# A House of Cards



## highpeaksdrifter (Sep 29, 2008)

Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?


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## dmc (Sep 29, 2008)

I know I'll get blasted for this..   But we need regulations..

I'm pissed about this bailout...  I had every opportunity to jump on the cheap $$ bandwagon but blew it off..  
But waddya gonna do?


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## Marc (Sep 29, 2008)

This should go well.


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## andyzee (Sep 29, 2008)

highpeaksdrifter said:


> Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?



When the stock market started being more of a driving force in business than good business sense.


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## RootDKJ (Sep 29, 2008)

I'm pissed to shit :uzi:.  I've lost over 8% of my portfolio today.  I've got cash on hand that I'd like to invest, but with how wacky things are who know what to buy?


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## bvibert (Sep 29, 2008)

Because this has the potential, I'm going to preemptively throw this out there....  Please try to keep politics out of the discussion so that we don't have to lock it...

Thanks in advance.


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## Johnskiismore (Sep 29, 2008)

I don't like the whole idea of bailing out at all.  That is our money, hardworking taxpayers money.  I think I'll stop their.:smash:


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## GrilledSteezeSandwich (Sep 29, 2008)

highpeaksdrifter said:


> Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?



Because not to many years ago..Lenders did a really good job of convincing homebuyers that instead of a 150k modest fixer upper..they could have a balloon mortgage zero down..cash on signing(totally illegal),,300k+ 3,000 square foot dream home for low initial payments..people are dumb and think short-term and went for it.  Are all those lenders who were doing illegal things going to prison????? lol.  People in the United States like to live above their means..it would be steezy to always drink Gray Goose cocktails and drive a Benz..but not if I have to live in my Benz..so I'll stick with Smirnoff and Suburu..


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## GrilledSteezeSandwich (Sep 29, 2008)

RootDKJ said:


> I'm pissed to shit :uzi:.  I've lost over 8% of my portfolio today.  I've got cash on hand that I'd like to invest, but with how wacky things are who know what to buy?



Well you'll gain that 8 percent back,..it just might take some time..the Stock Market has always been a gamble..remember how big Starter Jackets and Hats were back in the early 90s..well I bought some shares of Starter from my paper-route money for like $30 a share and eventually it was like $3 a share.  Good thing I had Disney and Home Depot to even things out and also a good thing I got rid of Disney and Home Depot a long time ago..so now I just do CDs..and will continue until I get better at Poker..lol..:lol:

I always thought I'd do the Wall Street thing after college and if that was the case..I probably wouldn't have a job now..


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## RootDKJ (Sep 29, 2008)

I can't play poker to save my life


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## ccskier (Sep 29, 2008)

It has to happen.  Either way the taxapayers money is going to be used.  Your tax dollars are going to pay for the idiots who bought more house they could afford, the idiot corporations that funded them, now getting some sort of assistance, etc...  There is much more at stake here than the bs exec payout plans.  The tax payers do not need a bailout, if they did, not a dollar should be given to those who have had a foreclosure, that I do not want my tax dollars going to.  They should have read the fine print of their mortgage or not over bought themselves into a home.  Sure it is the governments fault for not regulating the market, but that is the past, they must look torwards the future, that is what is at stake now.  The suposed $3500/200 million adults is not worth it to me.  People will get their $3500 and waste it, it will not improve the economy at all.  Did anyone look at their 401k today, well I did, lost about 20% since 01/01/2008.  Sure, I am invested in aggressive funds, but I am only 30 and have 30 years to go.  Generation x and y are going to have to rely on our retirement plans due to the lack of social security.  I would rather see them dip into the social security funds to bail out.  I put thousands a dollar a year and will probably never see a dollar.

Pretty bitter.


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## riverc0il (Sep 30, 2008)

GrilledSteezeSandwich said:


> People in the United States like to live above their means.


Bingo. Nuff said. The house of cards was partially caused by predatory lending. But Americans need to take a close look into the mirror before blaming banks for the bail out. Sucks that responsible Americans are going to have to foot the bill but what other choice is there? Let the banking industry crash? Ultimately, no one learns a lesson with a bail out package. But what else can ya do?


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## hammer (Sep 30, 2008)

riverc0il said:


> Bingo. Nuff said. The house of cards was partially caused by predatory lending. But Americans need to take a close look into the mirror before blaming banks for the bail out. Sucks that responsible Americans are going to have to foot the bill but what other choice is there? Let the banking industry crash? Ultimately, no one learns a lesson with a bail out package. But what else can ya do?


This might not be the best way to go, but sometimes I think that we should let things be...maybe the economy needs to tank for a while so that Americans will learn to live within their means.

This would really suck for me personally since all of my retirement is in 401k/IRA accounts and they would suffer...but I'm at the tail end of the baby boom generation and I expect to have to work into my 70s anyway... :-?


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## Marc (Sep 30, 2008)

RootDKJ said:


> I'm pissed to shit :uzi:.  I've lost over 8% of my portfolio today.  I've got cash on hand that I'd like to invest, but with how wacky things are who know what to buy?



Not true.  You haven't lost it unless you sold it.  Which would have been a pretty dumb thing to do.


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## Marc (Sep 30, 2008)

GrilledSteezeSandwich said:


> Well you'll gain that 8 percent back,..it just might take some time..the Stock Market has always been a gamble..remember how big Starter Jackets and Hats were back in the early 90s..well I bought some shares of Starter from my paper-route money for like $30 a share and eventually it was like $3 a share.  Good thing I had Disney and Home Depot to even things out and also a good thing I got rid of Disney and Home Depot a long time ago..so now I just do CDs..and will continue until I get better at Poker..lol..:lol:
> 
> I always thought I'd do the Wall Street thing after college and if that was the case..I probably wouldn't have a job now..



False.  Investing in stock is not a gamble, it's a calculated risk.  Stock speculation is a gamble.  There is a big difference.  The fact that you fail to understand the difference probably explains why you put all your money into CD's and poker.


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## riverc0il (Sep 30, 2008)

Marc said:


> Not true.  You haven't lost it unless you sold it.  Which would have been a pretty dumb thing to do.


This is a good point. I always look at down turns as an opportunity since I am only going on 30. Lots of people start selling following big one day declines and I just sit tight and let it ride. If you are too old to afford a downturn, your portfolio should be almost exclusively in stable funds and no need to worry. Otherwise, prices go up and prices go down and the more you invest and longer you invest, the more likely you'll come out ahead.


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## highpeaksdrifter (Sep 30, 2008)

highpeaksdrifter said:


> Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?



I’m not just asking about the bailout. From reading and watching the news I’m getting the impression that the real problem is credit. It seems that all businesses, no matter how successful, need to constantly barrow to stay in business. What happened to businesses being self sustaining?

It strikes me that capitalism as we know it is unfolding right before our eyes. It seems to me that government will be playing a bigger part in overseeing private businesses in order to protect the public from their unscrupulous practices.


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## Marc (Sep 30, 2008)

riverc0il said:


> This is a good point. I always look at down turns as an opportunity since I am only going on 30. Lots of people start selling following big one day declines and I just sit tight and let it ride. If you are too old to afford a downturn, your portfolio should be almost exclusively in stable funds and no need to worry. Otherwise, prices go up and prices go down and the more you invest and longer you invest, the more likely you'll come out ahead.



Indeed.  I had a bit of money just sitting around in my Roth that I'm using to buy stuff evertime we have a shite day like yesterday.

It's funny how often I hear what you just said preached but how rarely the advice is actually followed when there's the slightest hint of instability.

If you look back over the history of the S&P 500 composite, you'd be hard pressed to find any 10 year period that did not grow about 10%.  The last time I think was the Great Depression, and then it took what, 15 - 20 years.

A cool head pays big for the passive investor over time.  It's too bad there's not more of us.


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## dmc (Sep 30, 2008)

highpeaksdrifter said:


> I’m not just asking about the bailout. From reading and watching the news I’m getting the impression that the real problem is credit. It seems that all businesses, no matter how successful, need to constantly barrow to stay in business. What happened to businesses being self sustaining?



Friends of mine with successful ski shops take a line of credit out to buy their stock and then pay it off during the season...  It's the only way to stay in business...  

They can't afford to buy all that stock
the problem is it's now tougher for them to even get the $$ cause things are so F'd up.....


