This Time

[tuixiu]

Why? Why must someone "take responsibility" for the opinions offered here?

I agree Sam. I'll take responsibility if I do something illegal like threaten to assassinate the President in a message board, but I don't expect anyone to be held accountable for expressing opinions on the wisest financial moves or current/future state of the economy.

 

[Nords]

"It's always really different this time..." Nords
Nords, this is really getting tiring. In the school yard the bully always says, "Oh, yeah?" to everything the other kid says.
Well, my answer to your "Oh yeah"? Is... "Yeah".
If you don't think it's different this time then you are not paying attention.

OK, I'll volley another round, although phrases like "bully" and "not paying attention" and "pig-headed" tend to put a damper on the free exchange of ideas. Heck, they could even be seen as personal attacks in need of reporting or moderation. But there's no need to shoot the messenger if you don't care for the message.

And in every case I've seen the phrase "this time its different" used as a pejorative (including this one) the intent was pretty clear.
Nords can correct me if I've misinterpreted his intent.

Nah, it's pejorative.

"This time it's really different" is a cliché intended to invite some perspective to those who have discovered for the board's umpteenth time what they feel is a unique aspect of a crisis. However that crisis really hasn't demonstrated much difference from the previous several crises in at least the last century, let alone the last several centuries.

So, Boont, getting back to your specifics:

When were all three major automakers at or near bankruptcy?

Let's start with Chrysler in 1979 or Ford in 2001-2 or GM selling out to the unions in the 1980s. (The unions were doing a good job of keeping management from screwing up the company even further. Nonetheless both sides made irresponsible bargains whose implications are now coming due.) Look at VW's recent abuse at the hands of the Porsche block and Daimler-Chrysler's totally indigestible screwed-up merger. At another conference, Buffett has held up a 70-page document listing all the auto manufacturers of the 19th & 20th centuries who've gone bankrupt or been subsumed into bigger firms.

In another thread I mentioned that Buffett has pointed out that a century of airlines have consumed more billions in capital investment than they've returned in profit. I'll point out separately that in the 19th century there were hundreds of railroad companies going bankrupt. Yet somehow the country continues to train, fly, & drive.

I feel that manufacturers of public-transportation equipment are dealing in commodities with razor-thin margins. If they can't hack it then they'll go the way of their many many predecessors and we'll all move on. Not much different about it today. Toyota, Honda, & Nissan seem to be making much more effective use of their own govt subsidies, their own American plants, their own American workers, and their own quality/savings initiatives. Even Ford has foreign plants that beat the heck out of their American plants. So what's the problem with the old "Big Three" in Detroit? They know they can't afford their labor costs, and bankruptcy is the best way to deal with it.

When was it that all financial institutions world-wide from Switzerland, to Germany, to Saudi Arabia, to China, to Japan all on the ropes?

WWI and WWII both did a pretty thorough job of trashing worldwide banking systems. Japan's banking system-- they did it to themselves in the 1990s and didn't need any help from us. China-- even more widespread fraud than in the U.S., and for decades before this. Germany & Switzerland… don't know but I bet it gets back to the euro and the economic agreements that EU countries are supposed to abide by within their own borders.

We Americans tend to focus on the Great Depression without looking abroad to realize that things sucked pretty badly in other countries at the time. In fact WWII started for much of the world in 1933 and we just came in at the third act. I think your perspective on these financial issues would be broadened, maybe even cheered up a little, by reading Dimson & Marsh's "Triumph of the Optimists". Then there's the banking problems of 1893, 1907, & 1913. That's off the top of my head, but I think in inflation-adjusted terms they were more serious and widespread than today's banking issues.

Without these massive government bailouts you and me and ever one else is sunk. Do you deny this?
Nords, when did this happen before?

If you don't think it's different this time then you are not paying attention. When do you recall every major bank in the U.S. being technically bankrupt?

Actually I happen to agree with you on some of this; no "denial" required. The government is doing what govts are supposed to do in times like this-- inject liquidity and reduce fear through deficit spending. Economists are pretty sure that cutting off the money supply in 1929-30 made the Depression even worse, as demonstrated by beneficial results of the subsequent prolonged bank holidays and frantic attempts to add liquidity & employment. The Soapbox guys can make their own comparisons between the Roosevelt & Obama administrations.

During the bank panics of 1907 & 1913, without the Federal Reserve, J.P. Morgan pretty much strong-armed his fellow robber barons into injecting their own liquidity through massive buying and loans. At some point someone must've said "This really sucks, and this time I really mean it. Let's build a Federal Reserve and make it the government's problem next time."

