The ongoing financial turmoil and financial discussion thread

[Azure]

From....Paul Krugman, latest Nobel Prize winner in Economics, a professor at Princeton, arch-Bush hater, arch Obama booste.

http://www.nytimes.com/2009/03/06/op...n.html?_r=2&em

Last month, in his big speech to Congress, President Obama argued for bold steps to fix America’s dysfunctional banks. “While the cost of action will be great,” he declared, “I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters alongfor not months or years, but perhaps a decade.”

Many analysts agree. But among people I talk to there’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

I'm not going to quote anything else. Read it yourself.

I hope the rest of the media follows suit, and absolutely piles on Obama for the horrible, horrible mistakes he is making.

[Phanuthier]

Azure - agree on some points, disagree on others and some are too early to tell... in my opinion. I definitely think Obama is pissing away too much money (AIG for example) but I also don't believe in letting the market just send itself wherever. I've said this a few times, that one of the biggest challenges facing the USA is keeping jobs here and the country to produce value, versus sending the work to Mexico, India, China or another 3rd would country. And thats a very realistic view IMO. So, in that sense, I do believe Obama should do something to keep work here or right now, promote work.

To say Obama's plan is a failure right now, because the Dow is at 6600 - I don't know if you can say that. To say Geithner is misdiagnosing the problem, again too early to tell. Economics is tough because its not something you can say "this action will cause this result" but its alot easier to look back and say the results are fully expected from certain actions.

For the millions and billions and trillions of dollars being thrown around like a madman, well the dollar simply isn't worth as much now. I would have to think that the money that was "borrowed" from the many house traders that have already been spent and won't be given will take some time correct itself. The obvious answer should be to get the country to start producing, which I assumed was Obama big plan, but then I see alot of money being thrown to stupid companies that are meant to fail anyways like AIG or GM. In the meantime, they'll try to pick up all that money that was spent and take that load onto themselves (i.e. the debt) and hope that it gets paid off.

BTW anyone know how much American debt China is buying these days? I had heard China was going to stop or lower the amount of debt they are buying, especially since the Americans don't really care if the value of the debt China is holding gets devalued (versus if the debt was being bought by Americans). I think it was posted here, could have been somewhere else, but Hilary Clinton flat out said the USA really needs China to feed the USA more money and keep buying debt.

[Slava]

Originally Posted by MJK

Back on the topic. Am I the only one who is actively buying stocks right now? Looking for solid companies who's stocks have dropped a ton and picking them up?

Who has been actively trading during this time?

<raises hand> I'm definitely buying. I think that you have to be crazy to not take advantage of some of the pure bargains out there right now!

Originally Posted by macker

Ok, I see what you are saying....
Yes you would still own the shares and you would get them back after bankruptcy proceedings. You wouldn't be able to trade the stock during this time and the brokerage would also have to give you back any cash you may have in your account. FDIC or CDIC would protect you up to the stated limits.

In Canada your protection is actually through the CIPF if the brokerage goes bankrupt. You will have 180 days to claim...so make sure that you get your claim in if it happens!

[Azure]

A few opinions on the Obama plan from numerous think tanks in the US.

Andres Martinez (New America): The markets are underwhelmed by Treasury Secretary Tim Geithner's plan. But the policy response to the nation's credit freeze and the need to "bail out" the overleveraged financial sector is precisely the kind of subject that gets our adrenaline flowing at think tanks. So what do we think? Any surprises here? Is the administration doing enough (or too much) to fix the problem? These aren't easy questions, and I'm still not entirely clear on the overriding narrative of Geithner's plan. I can explain the stimulus to my four-year-old son, but I'd be hard pressed to explain the financial rescue to him -- or anyone else.

Dan Mitchell (Cato Institute): Geithner's bailout proposal is very disappointing. The economy is in a ditch in large part because of misguided government intervention. The best option would be to allow markets to operate. Unfortunately, Geithner has decided to continue the failed Paulson policy of hindering markets. He wants to prop up bankrupt institutions. He wants to hinder the natural and necessary reallocation of resources out of weak sectors of the economy (in this case, housing and finance). And he wants to create a "public-private" enterprise that almost surely will be a vehicle for ongoing -- perhaps permanent -- interference in private markets.

