Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-16-2008, 01:42 PM   #81
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,444
Rustic,

I do not have individual finance stocks, only through MFs. But same as many other shareholders, if we knew the BS that they pulled, we would not approve. You can profit from other people gullibility once. In addition, no one would want to destroy the economic environment that we need to live in. The CEOs are different than the shareholders like ourselves. They already pocketed the money and are now thumbing their nose at us. Nya nya nya nya nya nya ...

I do not own Berkshire shares, and do not think of Buffet as god. However, I believe he is in it for the long term, unlike these CEOs. He wants repeat business from his customers.
__________________

__________________
NW-Bound is online now   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 10-16-2008, 01:53 PM   #82
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 2,020
Quote:
Originally Posted by Rustic23 View Post
Ok, here is the definition when I Google Greed.

excessive desire to acquire or possess more (especially more material wealth) than one needs or deserves

I think you're trying to play a semantic game. Also note since I clearly stated that I'm talking about irresponsible greed and not greed.

Since you want to come up with some better semantics, and you don't like my term of irresponsible greed, please define for me what you would call the actions of an underwriter willfully taking on outsize loan risk.
__________________

__________________
Marquette is offline   Reply With Quote
Old 10-16-2008, 02:53 PM   #83
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
I have not heard the term 'Irresponsible Greed' and I was not trying to play a semantic game.

What we have right now is the advantage of 'Monday Morning Quarterbacking' or Why didn't you go for the field goal?

While I am not a banker, I did work in banking for 8 years and real estate longer. I know of numerous loan officers that pushed the envelope on loans. I know of underwriters that pushed the market. I have seen first hand CRA discussions with regards to loans. I know of loans that underwriters, loan officers, bank officers and just about everyone else associated with them did not want to make. However, the banks CRA rating was low and needed to be propped up. Loans were made. Not irresponsible greed, but an attempt to stay on the good side of regulators.

I know of no banker that believed that what they were doing put their bank at risk. Should they? Hindsight.... yes. Should have kicked the field goal! They were doing business as business was structured. And, in hindsight, it was wrong. However, In Jan. of last year, there were few out there that said what they were doing was wrong. Many, and I among them, wondered why, but it was the accepted business practice of the day. That is not irresponsible greed but Stupid business practice.

We sold our home two years ago. The kid who bought it, got a 80% first 20% second, and walked from closing with $2,000. He had the financial capability to make the payments, and he has. He has lived in the house for two years with wife and child. As long as both have a job, he will continue to live there. Are they over their heads? I suspect so. Who was greedy. Me? I sold it. Realtor (both) They sold it? Bank? They sold it? The kid? He bought it? Everyone? We were all doing business as business was done that day. No laws broken. Everyone doing what they thought their part was. Who was practicing 'Irresponsible greed'?

So. If you are saying that the bankers should have known, then I am in complete agreement. You would think someone would have looked at this and said 'Hey, this is going to destroy us', well some did. They were not listened to. Why? In Washington they were buying votes, In Houston, they were doing business, on Wall Street they were making money, those who only dreamed of home ownership had homes, and all was right with America. Till the house of cards fell. There is plenty of blame to go around. For me it starts with Washington. Notice I did not say Republican or Democrat but ALL politicians. It is Washington's hunger for power that got us to this point. I do not blame the business establishment for making money. They are just a dog doing what dogs do. I expect it. I also expect more of those we send to government, and hold them directly responsible! So, while I lean Republican, I would be glad to see every incumbent voted out of office! It just ain't going to happen. 13% approval rating for Congress and something like a 98% re-election rate.

Sorry. got carried away. most likely time to read and not reply for a while.
__________________
Rustic23 is offline   Reply With Quote
Old 10-16-2008, 03:45 PM   #84
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 2,020
Quote:
Originally Posted by Rustic23 View Post
Sorry. got carried away. most likely time to read and not reply for a while.
I actually enjoyed the back and forth. It's been educational and I do appreciate your insight as someone with insight into the business.

Quote:
Originally Posted by Rustic23 View Post
What we have right now is the advantage of 'Monday Morning Quarterbacking' or Why didn't you go for the field goal?
I know. On the one hand, I know that we have the benefit of hindsight. On the other hand, I was as convinced that the market was overvalued and we had too high a percentage of new home owners.

So, where do we go from here? Note, I'm not letting anyone off the hook. While I truly believe there may be some predatory lending off of some people that just don't know better, I more firmly believe that the vast majority of borrowers are just as culpable.

If the mess is truly the result of regulators forcing suspect loans, that still only explains the lower bell of mortgage distribution. But, a sharp enough supply contraction there will, I still feel, force higher prices along the rest of the distribution.

And, if the initial tremors started as the result of regulators forcing bad underwriting, then it's only fair that they bail out banks. Ultimately, we elected the officials that told the banks to lend so we're on the hook for it.

There's still some element that doesn't fit with the CDOs, though. Maybe someone just thought they had a brilliant way to make that bad paper go away. Then the banks are happy because the paper is salable and the government is happy because the banks are making subprime loans.

You mentioned buying votes, though. To me, that infers that some set of people wanted these loans to keep flowing. Since they were able to retraunch the risk away, they were more than happy with the juiced interest rate returns. So, what happens going forward?

Think we'll revisit underwriting and come up with more responsible regulation?
__________________
Marquette is offline   Reply With Quote
Old 10-16-2008, 04:16 PM   #85
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,444
OK. I see your points. We may just be little cogs in the system, and have to go with the flow. I may be very ignorant, not being in this business, but if the higher bankers at the top did not concoct these CDOs and CDS for little guys to unload their mortgages, perhaps they would stop after sitting on a pile of papers that no one wants to take.

