Bailout Nation: Freddie, Fannie, and more

[RedScare]

Hold on to seats. The DOW Futures market hit down 550, and trading was halted due to it hitting its daily limit.

European markets dropped 8%. Japan dropped 10%.

Today may be VERY ugly.

[N Judah]

And the impact of that warning was ... what, exactly?

That's the question to ask of your elected officials, not the Fed Chairman. Maybe he lowered interest rates? I don't know. As he stated:

"The overall view I take of regulation is, I took an oath of office when I became Federal Reserve chairman. I'm here to uphold the laws of the land passed by Congress, not my own predilections."

[houstonmacbro]

Hold on to seats. The DOW Futures market hit down 550, and trading was halted due to it hitting its daily limit.

European markets dropped 8%. Japan dropped 10%.

Today may be VERY ugly.

You think ...?

LOL

This is hilarious, but not really. Just last week (I believe it was Friday) when the markets were closing up, everyone was saying how this was 'over' and things were on the mend.

Which is it?

[RedScare]

You think ...?

LOL

This is hilarious, but not really. Just last week (I believe it was Friday) when the markets were closing up, everyone was saying how this was 'over' and things were on the mend.

Which is it?

Yeah, I heard that, too. I knew they were full of it.

I am actually going to try to make some lemonade. I've got a limit order to sell everything at the opening bell. Assuming I can sell, once it plummets, I'm going to buy it all back. We'll know if it works in about 30 minutes.

[houstonmacbro]

Yeah, I heard that, too. I knew they were full of it.

I am actually going to try to make some lemonade. I've got a limit order to sell everything at the opening bell. Assuming I can sell, once it plummets, I'm going to buy it all back. We'll know if it works in about 30 minutes.

Let us know ...

[RedScare]

So far, so good. Sold and it's dropping.

[N Judah]

How'd it go?

[RedScare]

I managed to sell out at a fairly decent price, but the stock price quickly bottomed out at 64 and slowly started rising, closing at 69. Of course, I was waiting for another big drop, so I never bought back in. I had hoped to jump out and back in with a big gap. Now I am just sitting on a pile of money (not a large pile, but a pile nonetheless). This is not a bad thing, as it allows me to buy back in at any time that the numbers look good. Like most people, I don't believe that we've seen the last downward spike in the stock market, so I will have many chances to buy back in at a low point. The only hitch is that I thought I would be able to sell and buy back all in one day. That did not happen.

On another note, some months back, a discussion of the unemployment rate took place, including the comment that the current rate is not bad. I mentioned that the BLS definition of unemployment does not include the underemployed, skewing the figures or how bad things may really be. It turns out that the BLS DOES compute the figure that I was talking about, unemployed, part-time workers and the discouraged workers. It is called the 'U6'.

http://www.slate.com/id/2202879/

I don't expect the U6 to become part of the lexicon, but it is an interesting statistic if you are concerned about how many of your neighbors may be suffering during our 'non-recession' recession. The U6 is currently at 11%, about 1 in 9 workers.

EDIT: And here is the prediction for October's job losses. October job losses may top 200,000

Edited October 26, 2008 by RedScare

[N Judah]

For whatever reason I think a lot of the hedge funds are waiting until right after the election to dump off their holdings.

Edited October 25, 2008 by N Judah

[RedScare]

For whatever reason I think a lot of the hedge funds are waiting until right after the election to dump off their holdings.

They have been forced to dump plenty of holdings already, due to margin calls. Whether they are waiting to dump the rest, or hope not to have to dump their other holdings at all, I have no idea. It is interesting to hear the frustration of the experts that the final capitulation has not occurred, as they believe there is still room to drop before a massive buyup occurs. Frankly, I thought that capitulation was going to occur yesterday, hence, my selloff. I am fairly confident that there is still a massive selloff in our future. That is why I am not upset to have sold. I have money to buy now.

[BryanS]

It looks like the Credit Default Swap (CDS) market will be exchange-listed shortly, per tickerforum.org... FINALLY.

When that happens, it is over for AIG, from what I read...

Edited October 31, 2008 by BryanS

[N Judah]

link?

[Subdude]

It looks like the Credit Default Swap (CDS) market will be exchange-listed shortly, per tickerforum.org... FINALLY.

When that happens, it is over for AIG, from what I read...

There are efforts to make CDSs exchange-traded, but while that isn't a bad idea it won't do much of anything to help the immediate crisis. First, all the existing bespoke CDS won't go away, and they often have five-year terms. Second, I don't think CDS are the cause of the current situation to begin with.

