Whitney On Wall Street's Future

Michael Dirubio said:
Yes- I am aware that the current economy doesn't meet the technical definition of a recession.
Click to expand...

Though oft repeated, the government actually doesn't define a "recession" as two quarters of GDP loss. It has a more liquid definition.

If the "two quarters" definition is used, it misses several recessions in the past.
 
REWahoo said:
My advise is to shoot early and shoot often...
Click to expand...

I just got back from the range. I'm pretty good with the .22 and 9mm when I'm shooting at paper and it doesn't shoot back.
 
eridanus said:
Yes.
Click to expand...

So what was the issue then? I have faint recollection of old statistics from 5 and 15 years ago. All I remember is that most of these stats are trailing and non predictive of anything.

Shortly after the 1993-94 high unemployment the stock markets reeled off their best 6 year performance ever. During the last spike in 04-05 the markets shot up again and so did home prices.

So I take it these recollections are favorable? ;)

And I'm not saying any of these things arent meaningful in some way or to some people. What I'm saying is they arent predictive or representative of much of anything. Certainly not signs of the coming apocalypse.
 
eridanus said:
Though oft repeated, the government actually doesn't define a "recession" as two quarters of GDP loss. It has a more liquid definition.

If the "two quarters" definition is used, it misses several recessions in the past.
Click to expand...
Recession is actually declared by a group of economists. You know about them. Economists just don't have the personality to be an accountant.

They make the "official" decision but it almost always comes after a recovery has obviously started. It doesn't depend on two quarters of GDP loss but I haven't ever heard of a recession with a 3% GDP gain.

The economy is actually not doing too badly. It's hell to be out of a j*b when you want one. I've been there and hope to never experience it again. A 6% unemployment is not a major disaster. It is being entirely overhyped.

Our big issue is the unwinding of the asset bubble created by Greenspan's loose money and clever financial instruments that really weren't.

I find it hard to believe but I think CFB is actually more of an optimist about our current situation than I am. It will pass. I suspect it will come very soon. Foreclosures should start fallilng in 4Q08 due to the timing of the liar loan interest rate resets having worked through the system. This will create a giant explosion of financial joy.

We could speed it up by getting rid of the "mark to market" rule for performing assets. These forced liquidations of good assets at distressed prices feeds a continuing downward spiral of the perceived asset value.
 
REWahoo said:
As long as you are dreaming you might as well see if you can find an internet forum where everyone agrees with you. ;)
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I agree with almost every opinion you have except for retiring in San Antonio. I know you appreciate this.

I don't want everyone to agree with me. If that was the case, why bother to post? Some people are sloppy with their "facts," argumentative and/or rude. I'll tolerate 2 or 3 clashes but after that I've had enough of their input. That's why the forum gods created an ignore feature. :angel:
 
2B said:
I agree with almost every opinion you have except for retiring in San Antonio. I know you appreciate this.

I don't want everyone to agree with me. If that was the case, why bother to post? Some people are sloppy with their "facts," argumentative and/or rude. I'll tolerate 2 or 3 clashes but after that I've had enough of their input. That's why the forum gods created an ignore feature. :angel:
Click to expand...

Um, I'm pretty sure he was talking to the guy that said it was his last post, the Michael Diabolical plot against America guy.
Not that the ignore feature isn't a good one. :angel:
 
A 6% unemployment is not a major disaster. It is being entirely overhyped.
Click to expand...
It would not be a major disaster if people had some level of savings and little debt.

We could speed it up by getting rid of the "mark to market" rule for performing assets. These forced liquidations of good assets at distressed prices feeds a continuing downward spiral of the perceived asset value.
Click to expand...

Your solution is to ignore the free market completely? Allow firms to set fantasy prices? People GOT INTO this situation by overlooking the fact that a 900 s.f. pre-war box in CA was not really "worth" $1mm. That a crack house in MI was not really "worth" $200k. Now the solution is to continue the fantasy that they are.. and that someone is going to keep paying the notes on them:confused: Good luck with that, as they say.

It's not up to the taxpayers or the government to make sure these credit bundles are worth something.. it's up to the companies that sell them to prove to us they are. They've shown they are incapable of that. I'm just stunned at the response of supposed "capitalists" to this crisis.. they should be rooting for the 'creative destruction' of such malinvestment.
 
ladelfina said:
It would not be a major disaster if people had some level of savings and little debt.



Your solution is to ignore the free market completely? Allow firms to set fantasy prices? People GOT INTO this situation by overlooking the fact that a 900 s.f. pre-war box in CA was not really "worth" $1mm. That a crack house in MI was not really "worth" $200k. Now the solution is to continue the fantasy that they are.. and that someone is going to keep paying the notes on them:confused: Good luck with that, as they say.

