tag:blogger.com,1999:blog-27697009.post1101260260374876460..comments2024-02-29T03:21:35.007-08:00Comments on The Great Depression of 2006 : More Bang for the BuckJim in San Marcoshttp://www.blogger.com/profile/09435296419912935381noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-27697009.post-8557322347476052912008-03-18T03:06:00.000-07:002008-03-18T03:06:00.000-07:00Jim, well said.The Fed DOES have a precedent for t...Jim, well said.<BR/><BR/>The Fed DOES have a precedent for this - the Argentina default crisis of 1980 would have left every major US bank insolvent had it had to market the bonds to market.<BR/><BR/>The Fed allowed the banks to carry the paper at par on hte books until it could be written off without causing the balance sheet to implode. Took about six years, but most of that was during the 1980s boom.<BR/><BR/>I wrote a more detailed post on the finances of Bear on my blog.<BR/><BR/>It would take losses of only 12 billion since November to make Bear technically insolvent. Given the immensity of its balance sheet, the massive fixed charges it had financing it (while experiencing shriking IB income) and the $57bn in mortgage securities, it seems quite possible that losses had exceeded this figure.<BR/><BR/>(That doesn't even count the off balance sheet obligations).Strategic Investorhttps://www.blogger.com/profile/06847403858456772158noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-63326545962597794602008-03-16T17:05:00.000-07:002008-03-16T17:05:00.000-07:00Hi SackI don't think you will get your pound of fl...Hi Sack<BR/><BR/>I don't think you will get your pound of flesh.<BR/><BR/>To simplify it, someone earned the million dollars that was put in the bank. Then someone borrowed the million to buy a house. The homeowner walked and the house is now worth 400K.<BR/><BR/>The Fed is going to advance the bank 1 million on the foreclosure so it can stay in business.<BR/><BR/>The Feds money advance only stalls the inevitable. The house is worth 400K today and probably 200K next year. It does give the smart money a second chance to get out before it hits the fan.<BR/><BR/>The parties culpable for this mess are probably the politicians who over the last 40 years have undone what the Congress of the 1930's tried to prevent from ever happening again.<BR/><BR/>If the government didn't step in, the hit is shared equally among everyone and it would be fast. You don't get whats left of your money until the house is sold. Each depositor that is allowed to withdraw all of their funds out, before the collapse, leaves a smaller pie to divide up among those still with accounts at the bank.<BR/><BR/>That is pretty much what a run on the bank is. The first in line get their money, the rest don't.<BR/><BR/>This is a horrible example, I am using Banks, and there isn't much of a chance of a depositor ever losing money there.<BR/><BR/>The Fed is hoping to curb this bank run with cash. I wish them luck. This could be a very bad week for the Stock Market. Friday is a triple witching day for the market. Halloween could be early this year.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-91773334744222803592008-03-16T15:09:00.000-07:002008-03-16T15:09:00.000-07:00Over for whom? Maybe a long painful episode is bet...Over for whom? Maybe a long painful episode is better than kill or cure with the chances on the former. But retribution must be meted out according to culpability.Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-53262106571968234192008-03-16T12:37:00.000-07:002008-03-16T12:37:00.000-07:00Hi SackAs for a stall, I think that will just drag...Hi Sack<BR/><BR/>As for a stall, I think that will just drag it out longer and make it more painful.<BR/><BR/>If the Governments keep out of it, it could be over in 6 months. Of course we know that's not going to happen.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-80240830003046259332008-03-16T11:49:00.000-07:002008-03-16T11:49:00.000-07:00Hi Anon 7:25There was a real estate crash in the 1...Hi Anon 7:25<BR/><BR/>There was a real estate crash in the 1920's that started in Florida in 1926. Here is <A HREF="http://greatdepression2006.blogspot.com/2008/01/its-never-been-this-bad-before-reprint.html" REL="nofollow">Link</A> to it.<BR/><BR/>As for what will happen in the next 6 months, I'm not sure, but we have front row seats. The third week in June will be the first anniversary of the Bear Sterns melt down.<BR/><BR/>The thing to realize is that there is a ton of misinformation out there. Countrywide and Bear Sterns didn't drop dead overnight.<BR/><BR/>This is a poker game. Bluff if you can. Thats how John Paul Jones won against the Serpis in the Revolutionary War.<BR/><BR/>We all think as individuals. It doesn't occur to each of us that we will all probably come to the same conclusion at the same time and act accordingly. What looks like a group move is just a lot of individuals with the same idea taking action.<BR/><BR/>Bear Sterns is just an example. Investors are voting with their feet. After months of sleepless nights, they want some peace of mind. So they sell.<BR/><BR/>When the government jumps off the deep end with rebates and bail outs, it does kind of suggest a message of impending doom. They know more than they are letting on.<BR/><BR/>My best guess it that we could end up losing half of our savings. It's not the end of the world, but at my age, it could crimp my retirement quite a bit.<BR/><BR/>Hope that's of some helpJim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-41209232539833387822008-03-16T11:23:00.000-07:002008-03-16T11:23:00.000-07:00"Where did all the money go?"Where it came from, o..."Where did all the money go?"<BR/>Where it came from, of course.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-52941611608516671002008-03-16T07:25:00.000-07:002008-03-16T07:25:00.000-07:00Dear Jim:The news gets more dismal, each passing d...Dear Jim:<BR/><BR/>The news gets more dismal, each passing day and month. Where will we be 6 months from now? It seems that no one is facing the reality of the current and significant problems in the credit markets and for the average citizen. I thought your article was most interesting, especially in light of a conversation I had 2 days ago with a friend in the Orlando, Florida area. He told me that there were numerous forclosures in a high end development near Winter Park. He said the homes had sold in the 1 million dollar range (+ 4,000 sq. feet) 2 years ago and now were being picked up for $400,000.00 or not at all. I read recently that an anlogy to the real estate "bubble" was the stock market in the 1920's were everyone was buying on margin. Anyway, as you pointed out in one of your articles several months ago it seems that 600,000 in "value" from the example above, just went "poof". Were did allthe money go?<BR/><BR/>Where will we be in 6 months? What are your thoughts?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-62727138393429734952008-03-16T05:47:00.000-07:002008-03-16T05:47:00.000-07:00This bailout loan is probably the biggest liar loa...This bailout loan is probably the biggest liar loan in history. Hopefully the record will not be broken.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-77584024104132928542008-03-16T03:33:00.000-07:002008-03-16T03:33:00.000-07:00Hi Jim:I second your point about not crystallising...Hi Jim:<BR/><BR/>I second your point about not crystallising a loss, which is why we should hope the fudging works - the passengers on the Titanic can't take comfort from thinking the Captain had it coming. So I'm crossing my fingers and calling a stall:<BR/><BR/>http://theylaughedatnoah.blogspot.com/2008/03/housing-stall-after-all.html<BR/><BR/>... and also arguing (in my amateur way - you Americans know more about money than we Brits, because you're allowed to keep some of it) for some forgiveness of debt, or even of interest:<BR/><BR/>http://theylaughedatnoah.blogspot.com/2008/03/forgive-us-our-debts.html<BR/><BR/>and<BR/><BR/>http://theylaughedatnoah.blogspot.com/2008/03/forgive-us-our-debts-part-2.htmlSackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.com