John Irons (Economic Policy Institute): A couple interesting nuggets: I think the most intriguing part of the plan is the use of public-private partnerships to buy troubled assets. Looks like this may be an effort both to provide banks with capital support and to take various kinds of assets (including mortgage-backed securities) off the banks' books. Given that the private market does not think well of these assets, it's hard to predict what the treasury will have to do to lure private money back into the market -- and at what cost. I'm looking forward to seeing the details.

Andres Martinez (New America): I'm intrigued by your use of the word "intriguing" in characterizing the private-public partnership to buy up toxic assets. It would have been a lot tidier to create a government "bad bank" to cleanse the banks' balance sheets, no? Great if we taxpayers can lure private investors to invest in these toxic assets, but are we left with crippling uncertainty as we wait for that question to be answered?

Adam Posen (Peterson Institute for International Economics): Yes, we all want the toxic assets to be sold eventually to the private sector, and we all want the government directing bank loans as little as possible. Is it realistic, however, to think that bribing the private actors who currently cannot put a price on those assets to buy them, and giving more funding and guarantees to current bank management and shareholders, will lead to good results? Or is this a replay of Freddie/Fannie: gains go to the private interests, losses go to the taxpayers and the management plays with house money? The Japan and the U.S. Savings and Loan experiences suggest that's what will happen.

David John (Heritage Foundation): I agree about the public-private partnership. It will be very tricky to set up, and no matter what, will not have any real effect for some time. A guarantee (to limit the banks' ultimate losses) would be faster, easier, and make much more operational sense. My favorite part of Geithner's proposal is the idea of finally going into these $100-billion-plus asset banks and getting more information about their portfolios. That would provide a better basis for determining need than the emergency-based system used so far. However, explaining it to my child will be a challenge that I'll duck for now -- and mine is five!

http://www.washingtonpost.com/wp-dyn...021003480.html

[Phanuthier]

Originally Posted by MJK

Back on the topic. Am I the only one who is actively buying stocks right now? Looking for solid companies who's stocks have dropped a ton and picking them up?

Who has been actively trading during this time?

Oh and I guess in response to this, I blew about half my stock money when the Dow was 8300 and half at the Nov 21 meltdown at 7300. Sure wish I was working right now, I just want to go shopping. With stocks so low, I had a few stocks that have been holding strong (i.e. Intel) that I've been trading in for some ones that have fallen hard lately. I really need to re-arrange my portfolio when things rebound a bit, I want to get back into Intel, Cisco, Western Digital, some ETFs like PSI, TAN, DWZ and MINDX.

I had Wells Fargo since October, picked up more when it dropped to $20, then when it fell to $10 and I knew I should have gotten rid of some at $22. I feel sort of stupid for having such large holdings in US Banks lol (JPM, Wells Fargo, American Express) in particular) - I'm confident it'll come back, but there are some attractive ones I want to add more to like Eaton and a few of the ones mentioned above.

[Azure]

Originally Posted by Phanuthier

Azure - agree on some points, disagree on others and some are too early to tell... in my opinion. I definitely think Obama is pissing away too much money (AIG for example) but I also don't believe in letting the market just send itself wherever.

Well, the problem is too complex for me and you to figure out, and the guys who made the PBS documentary about the economy falling apart think that even the Obama administration doesn't know what the heck they're doing, hence the pissing away of money to companies like AIG and GM who lack any foresight or business plan.

It is my belief that Obama is being played. His administration is being played, and they're falling for everything hook, line and sinker.

I've said this a few times, that one of the biggest challenges facing the USA is keeping jobs here and the country to produce value, versus sending the work to Mexico, India, China or another 3rd would country. And thats a very realistic view IMO. So, in that sense, I do believe Obama should do something to keep work here or right now, promote work.

Absolutely. I think that is both a short-term goal, as well as a long-term goal.

To say Obama's plan is a failure right now, because the Dow is at 6600 - I don't know if you can say that. To say Geithner is misdiagnosing the problem, again too early to tell. Economics is tough because its not something you can say "this action will cause this result" but its alot easier to look back and say the results are fully expected from certain actions.

Sure, point taken. But when you have people like Krugman and Jim Kramer, both VERY respected voices in regard to the economy calling what Obama is doing a failure, I think we should listen.

