After reading Billy's 6L I was thinking about my buddies shop. He runs a souvenir shop in Sydney. Anyway, he hired this really cute but kind of psycho Korean girl. This girl has it in her head that every man wants a peace of her. So, in her confidence she walks and acts in an extremely seductive manner. I have to say, the first time I saw her I thought "I want a peace of that" Please Register or Log in to view the hidden image! anyway, in comes Joe American credit card in hand and before long like a siren from the deep he's caught in this woman's song. He couldn't pull his eyes away from her and everything she handed him he just took and said yes. Suddenly his card was through the reader and he was out nearly $2000 USD! Shit, you should have seen the look on this guy's face. I can't really explain it. He was havening a heart attack maybe? I remember thinking, man, if this is how Americans are managing their money no wonder we're in deep shit. M
One thing I have been investing my money over the years is vinyl records, classics ones, the original first-run prints with flawless condition, Jimi Hendrix, Doors, Beatles and so on. I got the idea over ten years ago when everybody was dumbing them and replacing those with CDs, I think that those classics will never loose value compared to artificial stock markets and stuff like that. Last week I bought flawless vinyl version of... ...Saturday night fever Please Register or Log in to view the hidden image! lol Travolta on cover doing hes famous move, hilarious, I did pay for it 1 € in flea market Please Register or Log in to view the hidden image! Please Register or Log in to view the hidden image!
That's exactly what's happening on different scales everywhere. There are classic American cars and motorcycles that are being bought up by foreign investors left and right. You never see an Harley Shovelhead anymore when just a few years ago they were all over. On the other hand, there was some fluxuation in commodities markets recently that seemed a bit hard to justify with the current state of things.
Billy, I really enjoyed your 6L post. (boy I bet it's great calling your shot Please Register or Log in to view the hidden image! ) As a novice of finance, would you mind explaining what caused this situation. I understand some of your 6L points, but a "joe six pack" version would be nice. From what I understand, and please correct me if I'm wrong, is the economy was sagging. The Fed lowered interest rates several times to boost the economy. Some "creative" lenders used the low rates to pitch variable rate mortgages. The low starting interest rate made for very low monthly payments in the beginning, so people bought more house than they could afford, and when the rate went up..so did their monthly payment...beyond the range of their earnings. So many people defaulted. Some companies bought the bad paper, and were left with nothing in the end. I'm I on the right track?
Too much of the US economy is taken up by the financial sector...as compared to Europe for example. A major downsizing in this area will mean more investment for the REAL economy. I waiting gleefully for more investment banks to fail. Please Register or Log in to view the hidden image!
I bet against the dollar more than six years ago. - Moved money to Brazil's Real soon after it seem clear that it would not repeat the prior inflation history. I got four Real for each dollar (on average) then. A dollar buys only 1.81 at Cob today o or conversely I could buy almost three times my original dollars now. (It was at 1.56R$/US$ within last monthbut dollar has recovered some recently)* I do not know how to do it, and do not trust the chinese government, but the Yuan is under valued all would agree, so just convering an investind in Chinese bank would appear to be good, perhaps chinese stocks even better (they are down now) but some day I think China will just say screw you capitalist dogs. - you have exploited us long enough. Probably this will be combined with huge drop in dollar value and they will agree to return you original number of dollars (worth very little compared to what they were when sent to china.) There is no "sure thing" - if they were it would soon be killed by flow of funds taking advantage of it. Reason why I got good deal on Real had to do with fact now President Lula was prior to elections as major labor leader speaking to mass telling he would defalut on the debt , freeze big bank deposites, make social justice, repudiate Brazil's debt, etc. Anyone with wealth was despirate to get into dollars and I helped them on the black market (which is legal or at least very public in fixed location stores etc.) I knew (or at least bet) that Lula was much too smart to actually do any of his campaign promisses. When he was