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## ctenidae (Sep 30, 2008)

highpeaksdrifter said:


> I’m not just asking about the bailout. From reading and watching the news I’m getting the impression that the real problem is credit. It seems that all businesses, no matter how successful, need to constantly barrow to stay in business. What happened to businesses being self sustaining?
> 
> It strikes me that capitalism as we know it is unfolding right before our eyes. It seems to me that government will be playing a bigger part in overseeing private businesses in order to protect the public from their unscrupulous practices.



The #1 rule of business is to make teh ighest and best use of your capital. Generally, meeting payroll, a short-term need, is not the best use of expensive earnings. Therefore, most large company payrolls are met using short term paper. This is the next big problem on the way. It's entirrely possible that a large company or two won't make payroll. Imagine the effect on the country if GE doesn't make payroll.

We got here because Americans were willing to borrow much more than they could afford, and lenders were willing to let them, all in the quest for a quick buck. Bailout or no, consumer spending is about to nearly cease. The bailout is to at least maintain some vestige of a financial market, which is critical to any recovery going forward.

Some serious pain for everyone is on its way. But, things will adjust, and we'll all get better. My advice to everyone- sit tight, be smart, keep cash available, and wait. Panic selling only hurts you in the short, medium, and long term.


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## Marc (Sep 30, 2008)

ctenidae said:


> *Panic selling only hurts you in the short, medium, and long term.*



Not only hurts the seller, but in mass, hurts everyone.


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## BeanoNYC (Sep 30, 2008)

When our exports started being more financial and service related products than actual goods.


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## deadheadskier (Sep 30, 2008)

ctenidae said:


> Bailout or no, consumer spending is about to nearly cease. The bailout is to at least maintain some vestige of a financial market, which is critical to any recovery going forward.
> 
> Some serious pain for everyone is on its way. But, things will adjust, and we'll all get better. My advice to everyone- sit tight, be smart, keep cash available, and wait. Panic selling only hurts you in the short, medium, and long term.



You think it will get _that_ bad eh?  So, the fact that I'm bargain hunting in the market is probably not a good idea.


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## RootDKJ (Sep 30, 2008)

Marc said:


> Not true.  You haven't lost it unless you sold it.  Which would have been a pretty dumb thing to do.



Excellent clarification!  I should say it decreased in overall value by 8%.  I haven't sold anything.  In fact, I'm looking to buy more and I'm open to suggestions.


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## Marc (Sep 30, 2008)

RootDKJ said:


> Excellent clarification!  I should say it decreased in overall value by 8%.  I haven't sold anything.  In fact, I'm looking to buy more and I'm open to suggestions.



I'm a pretty passive manager, I typically just buy market tracking ETF's, rarely I'll take a bet of a sector, but mostly just a mix of domestic and overseas indices for me.


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## ctenidae (Sep 30, 2008)

deadheadskier said:


> You think it will get _that_ bad eh?  So, the fact that I'm bargain hunting in the market is probably not a good idea.



I hear some people predicting the Dow down to 5K, that kind of thing. I'm not that doom and gloomy, but I think there's more to go before the buying opportunities really come about.

I am a bit concerned about the next couple of days, though.


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## RootDKJ (Sep 30, 2008)

Marc said:


> I'm a pretty passive manager, I typically just buy market tracking ETF's, rarely I'll take a bet of a sector, but mostly just a mix of domestic and overseas indices for me.



I'm a little more aggressive.  Lots of international mutual funds.  I don't have many index trackers.  I'm also way overloaded on my company's stock.


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## andyzee (Sep 30, 2008)

BeanoNYC said:


> When our exports started being more financial and service related products than actual goods.


 
Amen, we are far too service oriented.


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## deadheadskier (Sep 30, 2008)

ctenidae said:


> I hear some people predicting the Dow down to 5K, that kind of thing. I'm not that doom and gloomy, but I think there's more to go before the buying opportunities really come about.
> 
> I am a bit concerned about the next couple of days, though.



could be

call me crazy, but I do think there's money to be made in the most at risk sector (banks) with certain banks that are a bit stronger.  Citi is up 12.5% for the day and JP Morgan Chase 10%.  It's always a risk, but if you're able to monitor things closely and can get in and out quickly, you can make money.  I personally don't have the sack or enough resources available to me right now to play that game, but I think it's there.


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## ComeBackMudPuddles (Sep 30, 2008)

bvibert said:


> Because this has the potential, I'm going to preemptively throw this out there....  Please try to keep politics out of the discussion so that we don't have to lock it...
> 
> Thanks in advance.





Not trying to get political, but I will say that there's no way to talk about this situation and/or to seek answers moving forward without getting political.  There's a clash of ideologies going on, and only talking about the markets tanking/the need for a rescue in a reactive way does not address the root cause(s).


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## cbcbd (Sep 30, 2008)

deadheadskier said:


> could be
> 
> call me crazy, but I do think there's money to be made in the most at risk sector (banks) with certain banks that are a bit stronger.  Citi is up 12.5% for the day and JP Morgan Chase 10%.  It's always a risk, but if you're able to monitor things closely and can get in and out quickly, you can make money.  I personally don't have the sack or enough resources available to me right now to play that game, but I think it's there.


Very true... I wish I could know too beforehand who was going to bust and who was going to go on a bank shopping spree. But as it goes - higher gains comes with higher risk.

I'm holding on for a little longer and then planning on investing on some more moderate risk funds and stocks that saw a downturn (I'm sure I'll find something, sigh). The only thing to try to figure out is how low will things go and when the lows are at the best... honestly, I think anyone with the money should invest in something right now - if they are looking at the long term. 

I honestly haven't even looked at my 401K or portfolio - I know it's not going to be good right now and have no intent of selling any of it anytime in the next 30+ years...


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## ComeBackMudPuddles (Sep 30, 2008)

Businessweek has a little expose on the 20 towns that will be hit hardest by the financial crisis....Interesting mix.


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## tjf67 (Sep 30, 2008)

Unless there is some sort of assistance this credit crisis is going to create problems that most people can not even imagine yet.   It a horrible spot that we are in.  To sit and do nothing is the wrong answer.  
You thought yesterday was bad.  It was a game of chicken with the gov against wallstreet.  If somethig does not pass the true problems are really going to arise.  Me you and everyone you know are going to be pinched.  

In theory I detest the bailout. Every living true blooded american does  But there really is not much of an alternative.  Your parents that live off there invenstments and anyone nearing retirement will suffer a set back that will take generations to recover from.

ALL these special interest groups flooded the phone of these phony politicions and they said they voted no because of that.  Well Mr and Mrs middle income America is what runs the show and they dont want to see all there saving/invesmtnes going down the drain to cater to special interests.


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## Moe Ghoul (Sep 30, 2008)

OldsnowboarderME said:


> This all so depressing ..I think I will go out and buy something on credit that should make me happy ... snowboarding gear or trip ..  yeah ...



<--------- Better put that 2 1/2 year old avatar to work now. 11.3 trillion dollar national debt and 500 billion/yr deficits sure adds up fast. It took us 200 years to hit 1 trillion in debt.


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## bvibert (Sep 30, 2008)

ComeBackMudPuddles said:


> Not trying to get political, but I will say that there's no way to talk about this situation and/or to seek answers moving forward without getting political.  There's a clash of ideologies going on, and only talking about the markets tanking/the need for a rescue in a reactive way does not address the root cause(s).



I realize that, which is why I posted the warning.  No politics is one of the few rules that we actively, and sometimes even pro-actively, strictly enforce.

IMHO, as long as we can keep the discussion civil and keep partisan mudslinging out of it I'll be OK with it.  I'm only speaking for myself though, I don't know how Greg and the other mods will feel about it.  

I don't have much hope that this thread will last too long before the name calling and mud slinging starts, but hopefully you guys prove me wrong.


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## Beetlenut (Sep 30, 2008)

I'd be curious to know, or find out if anyone is looking into, how many employees of Lehman Bros, AIG, etc... sold off their shares before the bottom fell out?


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## deadheadskier (Sep 30, 2008)

Beetlenut said:


> I'd be curious to know, or find out if anyone is looking into, how many employees of Lehman Bros, AIG, etc... sold off their shares before the bottom fell out?



