The ongoing financial turmoil and financial discussion thread

[Slava]

Originally Posted by Incinerator

add to that people with good credit who the lenders would favour more are generally people who are responsible about their finances.

Which means in these times of economic uncertainties, these are the same people who would tighten their belt and forego the luxuries, reducing spending and the stimulation to the economy...

So what is the point of making money cheaper to borrow for people who won't spend it?

Well in truth the case for borrowing to invest is stronger by the day. Your costs to do so are dropping, and the margin of safety is increasing. People talk about buying low and selling high....well how much lower can you buy?

[Incinerator]

Originally Posted by Slava

Well in truth the case for borrowing to invest is stronger by the day. Your costs to do so are dropping, and the margin of safety is increasing. People talk about buying low and selling high....well how much lower can you buy?

that would've been true in a normal recession, but we're talking about the complete destruction of our economic foundation--where people lose all confidence in how the system works, not just the market conditions. The world is going bankrupt and just when you think we've hit rock bottom (last Monday) it goes lower (this Monday).

So you tell me, how much lower can it go?

[Table 5]

hey look, a wee bit of good news!

http://money.cnn.com/2008/10/08/real...ion=2008100810

[Slava]

Originally Posted by Incinerator

that would've been true in a normal recession, but we're talking about the complete destruction of our economic foundation--where people lose all confidence in how the system works, not just the market conditions. The world is going bankrupt and just when you think we've hit rock bottom (last Monday) it goes lower (this Monday).

So you tell me, how much lower can it go?

Well truthfully I can't give you a specific number, but the fact is that we can't hit zero. Don't get me wrong, I have a vested interest here...if we hit zero or even close my job is out the window!

That being said when investor sentiment gets this bad the year ahead looks better and better. No one is saying that the entire economy is bankrupt and that we are all doomed to failure.

Strangely enough Canada is not even officially in a recession yet! (These things are decided after the fact anyway). The markets weren't even in bear territory until a couple of weeks ago...so you have to cut through the media here and look towards a brighter future which is not far around the corner.

[DementedReality]

so slava .. when does M1 change their rate? it still shows at 4.75

[Incinerator]

Originally Posted by Slava

Well truthfully I can't give you a specific number, but the fact is that we can't hit zero. Don't get me wrong, I have a vested interest here...if we hit zero or even close my job is out the window!

That being said when investor sentiment gets this bad the year ahead looks better and better. No one is saying that the entire economy is bankrupt and that we are all doomed to failure.

Strangely enough Canada is not even officially in a recession yet! (These things are decided after the fact anyway). The markets weren't even in bear territory until a couple of weeks ago...so you have to cut through the media here and look towards a brighter future which is not far around the corner.

I sure hope you're right since I've doubled the size of my portfolio in the last 2 weeks looking to average down! I don't think my heart can take any further downturns *gulps*

[Table 5]

i agree its a good time to invest in general, but im going to wait a bit to see atleast a bit of an uptick. this thing could still slog its way down into the 8000's....

[metal_geek]

Seems like bad news makes things worse, and untill companys start making thier projections it's gonna be hard for any good news to come out...

[MoneyGuy]

Originally Posted by Table 5

i agree its a good time to invest in general, but im going to wait a bit to see atleast a bit of an uptick. this thing could still slog its way down into the 8000's....

Might work, but often when people do this they can't bite the bullet when the uptick occurs and they miss out on the first 10-25% of the recovery. I'd consider dollar-cost averaging in over the next several months. It could drop into the 8,000s, but I doubt it. That would be quite the whopper of a correction.

To Metal_Geek, most of the rollercoaster market volatility is due to emotions and investor sentiment. People get buoyant and bid the market up, and when things aren't so good they get despondent and bid it down. This would be a great business if not for people.

[Table 5]

Originally Posted by MoneyGuy

I'd consider dollar-cost averaging in over the next several months.

Yeah, that's basically the plan. I've already started on a Financial, Real Estate, and Midcap indexes....and will probably soon follow with an O/G. Ideally, after that I'd be able walk away from my computer for a few months/year.

Now if only i could figure out what to do with this RIMM stock, ha. I don't really like the company anymore, dont think Tech will bounce back for a while, but its too low to really sell at the moment without feeling like a total idiot.

