Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-01-2008, 06:19 PM   #61
Recycles dryer sheets
barbarus's Avatar
 
Join Date: Aug 2007
Posts: 433
Quote:
Originally Posted by al_bundy View Post
and the House wants a different version now and they will probably fight over it until everyone forgets it. half of europe is now backing all their bank deposits, 3 month t-bill yields are creeping back up and overnight LIBOR yield is down

and it wouldn't surprise me if central banks started cutting rates
Indeed. We can cut, what?, 2% more here before we're at 0%

Not much ammo left on the interest side of the ledger.
__________________

__________________
Consult with only myself as your adviser or representative. My thoughts should be construed as investment advice of the highest caliber. Past performance is but a pale shadow and guarantee of even greater results in the future.
barbarus is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-01-2008, 07:19 PM   #62
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by samclem View Post
Lots of interesting conjecture. Lets look at one hard bit of evidence: The folks with the best knowledge of what might be behind these securities (and who work in RE finance for a living) are not rushing in to buy these great bargains. Gee, why would that be? "Here's free money folks, all you want, scoop 'em up while you can!" And yet-nobody thinks they are worth even the beaten down amount. But somehow you have faith that government functionaries, with no "skin in the game" and using my tax dolars, are better able to judge the marketplace and what these securities are worth. That's a leap of faith.

Here's an idea. If you think these securities are such a great deal, buy them with your own money. Do it today before the government rushes in and you'll make even more. Because one ancillary negative impact of government action will be to drive away private investors and risk-takers after the prices get bid up--the window is closing, don't be left behind! Jump in now, let us know how it goes.
Sam I've looked at trying to buying these things but Schwab doesn't offer them only Fannie Mae/Freddie Mac issued MBS which are currently yielding between 5 and 5.50%.

The other problem like most folks on Wall St and most banks I've simply run out of cash to buy things with. I could go on margin but, although I'm an aggressive investor I also am retired and margin investing is too risky.

But fundamentally at 7-8% margin rate the interest I get from these securities doesn't warrant the risk. However, if you'd be willing to loan me money for 10 years at 3.85% (the current 10 year T-Bond) I'd be more than happy to purchase some of these toxic waste securities with double digit returns and large potential capital gains if the housing market stabilizes. Really Sam I'm good for it and 3.85% is more than a money market. I'll PM you with wiring instructions

Anyway I think I've demonstrated part of the problem, nobody has cash to buy anything and it is way to expensive to borrow money, because banks don't have any to lend because their capital base has been destroyed. Admittedly because the banks made plenty of mistakes.

You are as usual correct, it is conjecture on my part that Uncle Sam can make money with the Paulson Plan (God knows what Congress will actually pass). I think one of the victims of the current crisis is the efficient market theory. With the price of US corporations (i.e stock market) fluctuating by 500 billion to a one trillion dollars virtually everyday it is obvious that price and the intrinsic value of securities is way out of wack. I've got 100+ year old banks stocks that have been swing widely between the low 20s and the mid 40s for the last year. These aren't internet companies there boring banks. So if the market is constantly mispricing these securities it stands to reason that there is an excellent chance the value of these junk status MBS is also mispriced.

I personally believe the US Treasury bill are way over valued (but there isn't a cost efficient way of betting against them). I look at this as opportunity for US taxpayers to exchange overpriced T-Bills and Bonds for 700 Billion worth mortgages backed by Real Estate that a few years ago millions of people collective pay well over trillion dollars. (i.e. the purchased/appraised value of all of the real estate used as collateral for the mortgage was well over 1 trillion.)

I am not saying I know for sure if the taxpayers will make money. I certainly see the potential for making money. I also think that Treasury is a unique situtation to be profitable due to our low borrowing cost. What I know for sure is when Running Man says categorically there is no way we taxpayers will make money he is full of crap.