Here is a pretty damning report on what Kramer said.

http://www.thestreet.com/story/10468...m_ven=GOOGLEFI

[Phanuthier]

Originally Posted by Azure

Sure, point taken. But when you have people like Krugman and Jim Kramer, both VERY respected voices in regard to the economy calling what Obama is doing a failure, I think we should listen.

Here is a pretty damning report on what Kramer said.

http://www.thestreet.com/story/10468...m_ven=GOOGLEFI

Yeah I agree those 2 guys bring very good opinions and I try to read everything I get from them. But when you look at a guy like Krugman, its alot easier for him to make comments when his ass isn't on the line, then if he were the one making the decisions.

Yes, I agree that Obama seems to be falling for every hook being thrown out there, and it does worry me. In 4 years though, we'll have to look at this problem as to the overall outcome - not every dollar being spent is going to be spent well, but if more dollars were used to create something good then being wasted, then I'd say overall he did what he had to do. It doesn't bother me too much that they are buying up the bad debt (as I said in my last post, the money that was leveraged up and since spent has to be repaid some way) but its not every bank thats in trouble - JPM is still strong, and Wells Fargo hasn't been needing bailout money as far as I can tell. It seems like the two that are really sinking the financial industry is Citi, and the bad debts that BoA took on when they took on Merill in the Sept shot gun wedding that this thread was born from. From one of my friends who's a lawyer and works with some of the transactions involving this Obama shopping spree, it seems like BoA can pick whatever the hell they want to see to the feds and combined with the Merill shotgun wedding, you have to think there was a verbal handshake that the feds told BoA they would take care of the Merill mess if BoA bought them. BoA seemed, otherwise, to be ok, although I don't know how much of that I'll believe as BoA essentially had the same clients as WaMu.

(oh and thanks for all the articles Azure, but less thanks for posting so many long ones as I have to get work done but I'm spending way too much time reading the ones you are posting. they are good articles though.)

[Azure]

On another note, a lot of people are looking towards Walmart to provide a huge stimulant to the economy and help struggling families get through the tough economic times.

Amazing that such a HUGE company is being run so precisely perfect despite the economic downturn.

Its called the free market at its best.

http://www.nypost.com/seven/02072009...007.htm?page=0

Considering this is a company that is helping families ride out the economic downturn, which is providing jobs and stimulus while Congress bickers, which had sales growth of 2% this last quarter while other companies struggled, you have to wonder why. At least, I wondered why. And in that spirit of curiosity, I applied for an entry-level position at my local Wal-Mart.

[macker]

Originally Posted by Phanuthier

Azure - agree on some points, disagree on others and some are too early to tell... in my opinion. I definitely think Obama is pissing away too much money (AIG for example) but I also don't believe in letting the market just send itself wherever. I've said this a few times, that one of the biggest challenges facing the USA is keeping jobs here and the country to produce value, versus sending the work to Mexico, India, China or another 3rd would country. And thats a very realistic view IMO. So, in that sense, I do believe Obama should do something to keep work here or right now, promote work.

To say Obama's plan is a failure right now, because the Dow is at 6600 - I don't know if you can say that. To say Geithner is misdiagnosing the problem, again too early to tell. Economics is tough because its not something you can say "this action will cause this result" but its alot easier to look back and say the results are fully expected from certain actions.


For the millions and billions and trillions of dollars being thrown around like a madman, well the dollar simply isn't worth as much now. I would have to think that the money that was "borrowed" from the many house traders that have already been spent and won't be given will take some time correct itself. The obvious answer should be to get the country to start producing, which I assumed was Obama big plan, but then I see alot of money being thrown to stupid companies that are meant to fail anyways like AIG or GM. In the meantime, they'll try to pick up all that money that was spent and take that load onto themselves (i.e. the debt) and hope that it gets paid off.

BTW anyone know how much American debt China is buying these days? I had heard China was going to stop or lower the amount of debt they are buying, especially since the Americans don't really care if the value of the debt China is holding gets devalued (versus if the debt was being bought by Americans). I think it was posted here, could have been somewhere else, but Hilary Clinton flat out said the USA really needs China to feed the USA more money and keep buying debt.