I'm not as cognizant of bank financial status as Brewer, whose opinions I'll defer to, but I'll point out that Wells Fargo and two of Hawaii's biggest regional/state banks appear to be doing just fine. "Every major bank in the U.S. technically bankrupt" seems to me to be a bit of a sweeping generalization.

Nords, this is really getting tiring.

You want tiring? I'll give you an example of tiring. "Tiring" is having to read a dozen "doom & gloom and this time we really mean it" threads every time the economy hits a speed bump. Just because a poster has become painfully & personally aware of an apparent catastrophe in their general vicinity does not make it a cataclysmic event requiring page after page of "sky is falling" posts and personal attacks.

Of course, this time it could really be different. But I doubt it.

 

[FIREd]

Germany & Switzerland… don't know but I bet it gets back to the euro and the economic agreements that EU countries are supposed to abide by within their own borders.

Just a side note... The problem with Switzerland is that a few (very large) Swiss banks lost their ways. They used to be known for their conservative money management and their aversion to risky bets. When the banking system consolidated in the past decade, it created two giant Swiss banks and one of them in particular, UBS, lost sight of its core business (private banking) to branch out into even more lucrative, though riskier businesses. In the early 2000s, UBS's stated ambition was to morph into a global investment bank and become the world's largest mortgage-backed securities trader. We all know what happened next... In the end, UBS went down because of a gross risk-management miscalculation. But it's important to note that most other Swiss banks are still doing fine. Even UBS's smaller rival, Credit Suisse has fared much better despite some pretty big losses.

 

[tuixiu]

I'm not as cognizant of bank financial status as Brewer, whose opinions I'll defer to, but I'll point out that Wells Fargo and two of Hawaii's biggest regional/state banks appear to be doing just fine. "Every major bank in the U.S. technically bankrupt" seems to me to be a bit of a sweeping generalization.

I bank at Wells Fargo and USAA, both seem to be on solid financial footing.

 

[clifp]

If you don't think it's different this time then you are not paying attention. When do you recall every major bank in the U.S. being technically bankrupt?

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b.
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The reason I visit this forum is because of post like Nords, they are substantive and contain a mix of historical facts and analysis.

Your creditability is damaged when you post things that are quickly and demonstrably false.

Let's take a look at the balance sheets (via Morningstar) for banks that I own
Total Equity (i.e Assets - Liabilities) in millions
BB&T 12,935.0

Wells Fargo 46,957.0

US Bancorp 21,675.0

Capital Source 3,050.0

Bank of America 161,039.0

Contrast that with companies who are really technically insolvent.
General Motors -59,939.0
Ford -1,989.0

Note insolvent companies have a minus sign.

I think a significant part of the problem is that media helped by folks like you, have done a great job in highlighting the problems while ignoring the stuff that is still doing pretty well like this.

State bank profits plummet

Earnings fall 73%; 1 in 6 report loss for third quarter

By Paul Gores of the Journal Sentinel
Posted: Nov. 25, 2008





One of every six Wisconsin banks posted a loss in the third quarter, figures released Tuesday by regulators show.
Although that's better than banks nationally - nearly one in four in the U.S. didn't make a profit in the quarter - it was another sign that state communities large and small are feeling the effects of the housing slump, financial crisis and slowing economy.
Earnings at Wisconsin's commercial banks plunged 73% in the third quarter, and 49 banks in the state didn't turn a profit at all, according to the Federal Deposit Insurance Corp.
From Milwaukee to Superior, an increasing number of banks finished in the red as more loans became delinquent. Many banks also took a hit from their investment in the stock of mortgage buyers Freddie Mac and Fannie Mae, which lost almost all their value when the federal government took them over during the quarter.

Now it is certainly legitimate news story to highlight the rough financial times. On the other hand the optimist in me notes the 3 out of 4 banks actually made money last quarter during a financial crisis, what a great business! when did 3 out 4 airlines ever make money?

Likewise the comparison to Great Depression are overwrought. Unemployment is 6.5%, for decades full employment was thought to be 5% so our crisis would be considered close to full employment during out grandparents times. During the Depression output in the US drop by 1/3, we are arguing if output has actually shrunk at all.


Now believe it or not I actually welcome dissenting opinions, but they need to backed up with real arguments.

For example if you posted a link to this video (well worth watching IMO)
and than said Perma Bear Peter Schiff said its going to get much worse because of X, Y, and Z. I'd listen. Similarly if you want to show me why the banks are insolvent because this class of assets is carried on the books at too high a level I'd be very interested.