running for second term -the very same people who were afraid he might get elected the first time got scard he might NOT be reelected! his current approval rateings are 64% for & 8% against and more than 50% in ALL social economic classes - something that has never even come close before in quite polararized classes in Brazil. --------------- *I have pondered a good bit trying to understand why. Part is what all say about Euroland not looking so good and chance that US may need to raise interest rates both to contol inflation and to sell Treasury bonds, but I also think fact that some need dollars and the banks will not leand is causing them to sell stocks invested in the BRICs (taking considerable profit in many cases) as the only way to raise needed cash. They want that cash in dollars, so that makes demand for dollars. Ironically, the troubles in US are actually making the dollar gain some lost ground IMHO. - I have never seen this idea in print so you are the first to know. LATER By edit. Now I Have: "Had Wall Street endured the same sized collapse, {as the Russain "dow"} the Dow Jones Industrial Averages would be trading at 6,500 and the S&P 500 at 720. Predictably, Prime Minister Vladimir Putin has vociferously denied that the remarkable collapse of Russian markets during the last four months had anything to do with his own shenanigans and Russia's invasion of Georgia. Invoking the finely honed rhetoric of his Soviet predecessors, he blamed Russia's market collapse on "speculative" moves by Western institutions withdrawing funds because of the "mortgage crisis" in the United States and Europe." - Obviously, I think Putin has a point here, but the way he has treated western investors is IMHO, much more important even that Russain actions in Georga. All of the BRIC markets are down more than the DOW becuase foreigners are need cash badly, as I said yeaster day above.
I just don't see how it's fair for the Government to give a private company 85 billion dollars, and not give it to every company.
Bingo, Mac - you pegged it right on the button. It was the senseless greed of management who's salaries and bonuses were computed on the dollar amount of outstanding loans - REGARDLESS of how risky those loans were. (And they also misrepresented the value/risk of those loans when they bundled them and sold them to others. That's why many of them are going to jail today.)
Logistics. The Gov. doesn't have any money either. They have to pick who they think are the most influential firms. If they keep bailing everyone out it becomes obvious that it's printing press money. That's when people loose faith in the US dollar and buy up "real" things instead. They would rather have a chunk of land ,for instance, than a bunch of dollar assets that are loosing value by the second.
Careful! You're making the same mistake that Michael made - it's not a gift (giving), it's a loan. Don't you agree that that's a big difference?Please Register or Log in to view the hidden image!
The people who made the big money off of this aren't the ones who will get bit, mostly. They're rich, and they've enjoyed huge tax breaks and other benefits allowing them to keep even more of their money than the rich of the past. Almost everyone in this game made money, and gets to keep it. the people who made usurious and un-repayable loans on terms and representations that used to be prosecuted in the courts made large fees and bonuses the bankers that bundled these loans for sale in ways that concealed their intrinsic worthlessness, and entered them as assets in violation of formerly established accounting rules, a practice formerly illegal and guarded against by the government, made big money the people who set up insurance operations to guarantee these bad loans in ways formerly prevented by government regulation made fat salaries and bonuses the various hedge fund CEOs and other upper level financial operators that took commissions for putting together highly leveraged and complex deals involving these phony assets and other people's investments made huge money - all time planetary records were set, and the tax rates were lowered especially for them, so they got to keep it and so forth, all around the horn. Many trillions of dollars were extracted from the US mortgage industry, and where it all went would be an interesting question. Off shore, away from the crash, would be likely for much of it. And all of that was made possible by Phil Gramm and other members of the Republican Congress, W&Co and their tax cut mantra and revocation not only of regulation but of enforcement of the remaining regulations, and the other players in the Reagan legacy era. If all we had to worry about was the makers of the bad loans getting bit in the ass, we wouldn't be reading these headlines.