It's not up to the taxpayers or the government to make sure these credit bundles are worth something.. it's up to the companies that sell them to prove to us they are. They've shown they are incapable of that. I'm just stunned at the response of supposed "capitalists" to this crisis.. they should be rooting for the 'creative destruction' of such malinvestment.
Click to expand...
I think you missed my point that if people are paying their mortgage on time the value of that cash stream has not collapsed. About 95% of the mortgages in the US (I don't know about Italy) are being paid on time and are not considered sub-prime. The big jump in foreclosures is tied to a few states and is heavily concentrated in sub-prime. The market for all mortgage backed securities and finacial assets of companies that hold large amounts of them has collapsed and no one will buy them except at great discounts. Forcing the immediacy of mark to market feeds on itself in driving the asset value down. The whole concept of mark to market is very new to our financial system. It sounds like a good idea until you see what it does to essentially sound assets during a panic.
 
ladelfina said:
Your solution is to ignore the free market completely? Allow firms to set fantasy prices? ........ Now the solution is to continue the fantasy that they are.. and that someone is going to keep paying the notes on them:confused: Good luck with that, as they say.
Click to expand...

ladelfina, why do you continue to do this? 2B has raised a very good issue about these marks-to-the-market, a point BTW that has been raised by several prominent financial professionals. He clearly indicates in his post that he is talking about performing assets. Yet, you respond with an irrelevant "sound-byte" about "free markets" and "capitalists", rather than a serious discussion of the issue he is raisng.

IMO, the "main street" equivalent of 2B's point is like owning a home in a stable neighborhood (with no recent real estate sales) and making your mortgage payments on time. Then your neighbor loses his job and is forced to sell his house at a below-market price. Do you think your creditors should then move in on you, revalue your home downward, claim your balance sheet has been weakened, and make you pay a higher interest rate on your debt, thus weakening your financial situation.

Many of these marks reflect an illiquid market, where the only sales are distress sales, and bids are "low-balled" by investors who are trying to maximize their risk-return profile. In these cases, wouldn't some type of discounted cash flow analysis, taking into account the probabilities of the cash flows actually being received, be preferable?
 
Michael Dirubio said:
All- I believe this will be my last post to this forum. There just doesn't seem to be an atmosphere here to allow honest discussion of idea's and thoughts. It appears to me that any one trying to sound some warning bells gets attacked. I'm not saying we are going into a depression, but anyone who believes that we are not in a recession is delueding themselves. Yes- I am aware that the current economy doesn't meet the technical definition of a recession. That is part of the problem: I honestly believe the government has changed the statistical formulas so that we can't have GDP contraction. Same with unemployement. Every time the government changes the formula, the unemployement rate goes down. I think that makes any comparison of unemployement rates meaningless. The incompetance of this administation cannot be overstated. The incompetance runs to every aspect: The CIA claims WMD are a slam dunk. Oops. None there. Lets give Tenet the Medal of Freedom rather than admit the mistake. And it just goes on: How did the CIA not see 30,000 Russin troops massing on the Georgian border? That was a complete surprise to the President? If it wasn't a surprise, why was he in Bejing instead of the situation room? What did we learn in Katrina and Ike? The government cannot respond to help citizens in a crises. As a californian, I have no illusions about the response for an earthquake: I am on my own. I'm ready for it. How can I not be aware of the problems with the economy and the governments total lack of response.

This was a posted point on this thread:

"Pretty much my point. So in 1993-1996 and from 2004-2006 when unemployment was higher than that, did you feel that unemployment was a major factor in our economy and our economic future? Does anyone even remember unemployment as an issue during those time periods?"

Yes I do. I remember article after article on the "Jobless Recovery", and how that was going to hurt us in the long run. Jobs going overseas doesn't mean good news for us. People didn't have good paying jobs and used thier houses as ATM's. Now the HELOC's are gone and 401K's are being depleted. The 25% drop in the market means that the 401K's are now almost gone. Where do we turn next? A drastic drop in the standard of living in this country. Do I want this to happen? No. Am I preparing for it? Yes.

Statistics are tough things. Someone on this thread said this: the employees that lost thier pensions are only .15% of the population and thats not significant.

That is a statistically fallacious argument. Yes .15% of the total population, but how much of the working population? And more important: what percentage of the PBGC's remaining assets? What I mean is this: The Leman Brothers employees will take a significant portion of the remaining PBGC assets. The PBGC is broke. I know because DW gets a statement cataloging 15 years worth of hard work for UAL for pennies on the dollar. Where is the PBGC going to get more money? Taxpayers. Maybe.