__________________________________________________ ____________

China holds $800 Billion of the US Tresuries out of $9 Trillion total. China's nuclear option refering to Financial vs Balistic Warfare. The US is going to be increasingly dependent on China and are going to have to find a way to get along with them. Last year the US borrowed 65% of all the money borrowed around the world and ten times more than the second place country. BTW : Japan holds $623 Billion in US Tresuries. The US has $11 Trillion in total liabilities and if you include social security and medicare promises the US is on the hook for $53 Trillion. The US debt was going up $10,000 per second when the debt clock was turned off and today, the US owes $66,000 for every American family. Basically each American family would have to write a cheque for $175,000 to get the country out of debt. Does the US need China?....

Article relates to this topic....http://worldnetdaily.com/index.php?f...w&pageId=90491

Also some of my amounts are taken from a show on CNBC "House of Cards" and could now be out dated as the debt is growing too quickly to keep up with...Google should update these #'s as I just revised the China T-bill amount from $477 Billion to $800 Billion and I am sure the Japanese amount is up a lot also...

[macker]

Originally Posted by Slava

<raises hand> I'm definitely buying. I think that you have to be crazy to not take advantage of some of the pure bargains out there right now!



In Canada your protection is actually through the CIPF if the brokerage goes bankrupt. You will have 180 days to claim...so make sure that you get your claim in if it happens!

__________________________________________________ __________________________________________
Right CIPF would cover if he is referring to the brokerage going bankrupt, which we have since determined was the basis so this is the case. If it is one of the investments within the brokerage account it could potentially fall under CDIC or FDIC (Merrill?) as I am not sure of their inner workings. It was explained to me that if for example you are dealing with BMO and they are CIPF and they go bankrupt you would get your money back, whatever the value was at the time. In this BMO brokerage account you may hold a Bank of Nova Scotia GIC. If BMO goes bankrupt CIPF kicks in and if Bank of Nova Scotia goes bankrupt then CDIC kicks in...CDIC has a stronger backing as it is a Federal Crown Corporation meaning that the government is ultimately backing the investments vs CIPF which is investment industry managed and funded. BTW many investments don't qualify for CDIC coverage and there are limits to the amount that is covered.

[Skyceman]

Jim Kramer is a good entertainer - I'll give him that:

http://www.youtube.com/watch?v=_nkZ3...eature=channel

[Draug]

Originally Posted by macker

The US debt was going up $10,000 per second when the debt clock was turned off and today, the US owes $66,000 for every American family. Basically each American family would have to write a cheque for $175,000 to get the country out of debt. Does the US need China?....

Is that the one that is in NY?

I find it amusing that they turned it off ... too much of an obvious reminder I suppose.

How does going up $10,000 per second compare to past times? 10 years ago, 20 years ago, 30 years ago?

[macker]

Originally Posted by Draug

Is that the one that is in NY?

I find it amusing that they turned it off ... too much of an obvious reminder I suppose.

How does going up $10,000 per second compare to past times? 10 years ago, 20 years ago, 30 years ago?

__________________________________________________ ______________

Yep. The only one that I know about is in New York. The US debt. is at historically high levels by all metrics available. There are many charts and graphs available on US government websites to illustrate this. As for Jim Cramer, I have never acted on any stock advice he has ever given out. I think you would do better shorting many of his picks. See :
http://seekingalpha.com/article/1146...cramer-s-picks

http://shortcramerpicks.blogspot.com/

Has he told you that he used to run a hedge fund......He isn't all bad and offers some info on the broader economy but his stock picks are speculative and dangerous at best and usually the stocks move up in advance of his show which leads you to think that those involved with the show may be acting on the picks before Jim Cramers clones do. Barrons had a good article on this in the past. The show is part of what is wrong with America today along with the get rich with Real Estate shows of yester year which induced many wannebe real estate moguls to wade into the water right about the time it was reaching boiling point.....You just can't consistently make money following the herd....that is the lazy way to invest....Do your own DD and know what you are buying and why and just as importantly when you are selling and protect your downside with stop losses and get into your positions with limit orders. Cramer is good for pumping stocks but it is way to late to get out when he recommends to dump stocks....You should have to sign a waiver to watch that show or Fast Money for that matter....