Greenberg dumped 40 million shares of AIG on 9/25.....but that was after the 85billion bail out


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## deadheadskier (Sep 30, 2008)

bvibert said:


> I realize that, which is why I posted the warning.  No politics is one of the few rules that we actively, and sometimes even pro-actively, strictly enforce.
> 
> IMHO, as long as we can keep the discussion civil and keep partisan mudslinging out of it I'll be OK with it.  I'm only speaking for myself though, I don't know how Greg and the other mods will feel about it.
> 
> I don't have much hope that this thread will last too long before the name calling and mud slinging starts, but hopefully you guys prove me wrong.



you're an A hole


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## wa-loaf (Sep 30, 2008)




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## wa-loaf (Sep 30, 2008)

It was a bad deal, glad it fell apart. Hope this gives them a chance to come up with something better.


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## bvibert (Sep 30, 2008)

deadheadskier said:


> you're an A hole





wa-loaf said:


>



I expected no less from this group...

You guys were a little slow to the punch though... :roll:


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## Moe Ghoul (Sep 30, 2008)

wa-loaf said:


> It was a bad deal, glad it fell apart. Hope this gives them a chance to come up with something better.



+1. 10 days ago the world was gonna come to an end if they didn't blankcheck Paulson within 48 hours. I just checked, the power is still on, the mailman stopped by, and the sun's still shining. Let Mr. Market do his job and we can collectively suck it up. All the regulations in the world can't stop the financial gang from staying one step ahead of them. Regulation without BROAD, CONSISTENT, PREDICTABLE ENFORCEMENT are just words on paper.


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## GrilledSteezeSandwich (Sep 30, 2008)

RootDKJ said:


> I can't play poker to save my life





ComeBackMudPuddles said:


> Businessweek has a little expose on the 20 towns that will be hit hardest by the financial crisis....Interesting mix.



No big surprise..most of them are in the NYC metro area..people think I'm crazy to keep putting money in CDs..my Dad does the same thing as well..sure it's only 4% interest but no risk..and it's fairly liquid..I wouldn't want my savings tied up for three decades..


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## Moe Ghoul (Sep 30, 2008)

Meanwhile, our SEC is negotiating with FASB to shut the toilet lid on mark to market accounting and suspending the forced markdown of "toxic assets". Great. That's the license to continue snowballing this fiasco. Kickin the can down the road again. Good to see the SEC is working in somebody's else's interest as usual. But it's still ok to naked short sell the shit out of unprotected stocks.


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## andyzee (Sep 30, 2008)

My company lost about 20% in stock value yesterday. Got about 18% back today.


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## dmc (Sep 30, 2008)

My company lost a big deal with a bank that got sold...

DAMN.....


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## Moe Ghoul (Sep 30, 2008)

andyzee said:


> My company lost about 20% in stock value yesterday. Got about 18% back today.



That's good to hear. It just goes to show that this has nothing to do with valuation anymore.


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## ctenidae (Sep 30, 2008)

Moe Ghoul said:


> That's good to hear. It just goes to show that this has nothing to do with valuation anymore.



Been so long since fundamentals ahd anything to do with anything, I'm not sure most people remember what the word means.


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## cbcbd (Sep 30, 2008)

ComeBackMudPuddles said:


> Businessweek has a little expose on the 20 towns that will be hit hardest by the financial crisis....Interesting mix.


From looking at the towns I'm familiar with it looks like most of them have a bunch of rich folks buying lots of expensive real estate... no surprise there - the bigger the stakes the larger the loss.
I'm not really worried for the folks in Darien, honestly.


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## RootDKJ (Sep 30, 2008)

andyzee said:


> My company lost about 20% in stock value yesterday. Got about 18% back today.



My company stock also went down around 18% yesterday, only gained back 6% today.


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## Marc (Sep 30, 2008)

ctenidae said:


> Been so long since fundamentals ahd anything to do with anything, I'm not sure most people remember what the word means.



*raises hand*

I have a vague idea of the word, after schlepping through _Common Stock and Uncommon Profits_ and _The Intelligent Investor_.  I don't remember much though.  Enough to know I didn't want to do it full time, that's for sure.  Basically why I fell back on index ETF's, thank God for those gems.


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## andyzee (Sep 30, 2008)

dmc said:


> My company lost a big deal with a bank that got sold...
> 
> DAMN.....


 
we probably brought them


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## dmc (Sep 30, 2008)

andyzee said:


> we probably brought them



haha... maybe you did...  Really put a damper on the deal..


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## 2knees (Sep 30, 2008)

ComeBackMudPuddles said:


> Businessweek has a little expose on the 20 towns that will be hit hardest by the financial crisis....Interesting mix.



oh wonderful.  my town is on that list.


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## RootDKJ (Sep 30, 2008)

2knees said:


> oh wonderful.  my town is on that list.



So is mine


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## deadheadskier (Sep 30, 2008)

Here's a question for the experienced traders.  Why are shares of Washington Mutual still being traded?  Chase bought all of it's assets, so it's really just a name now and worth nothing.  Curious why it's still even listed.


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## Moe Ghoul (Sep 30, 2008)

deadheadskier said:


> Here's a question for the experienced traders.  Why are shares of Washington Mutual still being traded?  Chase bought all of it's assets, so it's really just a name now and worth nothing.  Curious why it's still even listed.



It's not trading, it stopped at .16.  0 volume. Prolly already delisted at this point.


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## tjf67 (Sep 30, 2008)

Moe Ghoul said:


> +1. 10 days ago the world was gonna come to an end if they didn't blankcheck Paulson within 48 hours. I just checked, the power is still on, the mailman stopped by, and the sun's still shining. Let Mr. Market do his job and we can collectively suck it up. All the regulations in the world can't stop the financial gang from staying one step ahead of them. Regulation without BROAD, CONSISTENT, PREDICTABLE ENFORCEMENT are just words on paper.




Moe Ghoul you know better than this.  If something is not done to free up the credit market things are going to go down a lot further than they need to.  Who got the worst credit?  Farmers.  Do some research there are barges full of fertilizer a sitting in ports cause the farmers can't get the credit they need to have it shipped.  what next?  
Mr Market while I respect your opinion, don't you make money off of activity.  The more the merrier up or down?  

Marc EFT while I agree are a great way to go you want to see them at the same value 8 years from now?  Well thats what were are looking at if something does not get done.

The dow went up today on hopes of the bailout being put back together.  Did nothing for the credit markets.
This is pretty important sheat.  I hope people do a little educating on the issue.


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## Moe Ghoul (Sep 30, 2008)

tjf67 said:


> Moe Ghoul you know better than this.  If something is not done to free up the credit market things are going to go down a lot further than they need to.  Who got the worst credit?  Farmers.  Do some research there are barges full of fertilizer a sitting in ports cause the farmers can't get the credit they need to have it shipped.  what next?
> Mr Market while I respect your opinion, don't you make money off of activity.  The more the merrier up or down?
> 
> Marc EFT while I agree are a great way to go you want to see them at the same value 8 years from now?  Well thats what were are looking at if something does not get done.
> ...



Then fund the SBA, Dept. of agriculture, help them directly. I have no objection to helping those that need it. Meanwhile, let the market wreck the garbage and see what emerges. And the credit markets did ease a bit if you watch treasury yields. There's plenty of $$$$ out there, but they don't want to lend to each other. When does this cycle of debt end? You can't fund growth by borrowing and spending. 11.3 trillion national debt and rising.


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## tjf67 (Sep 30, 2008)

Moe Ghoul said:


> Then fund the SBA, Dept. of agriculture, help them directly. I have no objection to helping those that need it. Meanwhile, let the market wreck the garbage and see what emerges. And the credit markets did ease a bit if you watch treasury yields. There's plenty of $$$$ out there, but they don't want to lend to each other. When does this cycle of debt end? You can't fund growth by borrowing and spending. 11.3 trillion national debt and rising.



The Fund would be available for lending needs, with stipulation!
It stops right here.  This is a necessary evil.  
Let the markets wreck the garbage and see what emerges.  Geez that sounds great idea.  who is the market, traders? So they know whats best?

Yeah no thanks I think we can come up with something better


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## deadheadskier (Sep 30, 2008)

Moe Ghoul said:


> It's not trading, it stopped at .16.  0 volume. Prolly already delisted at this point.



