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Old 09-19-2008, 07:23 AM   #21
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Amazingly, now the gummint will guarantee money market funds.
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Old 09-19-2008, 07:23 AM   #22
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The really tricky part is the pricing of these "structured" investment objects -- collections of parts of mortgages, or pieces of parts of mortgages, or portions of pieces of parts of ....

Pay too much = give lots of money away to people who ****ed up
Pay too little = the companies go under anyhoo

Some of both will happen, no doubt (and already has, for that matter). Whatever pricing system is developed will certainly be gamed by the finance guys, to try to move from the "too little" to the "too much" category. After all, that's their fiducial duty -- to their shareholders, not the to people of the United States.
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New investment cycle phases
Old 09-19-2008, 07:45 AM   #23
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New investment cycle phases

New investment cycle phases

1. Fear of not getting my share out of that giant ATM machine
2. Fear of losing the wealth I now have and so justly deserve
3. Fear of losing it all - even the part I really worked for
4. Guns, ammo, canned food, tin foil

then, suddenly

4. The market's gong up - fear of not getting back in quickly enough - all that new wealth to be had.

then, next year's fear...

5. Fear of not having enough to pay the tax bill this is gonna cost...
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Old 09-19-2008, 07:51 AM   #24
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One thing we can count on when all of this is over with, is that we'll all face a lower standard of living. America's largest corporations have exploited capitalism big time. The surprising thing is that the general public doesn't even seem to be angry about it. I guess they figure this is business as usual.
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Old 09-19-2008, 08:00 AM   #25
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And now the SEC has banned short selling on a list of 799 financial stocks for 10 days. If you are short, this will be extremely ugly.
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Old 09-19-2008, 08:02 AM   #26
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One thing we can count on when all of this is over with, is that we'll all face a lower standard of living. America's largest corporations have exploited capitalism big time. The surprising thing is that the general public doesn't even seem to be angry about it. I guess they figure this is business as usual.

happens every decade, wall street almost goes out of business because they make close to a TRILLION $$$ in bad loans (in 2008 dollars), the government fixes it and people forget in a few years
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Old 09-19-2008, 08:07 AM   #27
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At least with the Resolution Trust Corporation we (the taxpayers) had the satisfaction of seeing the offending institutions go out of business -- although we were still stuck with the bill. Apparently this plan will permit the offenders to escape any consequences and continue "business as usual" -- while shifting all of the risk and ultimate loss to the taxpaper. This really sucks! Heads should roll!
it's called a moral hazzard

with wall street the government can force regulation down their throats as part of the new legislation. the government tried to regulate this going back to 2004 and it was DOA every single time.

if the government pays off people's mortgages, it's bad for wall street because they lose out on interest income, investors lose out on interest, rates will probably go up, inflation and whose mortgage gets paid off? everyone's who bought in a time frame or only people that can't pay it. i might have to stop paying my mortgage just to get a bailout then
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Old 09-19-2008, 08:08 AM   #28
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Or we could transfer custody to the govt, let them arrange a liquid market for both the buyer & seller, and get people back in business. Companies stay in business, people keep their jobs, families can take care of their homes & neighborhoods, and everybody keeps paying taxes. We could call it... I dunno... voodoo economics the "trickle down" effect!
The interesting question is to what extent there really will be a trickle-down effect. Is the guy in Hometown, USA who naively/stupidly took on a mortgage obligation he can't fulfill suddenly going to get debt relief? Is the American taxpayer going to send him a nice fat check to cover his obligations? Does a vast new welfare program for Wall Street automatically translate into a vast new welfare program for Main Street?

Personally, I believe that people should be held accountable for their actions, including experiencing discomfort and pain when they make a poor decision. I do not think that the taxpayer has any obligation or responsibility to rush in and save anyone from their own stupid decisions. Normally, the corporate executive class agrees with me completely, except when they are the ones doing the suffering. Fortunately, these folks have powerful friends in Washington who are more than willing to alleviate their pain.
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Old 09-19-2008, 08:18 AM   #29
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only thing is that when things get this bad nobody makes loans to anyone, period. companies like best buy rely on short term financing to buy things like holiday season inventory. when the credit markets freeze it can be very bad for everyone if the government doesn't step in.

before the Fed banks like JP Morgan would do this, now it's up to the Fed to be the lender of last resort. There is hundreds of years of historical precedent for this in England and other European countries.
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Old 09-19-2008, 08:23 AM   #30
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Well looks like it pays to be a calm investor like myself. I've been saying all along that we should all just sit tight as better days are ahead. Time to go play golf.
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Money Market Insurance
Old 09-19-2008, 08:32 AM   #31
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Money Market Insurance

The thing that upsets me the most about this new plan is insurance for money market funds. DW and I keep our cash in Vanguard Prime Money Market Fund where we're charged a small 0.24% annual fee.

Vanguard money market fees are among the lowest in the mutual fund industry. Since, they charge such low fees and their funds are owned by shareholders, they do not invest in risky paper and offer high returns on cash parked with them.

Some money market funds charge 3 or 4 times that for an annual fee. The mutual fund managers are greedy and many invest in riskier type paper in order to obtain higher yields (to cover the higher annual fee) and to thus make more money for fund management.