Never the less, the pontential profit is a distance second for supporting the Paulson, preventing a collapse of our financial system and protecting the taxpayers multi trillion investment in Fannie and Freddie bonds is the primary one.
__________________

__________________
clifp is offline   Reply With Quote
Old 10-01-2008, 07:23 PM   #63
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
Quote:
Originally Posted by OAG View Post
From my reading of the NEW SENATE BILL (which BTW is now 451 pages long) I would not bet on it passing the HOR. The BIG FDIC change EXPIRES on 12/31/2009. What a dumb thing to do (either raise it or don't but a 15 month change makes no sense to me. Everything will be fixed by then? I would not bet on it. And they have loaded it down with a bunch of unnecessary "stuff". I am almost thinking they do not want this thing to pass at all. Yesterday the Senate was not going to go before the HOR now they are going to pass this "new" thing then give it to the HOR, leave town, and say "take it, pass it, or leave it". Talk about arm twisting.
this whole thing seems like 1907. by the time JP Morgan got a bailout fund ready things calmed down. same here, the congress is doing it for confidence. by the time things are ready to move the markets will probably calm down
__________________
al_bundy is offline   Reply With Quote
Old 10-01-2008, 07:54 PM   #64
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,685
Quote:
Originally Posted by clifp View Post
I am not saying I know for sure if the taxpayers will make money. I certainly see the potential for making money. I also think that Treasury is a unique situtation to be profitable due to our low borrowing cost. What I know for sure is when Running Man says categorically there is no way we taxpayers will make money he is full of crap.

I was a bit overwrought at the prospect of our government throwing our good money after bad, I should not have stated there is not no way.

More to the overall point of liquidity look at GE. They were trying to roll over 96 billion on an ongoing basis of commercial paper. That is over 9 dollars per share and over 50% of annual revenues. In 2000 they had cash flow of 2 bucks per share and are up 50% to 3 bucks per share since then but their long term debt has gone from 80 billion to 346 billion, not even including their other shorter term debt. Any liquidity they get will most likely lead to a retirement of their commercial paper and not return any liquidity to the system. It was just a year ago they wanted to buy 27 billion of their own stock at 40. Now they are selling at 22.5 with a 10 percent interest penalty on top of it. IF the government spent 546 billion to buy all the GE paper, how much would that help the economy? The scope of overleveraging of corporations just seems staggering to me and people are rushing to unwind, the government should not in my crappy opinion leverage itself to delever the world.
http://www.nytimes.com/2007/07/14/bu...4electric.html

What Buffett's Bet Says About GE - Forbes.com
__________________
Running_Man is offline   Reply With Quote
Old 10-01-2008, 07:57 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by socca View Post
Senate to vote on rescue plan with added tax cut



I am stunned, absolutely stunned. Is this really my country? What has happened to America? Are Republicans iittle doggies you can pacify with a tax-cut bone?

What do tax cuts have to do with whether the basic Paulson proposal is a sound strategy? What happened to the concept of Congress as a deliberative body? I can understand playing stupid political games with minor legislation, but a $700B bill? This has degenerated into a farce.
Socca, I take it you either have no money or have it all stashed in govt bonds and CDs. Because no one with any money at risk would have your attitudes.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Old 10-01-2008, 08:08 PM   #66
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by Running_Man View Post
I was a bit overwrought at the prospect of our government throwing our good money after bad, I should not have stated there is not no way.

The scope of overleveraging of corporations just seems staggering to me and people are rushing to unwind, the government should not in my crappy opinion leverage itself to delever the world.
http://www.nytimes.com/2007/07/14/bu...4electric.html

What Buffett's Bet Says About GE - Forbes.com
Fair enough and that is not an unreasonable opinion. I am not happy that we are in a situation where it is necessary to do so.

As a shareholder of Berkshire and modest position in GE (although I have written put options to buy more GE at 25 in Jan.) I am not sure what to think of Buffets deal. Other than the obvious that he got a way better deal on GE stock than I got. It is also obvious to me that I'd rather as taxpayer get 10% loaning money to GE than buying up MBS on over priced real estate.