That's what I thought, but I read somewhere today a reference to WaMu, pick symbol had a Q in it though...it was near dead, but then rising.  Maybe I was reading a dated article as I remember WaMu trading at 1.68 after deadline before settling at .16


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## Moe Ghoul (Sep 30, 2008)

tjf67 said:


> The Fund would be available for lending needs, with stipulation!
> It stops right here.  This is a necessary evil.
> Let the markets wreck the garbage and see what emerges.  Geez that sounds great idea.  who is the market, traders? So they know whats best?
> 
> Yeah no thanks I think we can come up with something better



Ok. I said last week they should fund the FDIC and raise insurance limits. Sounds like they did that today. Can't wait to see what finally gets passed. Markets are willing buyers and sellers transacting/exchanging goods and services. So, yes, traders operate in many markets. I use the term "market" broadly, not limited to Wall Street.


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## deadheadskier (Sep 30, 2008)

Moe Ghoul said:


> There's plenty of $$$$ out there, but they don't want to lend to each other. When does this cycle of debt end? You can't fund growth by borrowing and spending. 11.3 trillion national debt and rising.



What do you think will get that $$$$ flowing again minus a 'bail out'?  I don't like the concept of a bail out and having tax payers foot the bill.  I do like the things I've read about the insurance option better.

As for the debt.....I say keep income taxes just how they are, but convert capital gains into an income tax.  Do that and cut spending.  Of course my feelings on capital gains will slow down the $$$$ moving I asked you about it my first question.

tough situation that I have no idea what the right fix might be

I do know I've been paying a lot more attention to the market these days.  I'm kicking myself as I had considered buying both Chase and Citi stocks yesterday.  Could've been flipped for a tidy profit today


----------



## Moe Ghoul (Sep 30, 2008)

deadheadskier said:


> What do you think will get that $$$$ flowing again minus a 'bail out'?  I don't like the concept of a bail out and having tax payers foot the bill.  I do like the things I've read about the insurance option better.
> 
> As for the debt.....I say keep income taxes just how they are, but convert capital gains into an income tax.  Do that and cut spending.  Of course my feelings on capital gains will slow down the $$$$ moving I asked you about it my first question.
> 
> ...



There's no easy answers obviously, otherwise I'd sell it to the highest bidder. 
They should increase capital reserve requirements, raise interest rates, reward savers, reform monetary policy, freeze gov't spending at the very least, cut corporate taxes and close loopholes and allow offshore profits to be repatriated at a discounted rate, help out the local or regional banks that have maintained sound lending practices. Prevent super banks from gobbling up the smaller ones to shore up their balance sheets with deposits. I could go on and on. Regulate the OTC derivatives markets, ENFORCE the securities laws ALREADY ON THE BOOKS vigorously. What's lacking is confidence right now. It's tough to draw up a plan when the government is changing the rules willy nilly in favor of a few.

So, let's say we put a trillion dollars into the system. If 6 months or a year from now were back at square one and they need 5 trillion dollars, then what.


----------



## riverc0il (Sep 30, 2008)

highpeaksdrifter said:


> I’m not just asking about the bailout. From reading and watching the news I’m getting the impression that the real problem is credit. It seems that all businesses, no matter how successful, need to constantly barrow to stay in business. What happened to businesses being self sustaining?
> 
> It strikes me that capitalism as we know it is unfolding right before our eyes. It seems to me that government will be playing a bigger part in overseeing private businesses in order to protect the public from their unscrupulous practices.


That is kind of unfair (and I am a harsh critic of American Capitalism). Many businesses need loans to grow and expand. Businesses that don't grow (especially in the tech sector) tend to flounder. Also, many businesses need temporary loans to purchase merchandise that it will later sell to consumers during the busy season. Businesses that need to "borrow" to "stay in business" have already failed and will find a difficult time finding loans because they likely will already have bad credit. Businesses in good financial standing need access to loans for a variety of very valid reasons.

Regarding government oversight, there is a delicate balance. We saw what no oversight did to our country and its people during the industrial revolution and robber baron eras. Too much oversight is problematic for business reasons. A fine balance can and should be struck. If a bailout package is required to sustain industries, then the businesses don't feel the pain of doing things wrong so that justifies increased over sight, IMO. Which should come along with the bailout package. Doubtful tax payers will ever truly see this money earned back but that doesn't mean that the financial industry still shouldn't suffer somewhat for its excesses.


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## Moe Ghoul (Sep 30, 2008)

Speaking for myself, for all the screaming about a credit freeze, I get daily solicitations and blank checks for all the money I can gorge myself on from a variety of credit cards offering 0-3% teaser rates and a transaction charge. I'm pretty sure I'm not the only person.


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## RootDKJ (Sep 30, 2008)

Since the old saying goes, buy low and sell high, after talking with my FA, I bought into another mutual fund today that complements my portfolio and fits my long term plans.  Year to date, I will have this at it's 2nd lowest price and the lowest it's been since August 2007.  I feel pretty good about it.  Time will tell.


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## deadheadskier (Sep 30, 2008)

Curious where some of you learned what you have.  What are your continued go to resources to stay informed?


----------



## Moe Ghoul (Sep 30, 2008)

deadheadskier said:


> Curious where some of you learned what you have.  What are your continued go to resources to stay informed?



Self taught, avoiding brokers, FA's, and subscribing to a few very smart guys that understand the macro issues, markets and economics. Staying current on legislation, mostly foreign news because you don't get too much real news about financials in the US anymore. Case in point: Wachovia's CEO 6 weeks ago claimed the bank was in good shape and only had 10 billion in bad loans. Turns out it was over 40 billion and they're toast. Case in point: Bernanke and Paulson claimed that the Bear Stearns bail out was an effort to prevent further problems in the financials. We know that was bullshit now. Truth: they prevented Bear Stearns from going into bankruptcy because they had paid out BILLIONS in bonuses several weeks before the failure. All that bonus money (Maseratis, Hampton homes, titty bar expenses) would have been taken back in bankruptcy court. So, They gave JPM a sweetheart deal and 30 billion to take it off their hands. But they didn't mention that on Faux Noise or CNBC.


----------



## mondeo (Oct 1, 2008)

Here we go...


highpeaksdrifter said:


> Would some of you guys who make a living in the financial sector explain to me when capitalism became all about credit markets and got away from businesses making a profit and paying their bills with it?



Looking at the Dow Jones, I see 5 out of 30 companies in the financial sector, counting GE. 6 last week before AIG was swapped out for a blue chip.

The deal with credit markets is that the 25 other companies on the list are hostage to credit to do major projects. Take, for example, UTC. Right now they're developing a radically new helicopter design and a radically new jet design. Even massive multinationals don't have the cash lying around to take on projects at that scale. It's constantly being invested.

What it comes down to is, if the company can make sufficient ROI to cover the interest and the future value of the money invested, everyone wins if they take out the loan. Bank makes money, they make money, and consumers get a better mouse trap.



dmc said:


> I know I'll get blasted for this..   But we need regulations..



Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...



Johnskiismore said:


> I don't like the whole idea of bailing out at all.  That is our money, hardworking taxpayers money.  I think I'll stop their.:smash:



Even though I don't like the package, taxpayers won't necessarily lose money. Same with AIG, which from most accounts I've heard, we stand to actually make money on.



hammer said:


> This might not be the best way to go, but sometimes I think that we should let things be...maybe the economy needs to tank for a while so that Americans will learn to live within their means.



For this and other reasons.



BeanoNYC said:


> When our exports started being more financial and service related products than actual goods.



Manufacturing has a tendency to produce lower wage jobs and lower profit margins. The key is specialization and expertise. It's harder to gain specialization and expertise in fields like financial analysis, science, engineering, etc. than manufacturing. More difficult field, lower supply of qualified workers. Lower supply, higher prices. Services (like financial analysis, and I would argue, engineering, doctors, accounting, etc.) are where we want to be on the world stage. If we don't do it, some other country will, taking money we could've had. And then we'll be back to manufacturing, but at a lower standard of living.



tjf67 said:


> Unless there is some sort of assistance this credit crisis is going to create problems that most people can not even imagine yet.   It a horrible spot that we are in.  To sit and do nothing is the wrong answer.
> You thought yesterday was bad.  It was a game of chicken with the gov against wallstreet.  If somethig does not pass the true problems are really going to arise.  Me you and everyone you know are going to be pinched.



