House turns down bailout

[Al_U_Card]

As Warren Buffet said, “Only when the tide goes out do you

discover who’s been swimming naked.” .......

 

and something of a cynic, as well?

Unless I'm misinterpreting the analogy, sounds like just a statement of fact.

Yup, the facts are that they claimed to know what was safe to use and what was toxic.....I guess our trust was misplaced?

[Mbodell]

So, it was a little bit dry at times, but Nassim Nicholas Taleb's book The Black Swan would probably be a good book made more relevant in recent times.

[kenberg]

is this good or bad?

I do not know anywhere near enough about economics to offer an informed opinion, but I do know that my friend Warren Buffett claims that some form of bailout, though highly distasteful, is unfortunately necessary.

 

Warren understands the workings of the financial world as well as anyone and he is also a man of great integrity - he would never make a statement like this unless he genuinely believed it was true.

 

So I am concluding that it is bad :(

 

Fred Gitelman

Bridge Base Inc.

www.bridgebase.com

And he might not be just a bit influenced by his standing as a man of great riches?

Really you question does not deserve an answer, because it should be obvious from my previous post that I think the answer to your question is "no".

 

I made it clear that I think Buffett is a man of great character.

 

Probably you know people that you feel that way about. How would you like it if some random stranger questioned your ability to judge character and your friend's integrity in this way?

 

I suspect you would either be less polite about it than I am being or you would simply ignore the person (as I no doubt should have ignored you).

 

Fred Gitelman

Bridge Base Inc.

www.bridgebase.com

And my opinion might be influenced by being a man of no great riches. Of course. But there are a lot of people out there whose market philosophy can be roughly summed up as "Watch what Buffet does and then try to do that before everyone else catches on". I would say his opinions deserve more than a passing glance.

[Al_U_Card]

Foxes in the henhouse.

 

When you can invest and own part of the operation and it produces goods of value then that is good.

 

When you "bet" on rises or falls in the value of the subjective appreciation of how the operation might do under certain circumstances....

 

When you derive financial instruments based on arbitrage and other fine and dandy theoretical models...

 

When you can produce money but prefer to borrow it at interest...

 

When you cut taxes on the well to do and deprive people of their future or medical care...

 

The litany is endless. There is little hope....but there is some. The power of the people to resist oppression and exploitation requires only awareness and intention. That is how 1776 grew into a republic.

[Al_U_Card]

We don't need to go into the oil in Iraq etc. to understand that economic woes at home (even if they are exacerbated by the deficits entrained by the conflict) trump dying soldiers and foreigners with the voting public.

 

Just ask yourself one question:

 

When that bank(er) was approving that crappy loan (they used to only loan to people that didnt need the money....lol) did they or did they not realize that it wasn't a problem because they would be able to package it up and sell it off and....some poor sap (not the bank or its shareholders) would get stuck with it....np

 

The answer to that question is why they cannot be let off the hook.

[Al_U_Card]

It all distills down to value for money. Not speculation for money. Not debt for money. Just value. Something being worth what it costs. Not what someone hopes it will be worth whenever...

 

The US has gone from World Financial Icon to third-world financial basket case. They won't be able to lower interest rates to counter the inflation that is coming due to the influx of cash (debt) needed for the bailout. The world bank is not far away. Another one of your precious freedoms and rights, on the way to the crapper, thanks to the neocons and their theories and practices.

 

There is little hope but there is still some. A groundswell of public sentiment and the resolve of the common person to insist that the government return to its of, for and by the people motive and modus.

[jikl]

If I answered this I would offend far too many people.

 

Sean

 

(by this I mean thread, not the previous post or a particular post)

[Al_U_Card]

Go for it!! (Its the cooler after all, despite some superfluous indignation here and there :( )

 

Just a reminder:

 

9-29 2008 -778 pts or -7%

9-17 2001 -685 pts or -7%

10-27 '97 -554 pts or -7%

 

10-19 '87 -508 pts or -23% !!!!!!!!! and we survived without any bailout.

 

When the man in the 10-gallon hat (or business suit) yells "Stampede!" is he warning you or is he creating one?...

[cherdano]

Go for it!! (Its the cooler after all, despite some superfluous indignation here and there :( )

 

Just a reminder:

 

9-29 2008 -778 pts or -7%

9-17 2001 -685 pts or -7%

10-27 '97 -554 pts or -7%

 

10-19 '87 -508 pts or -23% !!!!!!!!! and we survived without any bailout.

 

When the man in the 10-gallon hat (or business suit) yells "Stampede!" is he warning you or is he creating one?...