So maybe the best solutions is to give the 700 billion dollars to Warren tell him to do his best to save the economy and offer to split the profits with the guy.
__________________
clifp is offline   Reply With Quote
Old 10-01-2008, 09:26 PM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by clifp View Post
Anyway I think I've demonstrated part of the problem, nobody has cash to buy anything and it is way to expensive to borrow money, because banks don't have any to lend because their capital base has been destroyed.
These folks announced today that they are arranging to get $1 billion in financing to upgrade some movie theaters in the US. So, there's still money out there. Yes, it's not cheap money. The cheap money is gone. The cheap money existed only because the government was artificially making cheap loans possible by removing the element of risk from a large number of loans. Risk is back in the equation (it should never have left), and now the market is over-reacting. There's money out there (many folks on this board have some of it) and it will be loaned to others when interest rates are again at market level (the real market, not the make-believe market the government used to run, where everyone could afford a house).
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 10-01-2008, 09:36 PM   #68
Recycles dryer sheets
MGYog's Avatar
 
Join Date: Apr 2008
Posts: 174
Quote:
Originally Posted by ziggy29 View Post
please lay me off.

Please lay me off.

Please lay me off.

Please lay me off.

Please lay me off.

Please lay me off.

ok, you're fired!
__________________
Nihil obstat.....
MGYog is offline   Reply With Quote
Old 10-01-2008, 09:58 PM   #69
Recycles dryer sheets
Kwirk's Avatar
 
Join Date: Mar 2006
Posts: 154
Quote:
Originally Posted by samclem View Post
The cheap money existed only because the government was artificially making cheap loans possible by removing the element of risk from a large number of loans.
There's a lot that I'm not following today. Please explain.
__________________
Prepare for the future. Everything changes.
Kwirk is offline   Reply With Quote
Old 10-01-2008, 10:23 PM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,418
Quote:
Originally Posted by haha View Post
Socca, I take it you either have no money or have it all stashed in govt bonds and CDs. Because no one with any money at risk would have your attitudes.

Ha
Ha, I have a LOT of skin in this game (to me, at least), but I have somewhat of the same attitude. I understand about politics and compromises and earmarks and all, but this particular bill is supposed to be a response to a crisis, and should be dealt with in a stand-alone manner. I'm also not a Republocrat, so I don't care who is being tossed which bones. But if this is the "crisis" that everyone says it is, the Congress, which is supposed to be a deliberative body, should be capable of standing up and voting based on what they feel is right, not as the result of being bought off.

I believe that a solution needs to be found, but I doubt that what is being put forward is that solution. Haste makes waste, and all that. And although I don't think I've ever agreed with al_bundy before, I would be willing to bet (a small amount) that by the time any gov't brokered solution is in place to fix the problem, the problem will be well on the way to being mended by normal market farces.

I read a quote today by Henry David Thoreau - “This government never furthered any enterprise but by the alacrity with which it got out of the way.”

JMHO.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 10-01-2008, 10:35 PM   #71
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by Kwirk View Post
There's a lot that I'm not following today. Please explain.
Obviously, the situation is very complex and there's plenty of blame to go around. But, one big part of the present problem is that mortgage loans were very easy to get--laughably easy. When nearly anyone can get access to cheap money to buy a home, then home prices will obviously be bid up. These prices would not have existed had normal, traditional, risk-based loan underwriting been practiced.
There are several reasons that these traditional practices were not followed, but US government policies are at the root of several of them. Most importantly, Fannie Mae and Freddy Mac were the number one purchasers of subprime and Alt-A mortgages for several years, and they purchased a huge number of mortgage-backed securities. They provided a market for these bad loans/loan products, and so private comapnies produced them. Investors bought these products from these "Government-Sponsored Enterprises" because the market viewed them as being backed by the USG. Investors should have looked inside and seen how crummy the mortgages really were, but they didn't--they wanted the extra yield these products offered.
Here's more on how this worked.

