packs and Suzy Soccer moms to now optimistically pour their life savings back into equities in hopeful expectation of sudden GDP growth? Nothing has changed. The rumored plan stopped panic and a subsequent crash of confidence in the markets. That is all it did. It stopped the stampede of panicked sheep and calmed them down.
The market is going down hard before it goes back up. I assume a retest of 960 on the S&P and fear we could go all the way back to support around 800 before all is said and done. People pumping equities right now strike me as stupid or wishful, rather than doing so on economic fundamentals. No matter. It’s not my money that will be vaporized in the renewed downturn. They’ll be the ones left holding the 201(k)s.
What?????? Speculation in stocks is ALWAYS speculation. I thought the way to INVEST is to read a prospectus and look for a healthy, well managed company with a low P/E ratio in a growing market sector. Buying damaged Financial stocks just because they are pennies on the old dollar is speculation. Buying into a stock market dropping on hard economic fundamentals on the wishful chance it might rise after a rumor puts a tourniquet on a profusely bleeding financial sector is PURE speculation. Never forget that a tourniquet saves the victim but usually at the expense of the limb where the tourniquet halts circulation.
This bailout is a tourniquet that may or may not save the patient but guarantees the loss of the limb.
People stupid enough to join the ramp up in equities on NO fundmantals are the next in line for a painful spanking. Stupid hurts, but stupidity should never go unrewarded.
Investors rely on market fundamentals and have a reason to invest in a given vehicle at a given time, even with some level of acceptable risk. Speculators don’t employ the analysis or reason that investors due. So your question has no possible answer.
Real investors don’t speculate and speculators are not real investors. They are different animals. People buying stocks on the rumor of an unknown plan that may prove to have limited impact on the liquidity crisis are speculators, not investors. They are not making decisions based on market fundamentals but on a dream or wish that “things may turn around.”
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