Some sort of bailout is still likely. So the 7% drop was just the difference between 90% chance of a bailout happening, and maybe a 70% chance of a bailout happening. So if nothing else is done to solve the problem, expect another 20% drop in the market.

 

Short version: Market thinks no bailout will lead to a severe recession.

[Lobowolf]

It all distills down to value for money. Not speculation for money. Not debt for money. Just value. Something being worth what it costs. Not what someone hopes it will be worth whenever...

So if you can still make your house payments, a decline in market value shouldn't bother you.

 

With respect to tax cuts for the rich...well...to be fair, they ARE the ones paying the taxes.

[naresh301]

With respect to tax cuts for the rich...well...to be fair, they ARE the ones paying the taxes.

We should steal from the rich. After all, they ARE the ones with money...

[jikl]

With respect to tax cuts for the rich...well...to be fair, they ARE the ones paying the taxes.

 

I think you will find that in nearly every country, the richer you are the less you pay in taxes on a percentage basis. You have the best accountants, the best financial advisors etc

 

Sean

[glen]

what I noticed today was that discussion on this subject in financial forums was about 95% emotion, 5% thought, the worst I've seen it in many years - "ideas" for individual investors included be mostly cash, mostly grains, mostly oil, mostly real estate, sell all stocks now, buy low stocks now, be 100% debt free etc. - blame was given out to almost anybody - articles that were years old were dug up for "eye told u sew" - estimates of the problem ranged upwards to $20 trillion of toxicity - random guesses of what is about to occur include collapse, complete disaster, resiliency, meltdown, hyperinflation, deflation, stagflation, and californation

[mike777]

Note mainstreet lost over a trillion bucks today in the market.

 

Bailout plan is only 700 Billion assuming we lose every red cent.

[jdeegan]

B) Latest as of midnight CST in the U.S. - Yesterday's bill got defeated because e-mails and phone calls were running almost 100% against it in conservative congressional districts. Since 6pm CST a complete reversal - the same e-mails and phone calls are running 10 to 1 to do something to reverse the stock market decline by passing something - anything - next time around. Look for a finished bill by next Monday at the latest. It should include a directive to deep six the ridiculous (at least during a financial crisis) 'mark to market' accounting rule.

 

Do I think the delay is a good thing or a bad thing? I doubt anyone cares, but for what it's worth, I think the delay in passing a bailout will be seen on balance as a bit of a negative. The ultimate bailout bill will be better, but the delay has rattled the financial markets, and this might turn things ugly for a while. In the final analysis, if you can't trust Baron Paulson and Cardinal Bernanke, at least for a few months time, then we are all screwed.

[Elianna]

Classic.

 

Nice to be a House Republican and hold everyone's nuts in a vise.

Translation for non-native speakers?

An actual vise is a tool that is used to clamp something down to a workbench. It's not something pleasant to have one's genitals caught in it.

 

See also http://en.wikipedia.org/wiki/Vise_(tool)

[hrothgar]

With respect to tax cuts for the rich...well...to be fair, they ARE the ones paying the taxes.

If anything, I would think that the recent Wall Street meltdown would help demonstrate why we need a progressive tax system. (The House Republican's suggestion to cut capital gains taxes to zero and decrease regulation is a sick joke. Its another stellar example why the modern Republican party shouldn't be trusted to manage a Qwikie mart, let alone the government)

 

Wall Street managed to turn significant portions of the economy into a giant house of cards. Now its time to pay the piper. I think its only fair that the folks who benefited so greatly creating this mess bear as much of the burden as possible.

 

One thing that I would love to see is some kind of reconciliation between the size of bonus payments and the bailout plan. Does anyone have any good numbers regarding the magnitude of the bonuses paid out by AIG and the Wall Street I Banks over the past 2-3 years? I'd be very interested to understand the total amount. More specifically, how close is this figure to 700 billion dollars.

 

For what its worth, I think that some kind of bailout scheme is very much necessary. However, I think that it needs to come with some significant strings attached. Unfortunately, I think that the Democrats are missing the boat by focusing so much on the size of executive compensation. I think that it would be much more useful to regulate the forms that that compensation can take.

 

More specifically, the current incentive systems are fixated on short term profits and encourage wild risk taking. I think that we'd all be much better off if bonuses structures incentivized long term long term thinking. Pay the bigwigs what you want, but make sure that a significant portion of their compensation package is in the form of highly illiquid options with a vest date 10 years out...