So, the government is largely responsible for the excess in cheap money available to buy homes, and the resultant artificial run-up in home prices. Pumping yet more government money in will not solve the problem--it just kicks it down the road. What will solve the problem is government getting the h*ll out of the mortgage business and letting home prices and mortgage rates naturally reach the market-based rates. When interest rates are higher, more people will make money available to lend. This problem will fix itself without our 700 billion dollars. There may be a case for some legislation, but dumping a truckload of money on this cesspool is not going to make it smell better.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 10-01-2008, 10:42 PM   #72
Full time employment: Posting here.
RetiredGypsy's Avatar
 
Join Date: Mar 2008
Posts: 895
The local news just said the bill was passed tonight by the Senate.
__________________
I'm free and I like it!
RetiredGypsy is offline   Reply With Quote
Old 10-01-2008, 10:52 PM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by RetiredGypsy View Post
The local news just said the bill was passed tonight by the Senate.
Passed the Senate. This was never in doubt. Now it has to pass the House, where it failed before. I hope it fails again (in its present form)
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 10-01-2008, 10:52 PM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,418
Just the Senate, which was a done deal. The House won't even get to it until Friday.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 10-01-2008, 11:01 PM   #75
gone traveling
 
Join Date: May 2008
Posts: 3,864
Quote:
Originally Posted by samclem View Post
Passed the Senate. This was never in doubt. Now it has to pass the House, where it failed before. I hope it fails again (in its present form)
Ditto. This is one time where I really hope for congressional gridlock.
__________________
Westernskies is offline   Reply With Quote
Old 10-01-2008, 11:02 PM   #76
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
It wont. It'll pass. Everyone has successfully voted for and/or against it at least once and made their little speeches, so theres enough blame and plausible deniability around to suit.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 10-01-2008, 11:08 PM   #77
Full time employment: Posting here.
RetiredGypsy's Avatar
 
Join Date: Mar 2008
Posts: 895
I saw in the bill where motorcycle race tracks get taken care of for the next several years. Somewhere the wool industry gets a bite, as well as Puerto Rican rum. Some people are not taking this whole bailout thing very seriously.
__________________
I'm free and I like it!
RetiredGypsy is offline   Reply With Quote
Old 10-01-2008, 11:09 PM   #78
Recycles dryer sheets
Gardnr's Avatar
 
Join Date: Jul 2008
Location: ENE MO - near STL
Posts: 424
Quote:
Originally Posted by samclem View Post
But, one big part of the present problem is that mortgage loans were very easy to get--laughably easy. When nearly anyone can get access to cheap money to buy a home, then home prices will obviously be bid up.
Yep. Not to highjack the thread -- but the same thing has been happening to higher education costs, IMO. People have been wondering for years why college costs have increased at rates that exceed overall inflation. Easy money has done that. There are effects in other areas as well. Interesting times ahead as we move out of the era of high debt and easy money.
__________________
Gardnr is offline   Reply With Quote
Old 10-01-2008, 11:14 PM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,614
Quote:
Originally Posted by Gardnr View Post
People have been wondering for years why college costs have increased at rates that exceed overall inflation. Easy money has done that.
Indeed. And, while I applaud the goals of the newly-enhanced GI Bill, this is going to accelerate this. Guaranteeing tuition payment at the most expensive public university in the student's state for a large number of students is an open invitation to higher costs.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 10-01-2008, 11:15 PM   #80
Recycles dryer sheets
Gardnr's Avatar
 
Join Date: Jul 2008
Location: ENE MO - near STL
Posts: 424
The Senate bill is so larded down with miscellaneous cr@p it's unbelievable. You'd think that just for once, on this very important crisis bill, that they'd put aside the urge to bring home the bacon. Apparently not. Very discouraging and disgusting. Yes, I'm probably being naive, but for crying out loud!!!!
__________________

__________________
Gardnr is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Bailout bill fails REWahoo FIRE and Money 170 09-30-2008 08:19 PM
A different adventure begins..... LeatherneckPA Other topics 18 05-12-2008 11:35 AM
The countdown begins kumquat Young Dreamers 26 06-02-2007 10:23 AM

 

 
All times are GMT -6. The time now is 01:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.