[BryanS]

There are efforts to make CDSs exchange-traded, but while that isn't a bad idea it won't do much of anything to help the immediate crisis. First, all the existing bespoke CDS won't go away, and they often have five-year terms. Second, I don't think CDS are the cause of the current situation to begin with.

Insofar as the argument goes that "guns don't kill people, people kill people," one could argue that it was not the CDS that was the problem, rather the unregulated abuse of those instruments that were a problem. Clearly, that is what happened.

And while CDSs may not be "the cause" of the current situation, they are/were a significant contributing factor.

The Monster That Ate Wall Street

How 'credit default swaps'

Edited November 1, 2008 by BryanS

[BryanS]

link?

Karl Denninger... He's been trying to warn us for years... A self-avowed Republican... who claims he can no longer vote Republican...

http://market-ticker.org/

CDS to be exchange-listed shortly; The NY Fed apparently has pulled their head out of the place where the sun doesn't shine and is going make sure this gets done. For once the jawboning comes with actual results.

Be warned - AIG is likely toast as soon as that's implemented, and if you think that was a "loan" they got from the NY Fed, well, no, it wasn't.

My prediction is that it won't be repaid and as soon as the exchange is up and running, and we have margin supervision on the other "important" companies, AIG will be cut loose and sink.

You, the taxpayer, will get the bill for this lie about AIG getting a "loan".

My view on this is that AIG was propped up to prevent a chain-reaction CDS explosion, and once that threat has been lifted......

I might be wrong on this.... but I doubt it.

If you want to bet on the "Karl's wrong" trade AIG's stock is trading $1.60 premarket. Damn cheap lotto ticket if somehow the Hail Mary pass is caught - a potential 10-bagger (or more) for you!

Just don't place that bet with more money than you would blow on lottery tickets; hell, I'm tempted to buy a few, just like I do once in a while when the lotto jackpot is $130 million (money odds and all, 'ya know.)

[Porchman]

What's a few trillion between friends?

From the Chron/Boomberg...

Fed won't give info on nearly $2 trillion in loans

"The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral...."

"...The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression."

STORY HERE

[RedScare]

Umm...on second thought, THAT bailout plan is stupid. Let's try THIS bailout plan instead.

[BryanS]

Umm...on second thought, THAT bailout plan is stupid. Let's try THIS bailout plan instead.

Paulson, Bernake... complete idiots, clueless; liars. Get these captains off the helm! Where are they taking us?! $1 trillion lost in the stock market... in 3 days. Why are they liars? They told Congress they would spend the $700 billion on troubled assets... and then they turn around and do something else. Paulson even said at the time the bill was signed, he didn't think it would work. WHAT?! You just testified in front of Congress, begging, pleading to give you 700B or the world would end... and then you turn around do something entirely different! No credibility whatsoever. And everytime you open your mouth, the stock market tanks.

[TheNiche]

Paulson, Bernake... complete idiots, clueless; liars. Get these captains off the helm! Where are they taking us?! $1 trillion lost in the stock market... in 3 days. Why are they liars? They told Congress they would spend the $700 billion on troubled assets... and then they turn around and do something else. Paulson even said at the time the bill was signed, he didn't think it would work. WHAT?! You just testified in front of Congress, begging, pleading to give you 700B or the world would end... and then you turn around do something entirely different! No credibility whatsoever. And everytime you open your mouth, the stock market tanks.

Remember you made that remark about them being liars a day or so ago that I called you out for on a technicality?

You win.

[sifuwong]

Paulson, Bernake... complete idiots, clueless; liars. Get these captains off the helm! Where are they taking us?! $1 trillion lost in the stock market... in 3 days. Why are they liars? They told Congress they would spend the $700 billion on troubled assets... and then they turn around and do something else. Paulson even said at the time the bill was signed, he didn't think it would work. WHAT?! You just testified in front of Congress, begging, pleading to give you 700B or the world would end... and then you turn around do something entirely different! No credibility whatsoever. And everytime you open your mouth, the stock market tanks.

Agree. Someone, somebody, or some people need to get axed!! Also, 50B of that 700B is going to a bonus fund for management at those 'bailout' banks. Just outrageous!!

Edited November 13, 2008 by sifuwong

[RedScare]

Remember you made that remark about them being liars a day or so ago that I called you out for on a technicality?

You win.

Guess you shoulda seen that coming, huh?

[Subdude]

American Express has decided that it too will become a bank to get its turn at the trough.

Car companies, credit card firms... it's become sort of a "let's just throw a lot of money around and see what happens" kind of thing.

[TheNiche]

Guess you shoulda seen that coming, huh?

No.