Now, the way I understand it, this MM insurance will not be optional? But, with two money market funds recently not being able to pay dollar for dollar + dividends back to investors (one MM Fund was only 97 cents on the dollar), who will want to invest in an uninsured MM fund?

If Vanguard now feels they have to buy insurance, the annual fee is going to go up, which means a lower return for investors. This is just another example of how consumers will end up with less money because of the greed and ineptitude of some of America's largest financial corporations.
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Old 09-19-2008, 08:35 AM   #32
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I took a torts class in college. The professor summed up torts the first day: imagine that a tree falls on someone . . . torts is all about deciding whether the law is going to shift that tree from the person it fell on to someone else.

Here, big losses were incurred by reckless investors. Someone is going to pay for the mistake. Looks like the Government has decided to shift the loss from the shoulders of Wall Street to the shoulders of the innocent taxpayer. Was it the right things to do considering the "dire circumstances" . . . perhaps there was no other way to avert a disaster. But, make no mistake . . . we will all pay for this. Priorities will have to be massively shifted to accommodate the new Government debt. Taxes will have to raised. Needed Government programs will be curtailed. To believe that we have all somehow magically dodged the bullet is naive in the extreme --the Government just hocked our future. We have been ill-served by our leaders. I hope a sufficient number of us remember that in November.
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Old 09-19-2008, 08:35 AM   #33
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Amazingly, now the gummint will guarantee money market funds.
I heard that this was coming. What are your thoughts on it? I haven't had a chance to read up.
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Old 09-19-2008, 08:46 AM   #34
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I took a torts class in college. The professor summed up torts the first day: imagine that a tree falls on someone . . . torts is all about deciding whether the law is going to shift that tree from the person it fell on to someone else.

Here, big losses were incurred by reckless investors. Someone is going to pay for the mistake. Looks like the Government has decided to shift the loss from the shoulders of Wall Street to the shoulders of the innocent taxpayer. Was it the right things to do considering the "dire circumstances" . . . perhaps there was no other way to avert a disaster. But, make no mistake . . . we will all pay for this. Priorities will have to be massively shifted to accommodate the new Government debt. Taxes will have to raised. Needed Government programs will be curtailed. To believe that we have all somehow magically dodged the bullet is naive in the extreme --the Government just hocked our future. We have been ill-served by our leaders. I hope a sufficient number of us remember that in November.
I couldn't agree with you more. You've made a very accurate and eloquent statement of the issue. I'll bet we'll never hear any talk about tax increases from either major political party until after the election.
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Old 09-19-2008, 08:55 AM   #35
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The next administration is not going to be able to do anything but clean up the mess made by the current administration. That's not fair either. I'm not sure who I want to win for that very reason!

Audrey
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Old 09-19-2008, 08:59 AM   #36
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I have one more thing to say . . . then I'll cool my jets for awhile. When all the back-slapping and toasting is over the average little guy still isn't going to be able to afford those mortgage payments; thus, there will still be a tidal wave of foreclosures. And, the average tapped out consumer still can't afford existing houses. Thus, the driving force behind the financial collapse still remains. So, I don't see how we've "solved" the problem. Perhaps we've solved "the problem" for the imprudent investor, but we haven't solved the housing crisis.
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Old 09-19-2008, 09:06 AM   #37
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Finally, the adminisration grew a pair of gazungas and did what needed to be done.

Does anyone else see the delicious irony in all these nationalizations and handouts/bailouts happening under an allegedly conservative Republican administration? Hugo Chavez could only dream about doing his thing on the scale the US feddle gummint has done in the last few weeks.
Plus, it's perfect. Nancy Pelosi and her cronies will take credit for it, and blame Bush for making the mess happen, it's the perfect political crime...........
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Old 09-19-2008, 09:07 AM   #38
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The next administration is not going to be able to do anything but clean up the mess made by the current administration. That's not fair either. I'm not sure who I want to win for that very reason!

Audrey

this administration is cleaning up the results of what was passed during the clinton administration. repeal of glass-steagal, the hyping of subprime that started in 1997. Except for Greenspan, guess where Clinton's economic team went after 2000?

last few years fannie gave most of their bribe money to democrats to keep the regulators at bay. FDIC and Greenspan wanted to regulate these crazy loans back in 2004.
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Old 09-19-2008, 09:07 AM   #39
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The next administration is not going to be able to do anything but clean up the mess made by the current administration. That's not fair either. I'm not sure who I want to win for that very reason!

Audrey
So, it is ALL Bush's fault?
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Old 09-19-2008, 09:11 AM   #40
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I have one more thing to say . . . then I'll cool my jets for awhile. When all the back-slapping and toasting is over the average little guy still isn't going to be able to afford those mortgage payments; thus, there will still be a tidal wave of foreclosures. And, the average tapped out consumer still can't afford existing houses. Thus, the driving force behind the financial collapse still remains. So, I don't see how we've "solved" the problem. Perhaps we've solved "the problem" for the imprudent investor, but we haven't solved the housing crisis.
In my book, you've hit another home run. I read an article in yesterday's San Diego Union that average home prices in San Diego County are down to an average of $350,000, a number unseen since March 2003. Further, DataQuick predicts average prices to fall another $100,000 in the next couple of years. Part of the reason is that nearly 43% of recent sales are foreclosures.

Now, what will happen when unemployment goes up? Many homeowners in that county live from paycheck to paycheck. Things really are going to get worse in the housing industry.
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