From what I heard, these derivatives are not regulated. So, how is the government responsible in these CDO and CDS? Not that the guvmint is clear here with their GSEs, but I don't see how to blame it all on the guvmint.

Quote:
Originally Posted by Rustic23 View Post
I do not blame the business establishment for making money. They are just a dog doing what dogs do.
OK, I see your points. Dogs will need to be leashed. It's coming. Sad that some rabid canines already escaped...

PS. See another thread about AIG management having a romp right after being bailed out. As much as I am for capitalism, I am so disheartened by their action. How can you pass laws mandating decency? How do you tell these non-humans to behave? We know corporate governance is a joke. What do the board of directors care? Is it the doom of capitalism?
__________________
NW-Bound is online now   Reply With Quote
Old 10-16-2008, 04:17 PM   #86
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
I think it is going to take four or five years before history records what happened. I, I think, like you, really don't understand it all.

First there were bad loans.
Then these loans were packaged with good loans and sold to investors.
Market goes south.
Investors can't figure out what these loan packages are worth so they stop buying them.
Banks can not longer sell them, and other financial institutions that have these as part of their portfolio can't sell them. Therefore no one seems to be able to value them.
Rules require institutions to 'mark to market' seeing as these now have limited or no value, institutions loose huge amounts of value. As they loan 10 times assets, they can not longer lend and must begin to either sell assets or call existing loans. thus a credit collapse.

Now somewhere in all this is derivatives. I don't understand them and don't have a clue where they fit. I also wonder if the loan bundles could be split up and the bad loans removed and the rest of the package revalued.

It is hard for me to believe that this whole mess is caused by bad CRA loans, yet I do think it was a catalyst. The housing slump has gone on for about a year. Why did the system crash just last month?

Yes I did mention 'buying votes'. I don't mean that as 'I'll give you 10 bucks to vote whatever' but Federal, State and Local government have figured out that we are pare shaped, with the extreme rich at the top and poor at the bottom. By taking from the rich and giving to the poor they stay in office. Rich use to be a millionaire now it is $250,000. Soon it will be less. The only question how low will rich go, how long will the rich tolerate it, and could they do anything about it anyway. That's why I see public financing of campaigns so dangerous. It would complete the disenfranchising of the wealthy. Surely a topic for another thread.
__________________
Rustic23 is offline   Reply With Quote
Old 10-16-2008, 09:29 PM   #87
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,528
Quote:
Originally Posted by Rustic23 View Post
It is hard for me to believe that this whole mess is caused by bad CRA loans, yet I do think it was a catalyst. The housing slump has gone on for about a year. Why did the system crash just last month?
The system crashed last month (9/15) because Lehman went bankrupt, and that caused a "domino effect" of instability in the global financial system.

The bad loans in and of themselves weren't that big of a problem. Sure, there would have been losses, etc., but it would have been survivable without extraordinary measures. What made everything so deadly serious was that the investment banks/financial institutions that played with this funny paper, had ALSO leveraged themselves as much as 30:1 in an era of easy money/low interest rates. This meant that for a few happy years the fees and profits were huge. But when the housing market turned south - minor drops in asset value caused massive losses. Leverage cuts both ways, and the financial institutions that gleefully maxed out on leverage on the way up, were totally unprepared for the downside. Shocking and inexcusable, but there it is.

Audrey
__________________
audreyh1 is offline   Reply With Quote
Old 10-17-2008, 07:13 PM   #88
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 3,624
Wall Street's Shadow Market Video - CBSNews.com

Best video to explain this I have seen.

Looks like the executives of the financial companies hired a bunch of super brains to creat 'no risk' or 'minimum risk' securities. They did, and most likely, briefed their bosses on how they worked. Given the stated complexity of the underlying securities the executives eyes most likely glazed over. Guy on the right said "hmmmm I see" so guy on the left had to say "Of course" couldn't look stupid in front of everyone. The boss, making 500 million a year, certainly could not admitt he did not have a clue, and approved them.

Sounds to me like STUPIDITY rather than GREED. However, there is not doubt that the desire to make more money was at the heart of it. I hate to say it, but I have set in meetings like that and know that the guy at the head of the table didn't have a clue what he was being told.
__________________
Rustic23 is offline   Reply With Quote
Old 10-17-2008, 08:01 PM   #89
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,444
Thanks, Rustic for sharing the video link.

The Power Point presentation from my friend that I described earlier was more succinct, but described the same thing. I could not share it because it may be private.

I would buy the argument that it was caused by stupidity, more than intentional malice. However, most people do not have the luxury of a "stupid job" that pays $500M.

About idiot savants who proved how these CDS were supposed to work were using complicated and elegant-looking math models, hasn't any of these execs learned from the LTCM fiasco? That was not too long ago.

The public did not know, but there were experts who warned of this. Taleb warned against idiotic math modelling in his book "Fooled by Randomness". I read the following from Jon Markman last year, but did not believe him then. I should have, since Jon is not a permabear. If I also had read Taleb collaboration then, perhaps I would believe them more.

A bad market? You ain't seen nothin' - MSN Money

Are we headed for an epic bear market? - MSN Money (posted Sep 2007!!!)
__________________

__________________
NW-Bound is online now   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
Big Losses and Big Lessons Rich_by_the_Bay Health and Early Retirement 41 07-31-2008 02:51 PM
The new baby is home!! St.Patty's Day is his B-Day!! thefed Other topics 20 03-21-2008 04:48 PM
Big Dan Wants Big Money!! FinanceDude Other topics 0 09-19-2007 03:19 PM
SteveR's Big Day virginia Life after FIRE 43 06-03-2007 07:38 AM
Big day tomorrow! House goes on the market newguy88 Hi, I am... 25 01-28-2006 02:29 AM

 

 
All times are GMT -6. The time now is 03:43 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.