Absolutely. But the problem is with the bailout, we're setting ourselves up for even bigger problems.

The problem is that everyone is only seeing one side of the issue, ad only in the short term. It's either we need to save the market or we can't hurt me. But nobody is really looking long term. We do the bailout, and massive regulation follows. Bad long term. The bad debt is still there. Bad long term. Stock market stagnates, as it hasn't dropped enough to create real opportunities and nobody's actually made any money to pump back into the system. Bad. Supply of housing is kept artificially low, keeping people who can't really afford houses in them, and those who are looking to buy a house out because prices haven't readjusted to where they should be (which, at the peak, was about 2x a very steady historic level, going back about 100 years.)

Yes, without the bailout there will be a lot of pain in the next few years. But, with pain comes gain. Every recession creates opportunities for the people that were playing the bubble cautiously. And because of that, the markets, after a deep fall, will regain their footing and climb back out, and be healthy again. And stronger for learning that some risks are actually bad to take. With the bailout, none of that happens. Instead, Japan-like stagnation.


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## RootDKJ (Oct 1, 2008)

deadheadskier said:


> Curious where some of you learned what you have.  What are your continued go to resources to stay informed?



Also mostly self taught.  There's tons of information out there.  I got some good starters from folks over the years.  I do use a FA, mostly because I don't want to deal with the "paperwork" on some things and make sure I stay balanced.   It doesn't "really" cost me anything because my dad's account pays for almost everything.  

Mostly I just work with mutual funds, but I'd like to start investing in ETF's.  I'd also like to do some short term quick gain moves with stocks, but don't really have the time to do the additional research necessary.


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## RootDKJ (Oct 1, 2008)

Moe Ghoul said:


> Self taught, avoiding brokers, FA's, and subscribing to a few very smart guys that understand the macro issues, markets and economics. .



Care to share who you subscribe to?


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## RootDKJ (Oct 1, 2008)

Moe Ghoul said:


> But they didn't mention that on Faux Noise or CNBC.



That's pretty funny.  LOL


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## Moe Ghoul (Oct 1, 2008)

RootDKJ said:


> Care to share who you subscribe to?



Bill Fleckenstein and Marc Faber. You can find Fleckenstein every monday on MSN money for free. They both have subscriber sites. Faber used to post a monthly commentary on AME info, but I don't think he contributes anymore.


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## RootDKJ (Oct 1, 2008)

Cool thanks, I'm always looking for new experts to read


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## ComeBackMudPuddles (Oct 1, 2008)

Hey Moe Ghoul.....Is adding a big tax cut to the bailout/rescue plan, while leaving the core legislation intact, the answer???

(I think I know your response....  )


----------



## ComeBackMudPuddles (Oct 1, 2008)

mondeo said:


> Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...
> 
> [. . .]
> 
> ...




Just to say, these observations are pretty political........


----------



## riverc0il (Oct 1, 2008)

mondeo said:


> Deregulation is not at fault here; it's the manner in which the markets were deregulated. For those of us who've been through college recently, take this example: the kid who was sheltered by his parents from every evil, or the kid whose parents gave them more freedom while they were still at home. Which one handles alcohol better? Almost always the one who had more freedom. If you never let someone take risks and experience the consequences of taking bad risks, and then just let them loose on the world, they're going to put themselves in a world of hurt. And that's what's happened in the financial industry. All these opportunities for risk taking were (relatively) suddenly opened up to them, and, without prior experience of how to handle the risks, everyone went whole hog and went for it. And now the consequences...


Unless Mom and Dad step in and resque the fully grown kid after making a big mistake. The bailout wipes out the worst of the consequences and sets us up for a kid that hasn't learned his lesson and will be back at the bad stuff again after a short period of licking wounds. I don't disagree with the bailout. But I don't think it is going to help teach any hard lessons because those lessons would be too hard on everyone.


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## ComeBackMudPuddles (Oct 1, 2008)

riverc0il said:


> Unless Mom and Dad step in and resque the fully grown kid after making a big mistake. The bailout wipes out the worst of the consequences and sets us up for a kid that hasn't learned his lesson and will be back at the bad stuff again after a short period of licking wounds. I don't disagree with the bailout. But I don't think it is going to help teach any hard lessons because those lessons would be too hard on everyone.





Reduced executive pay + congressional oversight + upcoming regulations (if they're good) should help a little, no?


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## Moe Ghoul (Oct 1, 2008)

ComeBackMudPuddles said:


> Hey Moe Ghoul.....Is adding a big tax cut to the bailout/rescue plan, while leaving the core legislation intact, the answer???
> 
> (I think I know your response....  )



That's a whole other can of worms. I do support a Huckabee style tax system or Forbes flat tax and burn the existing tax code which is a disaster. I woulda thought that would be a bi-partisan no-brainer.


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## ctenidae (Oct 1, 2008)

Overall, I think the biggest root cause here is a near total lack of confidence within the market. No one knows what anything's worth, which means no one knows who's in trouble or safe.

Raising reserve requirements probably won't help much, since most of the banks have excess reserves in place already, which means they aren't lending anything. Raising the requirement decreases the possible liquidity in teh market, so I think it should be avoided.

Raising the FDIC limits could help forestall a run on the banks, but I don't think it would be very effective. Most people don't have $100K in a bank, anyway, so what do they care? Those are also the people most likely to panic, since Cousin Ned called and said he had to wait 2 hours in line at the bank to cash his welfare check, and that must mean there's a run going on and you better get yourself and Aunt Martha down to the bank and get your $42 out right now. Anecdotaly, I do know a lot of HNWs are scrambling to reorganize their accounts to spread money out between banks in $100K chunks. This does lead to some uncertainty for bank deposits, so raising the FDIC limit would be somewhat helpful, so should be pursued.

I think a bailout package should focus on providing emergency liquidity for non-financial companies first, perhaps as guarantees on commercial paper, but with some strict rules.

The Fed should also be enabled to shore up banks if required- last resort, only to forestall events that would collapse the whole market- counterparty, prime broker, that kind of risk. Again, with some strong restrictions (CEO pay, for example). Adding in silliness like tax cuts and such should be avoided, as they are not central to the problem at hand.


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## tjf67 (Oct 1, 2008)

Raising the FDIC limits could help forestall a run on the banks, but I don't think it would be very effective. Most people don't have $100K in a bank, anyway, so what do they care? Those are also the people most likely to panic, since Cousin Ned called and said he had to wait 2 hours in line at the bank to cash his welfare check, and that must mean there's a run going on and you better get yourself and Aunt Martha down to the bank and get your $42 out right now. Anecdotaly, I do know a lot of HNWs are scrambling to reorganize their accounts to spread money out between banks in $100K chunks. This does lead to some uncertainty for bank deposits, so raising the FDIC limit would be somewhat helpful, so should be pursued



Raising FDIC insurance will certainly help the banks.   250k is not going to do much.  Small and medium sized business are pulling money out of the banks like crazy.  If FDIC were to raise the limit to a million that would make the guy with 1 million in the bank to cover expense leave it there instead of pulling it out and goint to treasuries.  I see it happening every day of the week.  It takes a few weeks but that money starts to add up.


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## tjf67 (Oct 1, 2008)

deadheadskier said:


> What do you think will get that $$$$ flowing again minus a 'bail out'?  I don't like the concept of a bail out and having tax payers foot the bill.  I do like the things I've read about the insurance option better.
> 
> As for the debt.....I say keep income taxes just how they are, but convert capital gains into an income tax.  Do that and cut spending.  Of course my feelings on capital gains will slow down the $$$$ moving I asked you about it my first question.
> 
> ...



Dead read the proposal.  If done properly we dont flip the bill.  We will be investors and can actually make money off the deal when calmer head prevail.
Although this is certainly unprecedented it not the first time the government has done things that resemble


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## tjf67 (Oct 1, 2008)

deadheadskier said:


> Curious where some of you learned what you have.  What are your continued go to resources to stay informed?



Read to wall street journal every day.  It will be confusing for the first few months.  You will start to figure out what they are talking about on complicated issues.  They give you the facts and you draw your own conclusions.  
Anything that is anything in the financial world comes out in the journal.  It is what the media talks about all day long with there spin attached.


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## Moe Ghoul (Oct 1, 2008)

Lots of good ideas and thoughts on the subject on this thread. Guess what, this is what Congress is doing, so we can appreciate the difficulty they're having crafting something sensible.