We can make the same argument on the FDIC. The total number of banks failing is small. It only takes afew to deplete the FDIC. Once the FDIC is gone, there will be a run on banks. I saw an artical on the web to that effect. People need to keep an eye on deposited money. Is that panic? Is that likely? Each person needs to decide. I am arming myself both literally and figuratively. I like the Warren Zevon insurance policy: Lawyers, guns and money. Since I will not be around to reply to all the "conspiracy nut" posts: I'm really not. I don't believe in black helicopters and bugged phones, the NSA eavesdropping program aside. I just believe that the foxes are running the henhouse and we need to hold them to account and be ready for the consequences of our laxness. Here's hoping the market recovers. While I'm at it: here's hoping that the government balances the budget, people start saving more money, someone invents a better solar cell (or cold fusion), and honest people start running the government. Oh well, a man can dream.
Click to expand...

How did I know that this guy lives in California? (read: hes an overly liberal democrat)?

Bush gets bashed for Iraq and in the next sentence gets bashed for not doing something to stop Russia from moving into Georgia.
 
utrecht said:
How did I know that this guy lives in California? (read: hes an overly liberal democrat)?

Bush gets bashed for Iraq and in the next sentence gets bashed for not doing something to stop Russia from moving into Georgia.
Click to expand...
There is a large contingent of people that live their lives to "hate Bush." He is the devil incarnate to them even though they seldom believe in God.

I personally think he's done a poor job but I don't live my life around that. I did vote for him 4 times (2 for gov and 2 for pres) only because the dems found even less desireable candidates to run against him. It's an unfortunate fact that elections don't have a "none of the above" option. Failing to vote doesn't achieve that.
 
FIRE'd@51 said:
IMO, the "main street" equivalent of 2B's point is like owning a home in a stable neighborhood (with no recent real estate sales) and making your mortgage payments on time. Then your neighbor loses his job and is forced to sell his house at a below-market price. Do you think your creditors should then move in on you, revalue your home downward, claim your balance sheet has been weakened, and make you pay a higher interest rate on your debt, thus weakening your financial situation.
Click to expand...
A classic example of the doom caused by mark-to-market on performing assets came from the Schwab "Yield Plus" Fund. This is an ultrashort bond fund that was sold as a higher-yield alternative to money market funds. Many of the securities were mortgage-backed securities with investment-grade ratings, and all of the assets were performing. However, because the securities were marked to market and the market was panicking about pretty much any MBS, the NAV of the fund plummeted despite having no defaults on the underlying securities. As a result the fund has lost about 30% of its value year to date -- in a fund touted as being nearly as "safe" as cash.
 
2B said:
There is a large contingent of people that live their lives to "hate Bush." He is the devil incarnate to them even though they seldom believe in God.

I personally think he's done a poor job but I don't live my life around that. I did vote for him 4 times (2 for gov and 2 for pres) only because the dems found even less desireable candidates to run against him. It's an unfortunate fact that elections don't have a "none of the above" option. Failing to vote doesn't achieve that.
Click to expand...

I agree with you. I started out liking Bush but at this point I think hes failed on several levels, but at the same time hes nowhere near as bad as alot of people make him out to be.

Personally I think its ridiculous to think that the President himself has anywhere near as much control over every aspect of our lives as most people seem to think.

People have been complaining about healthcare, immigration, the economy, pharmacutical companies, energy...ect for as long as I can remember and they will still be complaining about that stuff years from now no matter who gets elected. McCain is not going to fix the healthecare problem and neither is Obama and to elect one of them based on the belief that they will is foolish.
 
ladelfina said:
It would not be a major disaster if people had some level of savings and little debt.



Your solution is to ignore the free market completely? Allow firms to set fantasy prices? People GOT INTO this situation by overlooking the fact that a 900 s.f. pre-war box in CA was not really "worth" $1mm. That a crack house in MI was not really "worth" $200k. Now the solution is to continue the fantasy that they are.. and that someone is going to keep paying the notes on them:confused: Good luck with that, as they say.

It's not up to the taxpayers or the government to make sure these credit bundles are worth something.. it's up to the companies that sell them to prove to us they are. They've shown they are incapable of that. I'm just stunned at the response of supposed "capitalists" to this crisis.. they should be rooting for the 'creative destruction' of such malinvestment.
Click to expand...