 

I'd very much prefer to see shareholders driving these sorts of initiatives. It would be better if these sorts of reforms were driven from the bottom up rather than the top down. Sadly, shareholders have been largely neutered in this day and age. Then again, it looks as if the Feds are about to become significant shareholders on Wall Street. This provides a bit more weight that they can swing around.

[Gerben42]

If this bailout is done, it should be made sure that the first 700 billion of profits from the banks who now get the bailout should be used to pay it back to the taxpayer. With interest.

 

Note mainstreet lost over a trillion bucks today in the market.

 

The "trillion bucks" that were lost were never really there. The people owning the shares thought tehy had their trillion bucks, true. But does that make them real?

 

BTW when is a company or bank big enough to be bailed out? Who decides? I would prefer some solution where those who were talked into the bad loans are bailed out. In that case, their bad loans are no longer a problem for them because they now are good loans, which in turn will help the banks too.

 

Pump the money in at the bottom, and then when the money has reached the top, take it away by taxing those at the top.

 

The focus should be on those who have lost everything, not those who are still millionairs but only less than before.

[P_Marlowe]

is this good or bad?

I do not know anywhere near enough about economics to offer an informed opinion, but I do know that my friend Warren Buffett claims that some form of bailout, though highly distasteful, is unfortunately necessary.

 

Warren understands the workings of the financial world as well as anyone and he is also a man of great integrity - he would never make a statement like this unless he genuinely believed it was true.

 

So I am concluding that it is bad :(

 

Fred Gitelman

Bridge Base Inc.

www.bridgebase.com

Sure, but just because it doesn't pass today, doesn't mean it won't pass, and the next version will be a reasonable one.

 

Mr. Buffett also has a dog in the fight with Goldman-Sachs, although I'm sure his feelings would be the same without this investment.

The Herald Tribune had a article along the line

"What would Warren Buffet do".

 

The answer was, get a stake in the companies you

are rescuing, that is what he did with Goldman

Sachs, ... and that is, what the bailout plan should

also include.

 

If taxpayer pay, they should get something back,

and I dint mean rubish papers, which may or may

not have something to do with mortages.

 

If this happens, I am pretty sure, that you could sell

the plan to the taxpayers, since it is clear, that the

community of taxpayer has to do something.

 

With kind regards

Marlowe

[P_Marlowe]

:( Latest as of midnight CST in the U.S. - Yesterday's bill got defeated because e-mails and phone calls were running almost 100% against it in conservative congressional districts. Since 6pm CST a complete reversal - the same e-mails and phone calls are running 10 to 1 to do something to reverse the stock market decline by passing something - anything - next time around. Look for a finished bill by next Monday at the latest. It should include a directive to deep six the ridiculous (at least during a financial crisis) 'mark to market' accounting rule.

 

Do I think the delay is a good thing or a bad thing? I doubt anyone cares, but for what it's worth, I think the delay in passing a bailout will be seen on balance as a bit of a negative. The ultimate bailout bill will be better, but the delay has rattled the financial markets, and this might turn things ugly for a while. In the final analysis, if you can't trust Baron Paulson and Cardinal Bernanke, at least for a few months time, then we are all screwed.

The delay cant harm, if the final plan got improved,

that means his long term prospects for being succesful

will be better.

 

As it is, the american household cant afford a lot of

failed plans, so you better insure, that your first

attempt is good.

 

With kind regards

Marlowe

[helene_t]

Agree with Gerben.

[Lanor Fow]

Harm whom?

 

Last friday Washington Mutual basically went under, Monday Wachovia got bought out. Its only been a very short length of tiem since lehmans went under and since then 5 investment banks have gone under beenboguht or changed, AIG has been nationalised, those two i mentined earlier, fortis in belgium, bradford and bingly and hbos in the uk, the list keeps growing.

 

IN fact banks seem to be failing on almost a daily basis at the moment, so coudl this bill ebgin delayed a few days have an impact? Most definatly it could.

 

 

As for the money in teh stock market not being real, well what is?

 

Even cash in hand changes value on a daily basis both in the country its worth (inflation and deflation) and in other countries (exchange rates). The old 'gold standard' means very little either as gold is one of the most volitile comodities around.

 

In the end money and worth is all abstract, peoepl beleive that one dollar will buy such and such just as they beleive that a stock in a company is worth such and such.

[Al_U_Card]

Since you can't blame human greed (you can, but it won't change of its own volition) you must blame the government and the regulators.

 

You can drive on the hiway at 100 km/hr and pass the radar cop with no fear.