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## ctenidae (Oct 1, 2008)

tjf67 said:


> Raising FDIC insurance will certainly help the banks.   250k is not going to do much.  Small and medium sized business are pulling money out of the banks like crazy.  If FDIC were to raise the limit to a million that would make the guy with 1 million in the bank to cover expense leave it there instead of pulling it out and goint to treasuries.  I see it happening every day of the week.  It takes a few weeks but that money starts to add up.



Good point. Hadn't thought that far out on it.


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## Marc (Oct 1, 2008)

Kind of funny, around the time of the inception of the FDIC, the cap was set in place with the excpectation for the states to come up with their own insurance to cover deposits beyond the cap.  To the best of my knowledge, Massachusetts was the only one to do so with the DIF.

I'm glad that's where my money is.  You know, if I had more than 100k in there.  Balls.  Thanks everyone for reminding me how poor I am.


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## Moe Ghoul (Oct 1, 2008)

I saw Brad Sherman (D) CA on CNBC last week stating that Paulson's 3 page proposed bill gave him carte blanche to bail out foreign banks, including China, UK, and Germany. I wouldn't be surprised if China and others have a gun to our heads threatening to pull the trigger on selling off dollar assets if they don't get some relief. Just a hunch, but considering that we have to borrow ~60 billion a month from abroad, that flow of money has slowed if you look at the TIC reports.


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## tjf67 (Oct 1, 2008)

Moe Ghoul said:


> I saw Brad Sherman (D) CA on CNBC last week stating that Paulson's 3 page proposed bill gave him carte blanche to bail out foreign banks, including China, UK, and Germany. I wouldn't be surprised if China and others have a gun to our heads threatening to pull the trigger on selling off dollar assets if they don't get some relief. Just a hunch, but considering that we have to borrow ~60 billion a month from abroad, that flow of money has slowed if you look at the TIC reports.




Paulson and Bernacke in my opinion are doing there jobs.  Brad Sherman D CA was all for loosing the lending rules that started this sheat.  I believe his state should be sawed off floated out in the ocean and left to do whatever it is they do out there. Hell he probably is not paying his mortage.  Its to easy to walk away.


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## Moe Ghoul (Oct 1, 2008)

tjf67 said:


> Paulson and Bernacke in my opinion are doing there jobs.  Brad Sherman D CA was all for loosing the lending rules that started this sheat.  I believe his state should be sawed off floated out in the ocean and left to do whatever it is they do out there. Hell he probably is not paying his mortage.  Its to easy to walk away.



I'm only pointing out what was said in public and a possible underlying motivation for this bailout/recovery package. Not about him or CA or his mortgage, lol.


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## ctenidae (Oct 1, 2008)

tjf67 said:


> Paulson and Bernacke in my opinion are doing there jobs.



The good news is that Bernanke did most of his research work on the Great Depression, and so should know theplaybook. Trouble is, then, as now, the markets had reached a tipping point where the complexity was greater than the knowledge could manage (a theory I devised 4-5 years ago, and should have published somewhere, or at least written down). 

Hopefully teh dictum "The more things change, the more they stay the same" holds true.


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## campgottagopee (Oct 1, 2008)

Nice thread--I've learned a lot from reading this but my head hurts---Haven't looked at my 401k nor am I


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## mondeo (Oct 1, 2008)

bvibert said:


> I realize that, which is why I posted the warning. No politics is one of the few rules that we actively, and sometimes even pro-actively, strictly enforce.
> 
> IMHO, as long as we can keep the discussion civil and keep partisan mudslinging out of it I'll be OK with it. I'm only speaking for myself though, I don't know how Greg and the other mods will feel about it.
> 
> I don't have much hope that this thread will last too long before the name calling and mud slinging starts, but hopefully you guys prove me wrong.


 


ComeBackMudPuddles said:


> Just to say, these observations are pretty political........


 
But still civil and not partisan. Just nicely saying everyone else is wrong and I'm right. :razz:



ComeBackMudPuddles said:


> Reduced executive pay + congressional oversight + upcoming regulations (if they're good) should help a little, no?


 

No, going back to my analogy, that's bringing the kid back from college. No learning actually happens, growth is stunted, and you're setting yourself up for more failure if you choose to deregulate again down the line.


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## deadheadskier (Oct 1, 2008)

mondeo said:


> But still civil and not partisan. Just nicely saying everyone else is wrong and I'm right. :razz:
> 
> 
> 
> ...



So, you're suggesting that golden parachutes and minimal gov't over sight should remain?


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## ctenidae (Oct 1, 2008)

http://money.cnn.com/2008/10/01/news/economy/senate_rescuebill2/?postversion=2008100113

_The bill also adds in three key elements designed to attract House Republican votes - particularly popular tax measures that have garnered bipartisan support.

It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The Senate bill would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

In addition, the bill includes relief from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."_

How do these count as being part of the current problem?
Congress is so screwed up.


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## drjeff (Oct 1, 2008)

ctenidae said:


> http://money.cnn.com/2008/10/01/news/economy/senate_rescuebill2/?postversion=2008100113
> 
> _The bill also adds in three key elements designed to attract House Republican votes - particularly popular tax measures that have garnered bipartisan support.
> 
> ...



Simple, even though the dems control congress, they need the republicans on baord to pass this thing. And the 1st 2 things were part of the Bsh tax cuts that the republicans want to extend, and the Alternative minimum tax thing is basically the standard year to year patch that congress has passed for many years now to keep the level at which the AMT kicks in from falling to ridiculously low levels that would amoutn to a significant tax increase for ALOT of taxpayers.

As a result, both of these are just easy add-ons that won't see the legislatots taking too much sh$t for pork barrel stuff and hopefully get the republicans and digresing dems onboard to pass the bailout.

And yes, congress is SOOOOOOOO screwed up.


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## highpeaksdrifter (Oct 1, 2008)

tjf67 said:


> Raising the FDIC limits could help forestall a run on the banks, but I don't think it would be very effective. Most people don't have $100K in a bank, anyway, so what do they care? Those are also the people most likely to panic, since *Cousin Ned *called and said he had to wait 2 hours in line at the bank to cash his welfare check, and that must mean there's a run going on and you better get yourself and *Aunt Martha* down to the bank and get your $42 out right now. Anecdotaly, I do know a lot of HNWs are scrambling to reorganize their accounts to spread money out between banks in $100K chunks. This does lead to some uncertainty for bank deposits, so raising the FDIC limit would be somewhat helpful, so should be pursued



That's fine for Cousin Ned and Aunt Martha, but what do you think Cousin Brian and Aunt Carol would do if they had to stand in line for 2 hours?


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## hammer (Oct 1, 2008)

drjeff said:


> As a result, both of these are just easy add-ons that won't see the legislatots taking too much sh$t for pork barrel stuff and hopefully get the republicans and digresing dems onboard to pass the bailout.


Adding this stuff makes me question the bailout even more...why can't it pass on its own merit?  Is it because the bailout has no merit?


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## ctenidae (Oct 1, 2008)

highpeaksdrifter said:


> That's fine for Cousin Ned and Aunt Martha, but what do you think Cousin Brian and Aunt Carol would do if they had to stand in line for 2 hours?



Probably get married.


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## wa-loaf (Oct 1, 2008)

hammer said:


> Adding this stuff makes me question the bailout even more...why can't it pass on its own merit?  Is it because the bailout has no merit?



Thats what happens when 535 people try to do something.


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## ctenidae (Oct 1, 2008)

wa-loaf said:


> Thats what happens when 535 people try to do something.



The speed and intelligence of a group varies inversely with its size.


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## hammer (Oct 1, 2008)

wa-loaf said:


> Thats what happens when 535 people *who don't want to lose their jobs* try to do something.


Had to correct your statement...


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## mondeo (Oct 1, 2008)

deadheadskier said:


> So, you're suggesting that golden parachutes and minimal gov't over sight should remain?


 
I'm suggesting that, without a bailout, policies that are shown to create more problems then benefits will naturally be killed off, eliminating the need for governement oversight while maintaining market freedom.