Hmmm.... I have always believed... and still do... that objects are only worth what people are willing to pay for them. If someone is willing to pay 1 million for a "900 s.f. pre-war box in CA " as you state it... then it IS in fact "worth" that much. How exactly do you "prove" how much something is worth? I can go to the local supermarket and buy a gallon of water for less than $1. But I would think if there was almost no water to be had, then that same gallon might be a lot more expensive.
Objects such as cars, homes, etc, do not have any inherant value. Their only value is in what people are willing to pay for them.
I personally believe the "true" reason behind the mortgage crisis that is tanking the markets right now, is that banks believed (and more often than not they are right), that the fed would always step in to protect them if things got out of control (like they are now... and the govt has). If the banks beleived there was no such protection, or at best just a tiny amount, then they would have been much less likely to do the risky business dealings that they did. Once again... it was business backed by the govt that started the problem... Sort of like adult children that still live at home, and are funded in part by their folks. They tend not to live a life of financial responsibility, because they do not have to.
 
FIRE'd@51 said:
2B has raised a very good issue about these marks-to-the-market, a point BTW that has been raised by several prominent financial professionals. He clearly indicates in his post that he is talking about performing assets.
Click to expand...

Most financial institutions borrow short and lend long. It is their only real reason for existing.

The recently imposed mark-to-market requirements are counterproductive and IMO have a lot to do with the stress we are experiencing right now.

Ha
 
Michael Dirubio said:
All- I believe this will be my last post to this forum. There just doesn't seem to be an atmosphere here to allow honest discussion of idea's and thoughts. It appears to me that any one trying to sound some warning bells gets attacked. I'm not saying we are going into a depression, but anyone who believes that we are not in a recession is delueding themselves. Yes- I am aware that the current economy doesn't meet the technical definition of a recession. That is part of the problem: I honestly believe the government has changed the statistical formulas so that we can't have GDP contraction. Same with unemployement. Every time the government changes the formula, the unemployement rate goes down. I think that makes any comparison of unemployement rates meaningless. The incompetance of this administation cannot be overstated. The incompetance runs to every aspect: The CIA claims WMD are a slam dunk. Oops. None there. Lets give Tenet the Medal of Freedom rather than admit the mistake. And it just goes on: How did the CIA not see 30,000 Russin troops massing on the Georgian border? That was a complete surprise to the President? If it wasn't a surprise, why was he in Bejing instead of the situation room? What did we learn in Katrina and Ike? The government cannot respond to help citizens in a crises. As a californian, I have no illusions about the response for an earthquake: I am on my own. I'm ready for it. How can I not be aware of the problems with the economy and the governments total lack of response.

This was a posted point on this thread:

"Pretty much my point. So in 1993-1996 and from 2004-2006 when unemployment was higher than that, did you feel that unemployment was a major factor in our economy and our economic future? Does anyone even remember unemployment as an issue during those time periods?"

Yes I do. I remember article after article on the "Jobless Recovery", and how that was going to hurt us in the long run. Jobs going overseas doesn't mean good news for us. People didn't have good paying jobs and used thier houses as ATM's. Now the HELOC's are gone and 401K's are being depleted. The 25% drop in the market means that the 401K's are now almost gone. Where do we turn next? A drastic drop in the standard of living in this country. Do I want this to happen? No. Am I preparing for it? Yes.

Statistics are tough things. Someone on this thread said this: the employees that lost thier pensions are only .15% of the population and thats not significant.

That is a statistically fallacious argument. Yes .15% of the total population, but how much of the working population? And more important: what percentage of the PBGC's remaining assets? What I mean is this: The Leman Brothers employees will take a significant portion of the remaining PBGC assets. The PBGC is broke. I know because DW gets a statement cataloging 15 years worth of hard work for UAL for pennies on the dollar. Where is the PBGC going to get more money? Taxpayers. Maybe.

We can make the same argument on the FDIC. The total number of banks failing is small. It only takes afew to deplete the FDIC. Once the FDIC is gone, there will be a run on banks. I saw an artical on the web to that effect. People need to keep an eye on deposited money. Is that panic? Is that likely? Each person needs to decide. I am arming myself both literally and figuratively. I like the Warren Zevon insurance policy: Lawyers, guns and money. Since I will not be around to reply to all the "conspiracy nut" posts: I'm really not. I don't believe in black helicopters and bugged phones, the NSA eavesdropping program aside. I just believe that the foxes are running the henhouse and we need to hold them to account and be ready for the consequences of our laxness. Here's hoping the market recovers. While I'm at it: here's hoping that the government balances the budget, people start saving more money, someone invents a better solar cell (or cold fusion), and honest people start running the government. Oh well, a man can dream.
Click to expand...

You're pretty darn cynical considering you've been on here for a month and have only 6 posts. While I disagree with CFB at times and others too, the bottom line is this is a forum containing a diverse group of highly intelligent people. Also, you WILL be called out if you can't defend your posts with facts. Must be all the enginners on here........:D
 
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