[Slava]

Originally Posted by macker

__________________________________________________ __________________________________________
Right CIPF would cover if he is referring to the brokerage going bankrupt, which we have since determined was the basis so this is the case. If it is one of the investments within the brokerage account it could potentially fall under CDIC or FDIC (Merrill?) as I am not sure of their inner workings. It was explained to me that if for example you are dealing with BMO and they are CIPF and they go bankrupt you would get your money back, whatever the value was at the time. In this BMO brokerage account you may hold a Bank of Nova Scotia GIC. If BMO goes bankrupt CIPF kicks in and if Bank of Nova Scotia goes bankrupt then CDIC kicks in...CDIC has a stronger backing as it is a Federal Crown Corporation meaning that the government is ultimately backing the investments vs CIPF which is investment industry managed and funded. BTW many investments don't qualify for CDIC coverage and there are limits to the amount that is covered.

Well the CDIC is for deposits (bank accounts, GICs, etc.) where the CIPF is for the solvency of the dealers themselves. The CIPF is funded by the dealers, but also has a huge line of credit and well thought out contingency plans in the event that none of this covers the losses. Long-story short, I don't think that there is anything to worry about here.

What I actually wanted to post was this:

http://online.barrons.com/article/SB...231157995.html

Its an article where Barrons essentially calls this the bottom.

[Azure]

Another former Obama supporter from the Obama supporting Washington Post is pissed.

http://www.washingtonpost.com/wp-dyn...l?nav=hcmodule

[Azure]

And yet another article about Obama's failures.

http://www.bloomberg.com/apps/news?p...d=amhpOT5rlR1Y

'War on Business'

[Azure]

Jim Kramer speaks out.

http://www.mainstreet.com/article/mo...nd-jon-stewart

[macker]

Originally Posted by Azure

Jim Kramer speaks out.

http://www.mainstreet.com/article/mo...nd-jon-stewart

Jim Kramer had some harse words towards Buffett today It's not like he hasn't been wrong numerous times in the past year...When Kramer speaks you can still multi-task. When Buffett speaks you stop what you are doing and listen to every word he says. He has been humbled lately but still has a body of work that can't be matched.

Buffett on CNBC today :
-Consumers are as scared as he has ever seen them. You can get scared quickly but it takes a long time to get confident again.
-In 5 years he can guarantee that the machine will be running fine but he would like to get there faster than 5 years and we can.
-In economics there is no free lunch and the US is going to attempt to have a lunch now that they are going to pay for in the future.
-President Obama is a very smart person and the right man to be comander and chief during this economic crisis.

[Flame Of Liberty]

Originally Posted by Azure

Another former Obama supporter from the Obama supporting Washington Post is pissed.

http://www.washingtonpost.com/wp-dyn...l?nav=hcmodule

To those who believe that Barack Obama is a different kind of politician -- more honest, more courageous -- please don't examine his administration's budget.

Obama is a great pretender. He repeatedly says he is doing things that he isn't, trusting his powerful rhetoric to obscure the difference.

He says the budget begins "making the tough choices necessary to restore fiscal discipline." It doesn't.

The gap between Obama rhetoric and Obama reality transcends the budget, as do the consequences.

Confidence (too little) and uncertainty (too much) define this crisis. Obama's double talk reduces the first and raises the second. He says he's focused on reviving the economy, but he's also using the crisis to advance an ambitious long-term agenda. The two sometimes collide.

Similarly, Obama claims to seek bipartisanship but, in reality, doesn't. His bipartisanship consists of including a few Republicans in his Cabinet and inviting some Republican congressmen to the White House for the Super Bowl.

During the campaign, Obama said he would change Washington's petty partisanship; he also advocated a highly partisan agenda. Both claims could not be true. The media barely noticed; the same obliviousness persists.

Even his supporter is basically saying that Obama is a fraud. Beautiful. I believe some of us were saying that many months ago.

[Agamemnon]

Originally Posted by Flame Of Liberty

To those who believe that Barack Obama is a different kind of politician -- more honest, more courageous -- please don't examine his administration's budget.

Obama is a great pretender. He repeatedly says he is doing things that he isn't, trusting his powerful rhetoric to obscure the difference.

He says the budget begins "making the tough choices necessary to restore fiscal discipline." It doesn't.

Speaking of powerful rhetoric... the article seems to contain nothing else.