There is a point to golden parachutes. For one, they're essentially signing bonuses, which guarantee a certain level of compensation independant of the amount of time the executive keeps his job. From this perspective, they're a way to get a high powered executive on board, not a way to take care of them when they screw up. The other purpose is to make them secure in taking risks. If, following these events, the various Boards of Directors determine that golden parachutes lead CEOs to feel too comfortable taking risks, they'll turn into silver drogue chutes from full fledged golden parachutes.

Look at Carly Fiorina. She took major risks and was hevily criticised for the Compaq merger and actions afterwards. Got kicked out, with a severance package over $20 million. Very shortly thereafter, HP took over the #1 spot in the PC market from Dell, and has been there ever since; many credit Fiorina for a good deal of HP's current success, yet she was kicked out before the success started showing. Without the golden parachute, would she have done the same things, going against the Board? Hard to tell, but it's less likely.

I'm not against all regulation. Transparency is almost always a good thing, and probably would've averted a good deal of the current problems, as buyers of securitized mortgages would have actually been able to accurately evaluate them, and led to a smaller market for bad debt. Conflicts of interest are another area, where you have CEOs serving on the boards of each others' companies, so you get a bunch of CEOs writing CEO pay packages. But if a company wants to take on risk? Let 'em. And let them fail. Bad business policies will scare off investors, good ones will bring investors in. There may be larger swings in fortune in an unregulated market, but on average it's economically favorable.


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## deadheadskier (Oct 1, 2008)

mondeo said:


> I'm suggesting that, without a bailout, policies that are shown to create more problems then benefits will naturally be killed off, eliminating the need for governement oversight while maintaining market freedom.
> 
> There is a point to golden parachutes. For one, they're essentially signing bonuses, which guarantee a certain level of compensation independant of the amount of time the executive keeps his job. From this perspective, they're a way to get a high powered executive on board, not a way to take care of them when they screw up. The other purpose is to make them secure in taking risks. If, following these events, the various Boards of Directors determine that golden parachutes lead CEOs to feel too comfortable taking risks, they'll turn into silver drogue chutes from full fledged golden parachutes.
> 
> ...



Interesting perspective.......like you I will use a school kid analogy.  A kid will drive much safer and take less chances when mom and dad are in the back seat of the Mercedes.  I can appreciate risk like your HP example, however I lack trust in many people in such positions.

Power corrupts; and absolute power corrupts absolutely

I think many people who get those ridiculous sign on bonuses become far more interested in themselves than that of the team.  You see it all the time in football.  A player busts his ass to get that big signing bonus then disappears. I have a feeling many of the Wall Street kingpins are the same way.

I admire your knowledge on the subject though.  Pretty good for a guy who fixes planes


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## mondeo (Oct 1, 2008)

hammer said:


> Adding this stuff makes me question the bailout even more...why can't it pass on its own merit? Is it because the bailout has no merit?


 
It's because the majority of the voters have very little grounding in economic theory. Only quick thing I could find was from 2002, at which point only 13 states required economics in high school, and only half of all high school students took an economics course; this was only 6 years ago, and prevalence of economics being taught in high school is on the rise. What percentage of people that graduated in 1990 were taught economics? 1980? 1970? And how many actually remember what they were taught? If you start talking about things like diminishing returns, return on investment, overhead, capital investment, etc., to the average Joe on the street, what reaction would you expect? I'm guessing a blank stare. Most people do not understand how the bailout would actually impact them.

The bailout will do what the proponents are saying it's supposed to do. But they're only talking about the next 2 years, which is as far in the future as they know how to look for most.


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## ski_resort_observer (Oct 1, 2008)

Moe Ghoul said:


> Speaking for myself, for all the screaming about a credit freeze, I get daily solicitations and blank checks for all the money I can gorge myself on from a variety of credit cards offering 0-3% teaser rates and a transaction charge. I'm pretty sure I'm not the only person.



Use them and have one minor scewup like a late payment and they gourge themselves with their new high interest rates. Don't get sucked in.

ETF's and MFs work great if the markets are growing. At present they will just drag you down with the ship. Invest in great small cap companies like Green Mountain Coffee Roasters(GMCR).


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## deadheadskier (Oct 1, 2008)

What I really don't understand is why someone gets to play Solomon and decide what banks institutions fail and who gets bailed out etc.  

To me the whole mess seems like a function of accounting rules that need to be changed.  AIG gets bailed out on capital liquidity concerns when reporting their liabilities in today's dollars when they are de-valued.  The fact is from a business operation stand point the company was producing 9 billion a year in profit.  Eventually bad debts that are no longer desirable because of the housing market crash will be worth something again when they make a turn around.  It seems to be me that banks should be allowed to continue profitable operations and afforded time to allow the bad debts to become valuable again.  In a market that moves as fast as the modern economy, a couple years would do it.  Perhaps the goal of the bail out, but of the Gov't just steps in and buys the debt and fire sales them......who outside of the banks win?


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## ski_resort_observer (Oct 1, 2008)

deadheadskier said:


> What I really don't understand is why someone gets to play Solomon and decide what banks institutions fail and who gets bailed out etc.



Most any financial institution can borrow from the 700B fund based on what perameters are decided upon in Congress. It's up to the banks to decide if they want to participate, get assimilated or cease operations.


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## andyzee (Oct 1, 2008)

Bill just passed by Senate.


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## ctenidae (Oct 2, 2008)

andyzee said:


> Bill just passed by Senate.



Timothy Murphy (R-Penn) said this morning that the bill didn't pass last time because they did a poor job of selling it to the public. They focused on liquidity, "which the average American thinks is what you mop up off the floor."

Sadly, true.


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## deadheadskier (Oct 2, 2008)

ctenidae said:


> Timothy Murphy (R-Penn) said this morning that the bill didn't pass last time because they did a poor job of selling it to the public. They focused on liquidity, "which the average American thinks is what you mop up off the floor."
> 
> Sadly, true.



Concerning his comments about liquidity, indeed it is sadly true.


The Bill didn't pass the House because there are far more members up for election than in the Senate.  I'd be interested to look in depth at the Senate.  I'd bet the majority of yes votes came from folks who are not up for election and the no votes are from ones who are.

Senate approval puts a ton of pressure on the House to follow suit.


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## ComeBackMudPuddles (Oct 2, 2008)

Probably obvious to the well-informed posters in this thread, but novices/non-experts (like myself) might get some information from this Time article titled "18 Tough Questions (and Answers) About the Bailout".


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## hammer (Oct 2, 2008)

ComeBackMudPuddles said:


> Probably obvious to the well-informed posters in this thread, but novices/non-experts (like myself) might get some information from this Time article titled "18 Tough Questions (and Answers) About the Bailout".


Good article...I definitely count myself as one of the non-experts, and yes, I did take a basic economics course in college, although I don't remember much of it anymore...


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## ctenidae (Oct 2, 2008)

ComeBackMudPuddles said:


> Probably obvious to the well-informed posters in this thread, but novices/non-experts (like myself) might get some information from this Time article titled "18 Tough Questions (and Answers) About the Bailout".



Nice find.
Makes me feel better that most of my answers to my wife's questions (and she is in it as much as I am) ahve been "idunno".


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## GrilledSteezeSandwich (Oct 2, 2008)

This guy at the bar was telling me that in a year it will be impossible for even someone with good credit to get a mortgage....any truth to that???  Banks make money lending money so why would they stop????


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## ctenidae (Oct 2, 2008)

GrilledSteezeSandwich said:


> This guy at the bar was telling me that in a year it will be impossible for even someone with good credit to get a mortgage....any truth to that???  Banks make money lending money so why would they stop????



Because they make money by lending it and getting paid back.
August last year they were saying mortgages would be impossible. People are still buying.


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## GrilledSteezeSandwich (Oct 2, 2008)

ctenidae said:


> Because they make money by lending it and getting paid back.
> August last year they were saying mortgages would be impossible. People are still buying.



My sister and her husband just bought a condo in DC and I know they had to put down 20%


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## ComeBackMudPuddles (Oct 2, 2008)

GrilledSteezeSandwich said:


> My sister and her husband just bought a condo in DC and I know they had to put down 20%





20% down.....Isn't that how things used to be way back when (_i.e._, more than 10 years ago)?


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## GrilledSteezeSandwich (Oct 2, 2008)

ComeBackMudPuddles said:


> 20% down.....Isn't that how things used to be way back when (_i.e._, more than 10 years ago)?