But if I want to hear shallow "the sky is falling" ratns, I can channel surf cable news.

 

[Midpack]

As I told my buddy the other day. "I am going to name a job that is bullet proof. Not vulnerable to hi-tech or off-shore replacement in any way shape or form. What is it? Beer truck driver. They aren't ever going to stop drinking beer and you can't ship it over the Internet."
boont

A couple who we are good friends with are: he/bankruptcy attorney and she/OBGYN nurse. While their investments have undoubtedly suffered, their jobs appear bulletproof to me. In terms of income, they are unaware of a recession - it's almost hard to socialize with them right now.

 

[lazygood4nothinbum]

fyi

Wall Street Lays Another Egg: Politics & Power: vanityfair.com

by Niall Ferguson - Wikipedia, the free encyclopedia

 

[DblDoc]

fyi

Wall Street Lays Another Egg: Politics & Power: vanityfair.com

by Niall Ferguson - Wikipedia, the free encyclopedia

And this quote sums it up nicely...

Nothing New

As long as there have been banks, bond markets, and stock markets, there have been financial crises.

DD

 

[lazygood4nothinbum]

um, what was that, cliffsnotes?

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while thumbing through you could have at least skipped to the last page...

It remains unclear whether this crisis will have economic and social effects as disastrous as those of the Great Depression, or whether the monetary and fiscal authorities will succeed in achieving a Great Repression, averting a 1930s-style “great contraction” of credit and output by transferring the as yet unquantifiable losses from banks to taxpayers.

 

[NW-Bound]

A couple who we are good friends with are: he/bankruptcy attorney and she/OBGYN nurse. While their investments have undoubtedly suffered, their jobs appear bulletproof to me. In terms of income, they are unaware of a recession - it's almost hard to socialize with them right now.

As my wife already ER'ed and I am working less and less, we are not dependent on income-producing jobs like most of the general population. Of course, our portfolio has suffered a sizeable 30% loss, but we still are in much better shape than people fretting of losing their job.

However, we do not rejoice on being able to thrive or enjoy our purchasing power. For our portfolio to perform in the coming months, we need the spendthrifts out there to regain their purchasing power, so that the companies I own can make profits off them. No schadenfreude here.

 

[DblDoc]

um, what was that, cliffsnotes?



while thumbing through you could have at least skipped to the last page...

Um no. It was a direct quote from the article...

DD

 

[HFWR]

The question of whether it's different this time, or not, might make interesting conversation around the [-]beer[/-] pickle barrel. But the more interesting question, assuming your answer was "yes", is "What're ya gonna do about it?"

As the Bible says, "there will be wars, and rumors of wars..."

Damn, I think lightening just struck my house...

 

[lazygood4nothinbum]

what could you do other than be aware. ya still gotta live yer life. i had this odd sensation during dinner last night. everyone around the table, more food than we could possibly eat at three sittings. discussions of purchases, a new saddle, some new horses, an upcoming 10-day trip at $450/night, a recent surgery. and i was thinking all this could end in an instant. no food. no money. poor health. one minute you think you are secure. the next day you've got 40% less than you thought you had. the day after, who knows, even that could be cut in half. i'm sitting at a thanksgiving table of abundance thinking how quickly the tables could turn.

i go home, stopping first at a friend's oceanfront condo to drop off the pocketbook she'd left at the party, i pass mom's house, i pass my bud's old homestead and so many people i love are dead. and you know, you pretty much can't plan on anything. you can't hold onto anything. it all slips away like it was never there. like life has a mind of its own. all you can do is hop on for the ride. keep your eyes open. duck when you must. scream when you have to. smile as you can. that's life.

 

[bubba]

I don't have a dog in this fight, but I will say that I totally respect Nords for the amount of research/reading he must do to stay so well informed. Couldn't disagree more about the "someone take responsbility" business - I'll worry about my own knitting and let the others be. To me, this forum is a place to hear new ideas that I can ponder and either implement or discard at my option.

 

[Martha]

I went back and did some cleanup. We are leaving the thread open for now but please speak about the topic without inflammatory posts and personal attacks.

 

[unclemick]

Ho hum - yep this time it's really different:

How about your age in bonds or 110-your age in stocks with BADDA BING! some new kids on the block!

Vanguard Total World Stock Index/Inflation Protected Securities - a little offense and defense.

No guts no glory - MPT wise.

heh heh heh - of course if you are ex pat the fixed side gets real interesting inflation and currency fluctuation wise.