As of last night, there was not yet any evidence from which I might have concluded that they were liars. Disingenuous, probably; dishonest, possibly. But not liars.

And then this morning there was.

[RedScare]

American Express has decided that it too will become a bank to get its turn at the trough.

Car companies, credit card firms... it's become sort of a "let's just throw a lot of money around and see what happens" kind of thing.

It is becoming clear (to me at least) that the executive culture at our biggest corporate and financial firms may be so corrupted in their thinking that they may be incapable of committing to the type of behavior required to extract their firms from the mess in which they find themselves. Even if they can survive their own greed and incompetence, the cost to the American people may be so great that we never fully recover. For instance, consider the catch-22 we now find ourselves caught in. The stock market depends entirely on confidence, yet anyone with confidence in these thieves is nuts. Where do you put your money?

[TheNiche]

It is becoming clear (to me at least) that the executive culture at our biggest corporate and financial firms may be so corrupted in their thinking that they may be incapable of committing to the type of behavior required to extract their firms from the mess in which they find themselves. Even if they can survive their own greed and incompetence, the cost to the American people may be so great that we never fully recover. For instance, consider the catch-22 we now find ourselves caught in. The stock market depends entirely on confidence, yet anyone with confidence in these thieves is nuts. Where do you put your money?

I completely disagree with this conclusion. The world has witnessed far more disasterous financial crises, and they've always come to a conclusion. Not always swiftly, mind you, but to say that we may never recover is highly improbable.

[memebag]

I completely disagree with this conclusion. The world has witnessed far more disasterous financial crises, and they've always come to a conclusion. Not always swiftly, mind you, but to say that we may never recover is highly improbable.

That's the problem with the last instance of something. You're never sure it's the last one until the heat death of the universe comes and there haven't been any more.

[RedScare]

Besides, I said that I have concerns whether we FULLY recover, not that we never recover. We always recover. The unknowns are how long and at what cost. But, where I initially thought that this would be a middle of the road recession, I am growing more pessimistic that the actions of our corporate and financial executives, combined with a Congress that is either incompetent or too politically motivated will prolong and deepen this recession.

Let's just say that my personal confidence in the ability of the US to pull itself out of this fiasco unscathed is waning rapidly. I do not doubt that the level of knowledge of how to combat these crises is greater today than in the past. I doubt the sense of committment to do the right thing is as high as in the past. Greed will do that to you.

[TheNiche]

Besides, I said that I have concerns whether we FULLY recover, not that we never recover. We always recover. The unknowns are how long and at what cost. But, where I initially thought that this would be a middle of the road recession, I am growing more pessimistic that the actions of our corporate and financial executives, combined with a Congress that is either incompetent or too politically motivated will prolong and deepen this recession.

Let's just say that my personal confidence in the ability of the US to pull itself out of this fiasco unscathed is waning rapidly. I do not doubt that the level of knowledge of how to combat these crises is greater today than in the past. I doubt the sense of committment to do the right thing is as high as in the past. Greed will do that to you.

What you've said is confusing to me. I don't understand what you mean by the difference between a recovery and a full recovery. I don't understand what you mean by us having the ability to pull ourselves out of this fiasco. Please clarify.

I'll tell you this, though. Greed and corruption is nothing new or unique to this situation or to this era.

[Mark F. Barnes]

Well if you all recall all the political posturing that was going on in front of the cameras, and Pelosi and crew were saying there was no way they were going to just give a "$700 billion dollar blank check to anyone", and how they were going to restructure it to give it some "accountability, and transparency". What a load of crap that was. What was done was they took the original plan, load an additional $300 billion in pork on top of it, and still gave the blank check to the Treasury, do whatever they wanted to with, which they are now doing, with zero accountability, and about as much transparency as a sheet of tin foil. Why do you act so surprised? Oh I know, blame it on Bush!!! No this lies right in the lap of Congress, they wrote it, they passed it, and we're paying for it. And this is the same Bunch that basically have a ticket to ride now for the next couple of years, they have free reign to do what ever they wish. It's gonna be really great to watch for the next couple of years, hang on tight. This ought to be interesting. Keep watching for the sequel "The Fleecing of America".......... soon to be in a theater near you. Rated XXX because we are certainly going to be getting screwed..............

[crunchtastic]

Here's a really good article that came out a couple of days ago, by Michael Lewis (Liar's Poker).

http://www.portfolio.com/news-markets/nati...eets-Boom#page1

edit: it gives one of the most easily understandable explanations of the bond and CDO market I've read.

For those of you who never read Liar's Poker, I highly recommend it. It tells how the sausage is made.

Edited November 13, 2008 by crunchtastic