I always thought 5% was the norm..but I hardly had pubes 10 years ago..lol


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## Moe Ghoul (Oct 2, 2008)

Upside down car loans, 0 down mortgages, 110% HELOC's, what the fuck did anyone expect? Adding back gold today.


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## drjeff (Oct 2, 2008)

ctenidae said:


> Timothy Murphy (R-Penn) said this morning that the bill didn't pass last time because they did a poor job of selling it to the public. They focused on liquidity, "which the average American thinks is what you mop up off the floor."
> 
> Sadly, true.



I noticed, as did my wife and parents last night that atleast on the NBC nightly news, they were WAYYY more positive about the bailout proposal and trying to sell it to Joe Q. Public than they were just a few days ago.  Coincidence or not, I'm not sure


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## Moe Ghoul (Oct 2, 2008)

Next week could be even uglier. I would suggest if you have some extra cash in the bank to yank it and keep some at home if you don't keep a stash at home. It wouldn't surprise me if there's a "bank holiday" freezing up access to accounts on its way. Worst case scenario, you re-deposit if it doesn't come to pass. Rumor has it BOA is in trouble. A major insurance carrier is on the ropes. Nothing that I can substantiate at this point. This "bailout", "rescue" or whatever label you want to paste on it ain't gonna work.


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## RootDKJ (Oct 2, 2008)

Moe Ghoul said:


> Next week could be even uglier. I would suggest if you have some extra cash in the bank to yank it and keep some at home if you don't keep a stash at home. It wouldn't surprise me if there's a "bank holiday" freezing up access to accounts on its way. Worst case scenario, you re-deposit if it doesn't come to pass. Rumor has it BOA is in trouble. A major insurance carrier is on the ropes. Nothing that I can substantiate at this point. This "bailout", "rescue" or whatever label you want to paste on it ain't gonna work.



Can you site your source on BOA?


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## Moe Ghoul (Oct 2, 2008)

RootDKJ said:


> Can you site your source on BOA?



No. Like I said, it's a "rumor". Could be complete BS.


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## tjf67 (Oct 2, 2008)

Moe Ghoul said:


> Next week could be even uglier. I would suggest if you have some extra cash in the bank to yank it and keep some at home if you don't keep a stash at home. It wouldn't surprise me if there's a "bank holiday" freezing up access to accounts on its way. Worst case scenario, you re-deposit if it doesn't come to pass. Rumor has it BOA is in trouble. A major insurance carrier is on the ropes. Nothing that I can substantiate at this point. This "bailout", "rescue" or whatever label you want to paste on it ain't gonna work.




Are you that irresponsible to spead fear like this.  Come on grow up.


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## tjf67 (Oct 2, 2008)

GrilledSteezeSandwich said:


> This guy at the bar was telling me that in a year it will be impossible for even someone with good credit to get a mortgage....any truth to that???  Banks make money lending money so why would they stop????



If deposits drop enough they dont have the reserves to make loans.   Tell the guy at bar to have another drink and come talk to you in a year


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## Moe Ghoul (Oct 2, 2008)

tjf67 said:


> Are you that irresponsible to spead fear like this.  Come on grow up.



Grow up? Spreading fear? It's a cautionary suggestion.  When every commentary ends in "......not since the depression", I'm not trying to spread fear, that's already rampant.


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## GrilledSteezeSandwich (Oct 2, 2008)

tjf67 said:


> Are you that irresponsible to spead fear like this.  Come on grow up.



Believe what you want to believe..but a guy at the bar said the same thing as Moe..


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## Moe Ghoul (Oct 2, 2008)

GrilledSteezeSandwich said:


> Believe what you want to believe..but a guy at the bar said the same thing as Moe..



GSS, wasn't I talking about this 9 months ago on PASR?


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## GrilledSteezeSandwich (Oct 2, 2008)

Moe Ghoul said:


> GSS, wasn't I talking about this 9 months ago on PASR?



I don't remember..I think I was stoned that day


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## Moe Ghoul (Oct 2, 2008)

GrilledSteezeSandwich said:


> I don't remember..I think I was stoned that day



AHAHA!! I shoulda guessed that reply.


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## Moe Ghoul (Oct 2, 2008)

RootDKJ said:


> Can you site your source on BOA?



If you happen to be watching FBN, they were discussing the possibility of "bank holidays" around 2:21PM today. I don't make this stuff up.


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## GrilledSteezeSandwich (Oct 2, 2008)

Moe Ghoul said:


> If you happen to be watching FBN, they were discussing the possibility of "bank holidays" around 2:21PM today. I don't make this stuff up.



What exactly is a bank holiday?  My next CD is up October 18th...I don't want to pull it out early and be penalized...are you suggesting we keep our money under the mattress???  At my bank they offer a 103% loan..does that mean I can take out $206,000 on a $200,000 house?


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## Moe Ghoul (Oct 2, 2008)

GrilledSteezeSandwich said:


> What exactly is a bank holiday?  My next CD is up October 18th...I don't want to pull it out early and be penalized...are you suggesting we keep our money under the mattress???  At my bank they offer a 103% loan..does that mean I can take out $206,000 on a $200,000 house?



ROFL. No, its just a suggestion to keep some cash at home, not sell everything you own. A bank holiday is a polite way to say the bank is closed til further notice.
I bumped that thread up from last March on PASR.


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## hammer (Oct 2, 2008)

Moe Ghoul said:


> A major insurance carrier is on the ropes. Nothing that I can substantiate at this point.



Is this statement related to what I saw about MetLife here:  http://www.foxbusiness.com/story/markets/futures-mixed-senate-approves/


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## Moe Ghoul (Oct 2, 2008)

hammer said:


> Is this statement related to what I saw about MetLife here:  http://www.foxbusiness.com/story/markets/futures-mixed-senate-approves/



Apparently, Harry Reid made a comment, and the insurers are all getting hammered share price wise.


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## deadheadskier (Oct 2, 2008)

Moe Ghoul said:


> Next week could be even uglier. I would suggest if you have some extra cash in the bank to yank it and keep some at home if you don't keep a stash at home. It wouldn't surprise me if there's a "bank holiday" freezing up access to accounts on its way. Worst case scenario, you re-deposit if it doesn't come to pass. Rumor has it BOA is in trouble. A major insurance carrier is on the ropes. Nothing that I can substantiate at this point. This "bailout", "rescue" or whatever label you want to paste on it ain't gonna work.



Bank Holiday would have to mean a Wall Street holiday as well correct?  The amount of chaos such an event would cause in the markets would seem to warrant that.


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## Moe Ghoul (Oct 2, 2008)

deadheadskier said:


> Bank Holiday would have to mean a Wall Street holiday as well correct?  The amount of chaos such an event would cause in the markets would seem to warrant that.



There isn't much left on Wall Street to take a holiday at this point. I'm referring to chartered banks, FDIC members.


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## GrilledSteezeSandwich (Oct 2, 2008)

It seems like a good time to buy Microsoft..it seems like it's in a valley and I could see the stock peaking again soon..

http://stocks.usatoday.com/custom/u...symb=MSFT&style=1623&size=2&time=5yr&freq=3mo


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## deadheadskier (Oct 2, 2008)

GrilledSteezeSandwich said:


> It seems like a good time to buy Microsoft..it seems like it's in a valley and I could see the stock peaking again soon..
> 
> http://stocks.usatoday.com/custom/u...symb=MSFT&style=1623&size=2&time=5yr&freq=3mo



I'm not sure I agree with that statement.  I'm far from an expert, actually I'm a downright novice on the subject ::lol: but to me in economic slow downs, people are going to try and get by with as little investment as possible in technology needs.  It may have hit bottom, but I (personally) wouldn't bank on it heading up a great deal anytime soon. 

Seems to me the safe bets would be in sectors that are everyday needs no matter what; medical, consumer goods from companies like J&J, energy.  I really don't play the market at all though.  For chits and giggles I threw a couple hundred at AIG and WB when they were trading below $3.50.  My dumb luck and they actually were gainers today :grin:  not that I expect to make any money at them....more just playing while watching the mess unfold.


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## WJenness (Oct 3, 2008)

Someone at work just forwarded this to me, I thought some of you might appreciate the humor.







-w


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## ctenidae (Oct 3, 2008)

What's funny is, that's only 4 days old, and it's already somewhat out of date.

Funny, though.


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