 

If you "know" that he will not cite you for less than 120, you will go close to 120 until you see him, when you will slow a bit (just in case) and then resume your 120....if there was no cop, or you are in an ambulance (or cop car) you go as fast as you want.

 

Rules are there to protect us from their (human greed) tendency to push the envelope and they need to be clear and to be enforced.

[Al_U_Card]

It is not like they didn't see it coming...

 

If the global economy is as safe as houses.....,

then there's a crash on the way

 

David Hirst - August 20, 2008

 

I TRY to be very, very careful about calling a crash. Others are not. But

most of the economic "yea-sayers" are, as usual, finding a bottom, like

our friend from A Midsummer Night's Dream, who had no bottom.

 

For a few weeks I have been hearing of a big one coming, a very bad

moon rising. I have, until now watched and wondered, but as the evidence

mounts, the muttering of a major bank collapse that will bring the whole

show down around our heads increases.

 

Ambrose Evans-Pritchard of London's The Daily Telegraph is reporting

"the US money supply has experienced the sharpest contraction in

modern history, heightening the risk of a Wall Street crunch and a severe

economic slowdown.

 

"Data compiled by Lombard Street Research shows that the M3 'broad

money' aggregates fell by almost $US50 billion in July, the biggest one-

month fall since modern records began in 1959."

 

This might, on its own, be dismissed as Ambrose doing what he does best,

hunting down headlines. But this article does not exist in a vacuum.

 

Unhappily, Professor Nouriel Roubini is in a glum mood even by his

standards.

 

"The UK economy is not my brief," he writes, "but I see that hedge funds

are circulating a report from the US guru Jeremy Grantham predicting a

very bad end to Gordon Brown's debt experiment.

 

"The UK housing event is probably second only to the Japanese 1990 land

bubble in the Real Estate Bubble Hall of Fame. UK house prices could

easily decline 50% from the peak, and at that lower level they would still

be higher than they were in 1997 as a multiple of income." That is one hell

of a call.

 

"If prices go all the way back to trend, and history says that is extremely

likely, then the UK financial system will need some serious bail-outs and

the global ripples will be substantial," says Grantham.

 

Roubini notes that for months the exchange markets ignored this

impending train crash, just as they ignored the property bust in Europe's

Latin Bloc, or the little detail that UBS alone had just lost the equivalent of

8% of Switzerland's GDP. All they cared about in the currency pits was the

interest rate gap: US low, Europe high.

 

"Now," Roubini writes, "the paradigm has flipped. The Fed may have been

right after all to slash rates to 2%. The European Central Bank may have

panicked by tightening in July. Note that the elder Swiss National Bank did

not do anything so rash.

 

"Bulls now believe America is turning the corner. Financial stocks are up

20% since early July. Some 'monoline' bond insurers have risen 1200% in

a month as fears of Gotterdammerung give way to sheer intoxicating

relief, and a 'short-squeeze'. Such are bear-trap rallies.

 

"Regrettably, I remain beset by gloom. The US fiscal stimulus package

that kept spending afloat in the second quarter is running out fast. There

is nothing yet to replace it. The export boom cannot keep adding juice as

the global crunch hits. My fear is that the US will tip into a second, deeper

leg of the downturn, setting off a wave of savage job cuts. This will start to

feel more like a real depression.

 

"The futures market is pricing a 33% fall in US house prices from peak to

trough, based on the Case-Shiller index. Banks have not come close to

writing off implied losses on this scale."

 

Daniel Alpert from Westwood Capital predicts that a mere 28% fall would

alone lead to a $US5.4 trillion haircut in US household wealth, and leave

lenders nursing $US1.25 trillion in losses. So far they have confessed to

less than $US500 billion.

 

Meredith Whitney, the Oppenheimer Bank's Cassandra, predicts a

gruesome 40% fall in prices. "I do not think we are near the end of write-

downs. I continue to see capital levels going lower, and stocks going

lower," she said.

 

"So no," says Roubini, "this painful ordeal is far from over. We are not

witnessing a dollar rally so much as a collapse in European and

commodity currencies. The race to the bottom has begun in earnest."

 

In an interview with CNBC, David Kotok of Cumberland Advisors

argued that the financial crisis is only about halfway over and another

leg down is in the offing. His main reason is that banks have continuing

needs for capital and at current costs in the markets, the maths doesn't

work. Some banks will be unable to raise funds privately.

[y66]

Since you can't blame human greed (you can, but it won't change of its own volition) you must blame the government and the regulators.

 

Who decides who shall govern?

 

We have met the enemy ... and it includes you Al! :(