Yes it was, but nothing I did not explain more than a year ago at: http://www.sciforums.com/showpost.php?p=1502039&postcount=1 When defining the "6L cycle." (A condensed version of that link’s post is post 30 of this thread.) I can add to Iceaura's post some quantative information: Lehman paid bonuses totaling 5.7 BILLION last year. - All that churning and repackaging of now nearly worthless paper did bring in lots of profits and they were shared out with the employees who did that creative re-packaging of mortgages, to make marketable securities which brought in more funds to buy still more mortgages etc. etc. building the leverage ever higher. Also more than a year ago, as posted in the above "6L cycle" OP, that Leverage (one of the "6Ls") ratio was only 25 (still outrageously dangerous) and now (actually a few months ago - current data not available) it is 32! That means these greedy guys and their firms lent $32 dollars out for every one they had so it only took a 3% default rate to bankrupt them. But before the s*** it the fan, it was great for the annual bonuses. Now most of Lehman's staff is looking for a job. - I suggest the they could work in the prison laundry or license plate plant. They knew what they were doing. The risk they were taking with the US economy for personnel gain. Hell if they had stolen a TV and got caught they would be in Jail. In GWB's government stealing a few million is OK. He has taken millions from the Saudi to keep the US hooked on oil. His scheme of making alcohol from corn uses essentially as much oil as the as the cars running on pure gasoline would use so it was / is just a way to distract Joe American into thinking GWB was not still the faithful servant of the Saudi Royal family that started funding him 30 years ago with a gift of money (to his father) to buy a small oil company for GWB. With his management skills, GWB was able to bankrupt even an oil company! Now he has graduated and bankrupted the entire USA by deregulations, tax transfers to the wealthy supporters, starting needless wars (certainly not against his financial patrons, the Saudi, who trained the 9/11 in their "religious" schools and indirectly funded the attackers with their oil profits.)
Sorry, I understand it's a loan. Wrong word used there. I'm just not in love with the idea of the Government loaning money to a single private company, without offering those kinds of loans to all business. To me, that's favoritism. It might me necessary to bail out AIG, I just don't think it's fair to cover the ass of one company because of bad management, when other smaller companies would not even be considered for such things. (ie. Joe's Diner)
Yup, that little point seems totally lost on so many people. It another bubble they(Global Financiers that control your FED) are purposely building to bust spectacularly. You are going to have to learn Canadian and Mexican soon. (Kidding)
The first difference is that AIG stands as a financial intermediary, insurer and reinsurer in a huge number of situiations. If Joe's diner fails, that may affect Joe, his employees and the businesses that are in the immediate area, but if AIG fails that affects Bank of America, Chase, JP Morgan, lots and lots of leasing companies, Travelers Insurance, Wachovia...it's probably a shorter list to name the companies that do *not* have some exposure to AIG. Worse, AIG doesn't even have to go under, their being downgraded has already caused a lot of problems in a large number of financial transactions that were counting on them maintaining a high credit rating. To take an easy example, let's say you liek to fly in airplanes....AIG's aircraft leasing subsidiary finances or backstops the financing on a lot of them, and AIG's downgrade puts that company in a precarious position, which puts lenders involved in a precarious position which makes them think about repossessing planes, which puts many of the major airlines (many of which lease their planes) in danger. So there is a disparate effect on the economy between Joe's Diner and AIG. The fall of AIG could trigger a panic, the fall of Joe's Diner, probably not. The second reason is that AIG has a lot going for it. It has $78 billion worth of equity right now, despite its losses (almost all of which were generated by one subsidiary, AIG Financial Propducts). That means if you take the (book) value all their assets and subtract the book value of all their liabilities, they should have $78 billion of assets left over. If you let AIG FP go bankrupt and leave the parent alone (which means the creditors of AIG FP are screwed, but would leave all its insurance operations intact, AIG is still earning a net profit. At the end of the last fiscal year, despite the losses by AIG FP, AIG still manages to earn $6 billion in net profits. This year it is losing money, so far, though those losses are again ties to their participation in the financial products. (Though I suppose the aircraft lease products are "financial products" as well, and that sub makes a tidy profit and is estimated to be worth $11 billion all by itself.) AIG has a lot more ability to repay $80 billion in loans than Joe's Diner. Many restaurants have negative equity, where their liabilities exceed their assets.
Yeah whatever, we'd all love to be able to run a business that, even though accused of fraud all the last decade and makes huge mistakes, still gets bailed out by the big boys.