[MoneyGuy]

Originally Posted by Table 5

I don't really like the company anymore, dont think Tech will bounce back for a while, but its too low to really sell at the moment without feeling like a total idiot.

I feel if you wouldn't buy it now at today's prices, then why do you even own it. If you think tech is good value and will do well over the coming many years (I do) then buy more. If you don't feel that, then I'd sell what you have. I'd be DCAing into it right now with smaller amounts.

[Phanuthier]

Just in, the Feds are giving AIG another $37.8 billion in bailout.

This after yesterdays news that the AIG execs used the last bailout money for a weekend vacation and spas.

God this system is so corrupt

[Claeren]

^ After they used up the first $85 Billion in what, less than 10 days?

We are no where near bottom people. Even if it is slows in its plummiting, it is not going up anytime soon either. Count on YEARS (hopefully not decades) before we see any upward movement beyond simple volatility.

That is not to say good traders cannot make money by playing that volatility, but a lot of people would be better served trying to find other places for their money right now.


I get the impression Bank of America has also bitten off more than they can chew.

And virtually all of the financial companies are diluting their shares with massive new share offerings. You can't issue Billions in new shares without diluting the value of all of the existing shares.



Claeren.

[Slava]

Originally Posted by Claeren

^ After they used up the first $85 Billion in what, less than 10 days?

We are no where near bottom people. Even if it is slows in its plummiting, it is not going up anytime soon either. Count on YEARS (hopefully not decades) before we see any upward movement beyond simple volatility. (Not to say good traders cannot make money by playing that volatility.)


I get the impression Bank of America has also bitten off more than they can chew.

And virtually all of the financial companies are diluting their shares with massive new share offerings. You can't issue Billions in new shares without diluting the value of all of the existing shares.



Claeren.

I don't think that they "used up" the 85 million. I do agree that you can't issue new shares without diluting the others, but this is not a sign of the end of the world as we know it either!

[Phanuthier]

Yeah I don't think they used it up ... but if they are running into cash flow problems and are fighting for their lives day to day (thus needing another $37.8 billion) ... they shouldn't be blowing their cash on weekend resorts and spas.

[Claeren]

On CNN just now they were saying that 'they used up the $85B and need a new $37.8B for subsiduary's to keep them afloat' but that 'they have calls in with both the Fed and AIG to get details but with no replies yet'.

I don't mean that they have literally spent the first $85B though, but I think they mean they have 'allocated the entire amount' and still need more, which is basically the same thing, no?


And the world is not ending, but Trillions in debt must be written down still and an entire market that has valued stocks based on easy money and high leverage must reprice the entire market based on hard to get money and low leverage. That is going to take years, not weeks.



Claeren.

[Jason14h]

The feds should say "We will put $1000 bail dollars for every $1 executives pay back from their compensation".

And then the company would pay the executive $2 for every $1 they put up!

[Slava]

The feds should go after these guys and get the money back (or at least prosecute them).

Here's the thing with this whole subprime mess unwinding. Lets say that the whole real-estate market in the US is worth 20 Trillion. The subprime issue might be 10-15% of that? Its not going to take the entire economy under...but the final amount of assets to unwind is an enormous figure.

In other words, the small percentage (relatively speaking) is an enormous figure and its going to hurt. But its not time to panic and start stockpiling to fend off the survivalists!

[Phanuthier]

AIG responds ...

http://www.forbes.com/markets/2008/1...acescan01.html

The flailing insurance giant explained in a letter from its chairman to U.S. Treasury Secretary Hank Paulson that it was simply a "mischaracterization." The "executive retreat" only included 10 AIG employees, with the rest of the attendees being independent insurance agents. He also made sure to point out that the event was planned before the bailout took place.

Does the US gov't have any control over these guys with the 80% leverage? If they did, fire these guys. The company files for bankruptcy, but they still don't cancel their posh weekend vacation.

[Bob]

Dow down below 9000 right now.

Also, a whole bunch of big financial firms report earnings on the 16th. That could be very bad indeed.

Edit: The Dow has just dropped like 200+ points in the last few minutes.