Financial topics

Investments, gold, currencies, surviving after a financial meltdown
John
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Re: Bears

Post by John »

thrive wrote: > It would be interesting to hear your feedback and that of others
> here on the forum about Charles Nenner's comments on CNBC.
> http://charlesnenner.com

> If you go to Nenner's Sept 9, 2009 video clip you can see his
> latest thoughts on future market performance. Nenner charts the
> current markets side by side with the markets of the 1930s, with
> the premise (as I see it) that the timing of peaks and valleys
> are similar. For over a year I've been visiting
> GenerationalDynamics.com and this forum -- I appreciate the many
> insights.
I watched the first half of the Sept 9 video, and I see that he's
comparing the market in 2009 versus the market in 1937. That
comparison is not valid, since 1937 is 8 years past 1929, and all the
deleveraging had been pretty much completed.

Furthermore, in 1937, the market was still at only around 90% of its
trend value, having fallen to 25% of its trend value in 1932.

Today, the deleveraging is still going on, and still has a long way
to go. Furthermore, the market is at 175% of its trend value, and
has been well above its trend value since 1995.

** Great Depression and Dow Jones Industrial Average
** http://www.generationaldynamics.com/cgi ... 010.i.djia


So Nenner is just one more typical so-called "analyst" on CNBC who
spouts Pollyannish nonsense.

John
John
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Re: Financial topics

Post by John »

Dear Higgie,
Higgenbotham wrote: > Greenspan's comments this morning on Meet the Press. More
> comments from him at the link. I was actually shocked to see "Easy
> Al " basically say it's time to withdraw the stimulus. It wouldn't
> surprise me to see the stock market down tomorrow on these
> comments.

> http://www.msnbc.msn.com/id/34380027/ns ... ss/page/5/
I saw Greenspan's interview as well, and I was surprised at how
little he said. Basically he was giving a professorial lecture on
what a recession is, and complimenting the Fed on doing a great job.

Greenspan is getting a lot of the blame for the crisis
(unjustifiably, as I've said many times, since the worldwide real
estate bubble began in the mid 1990s), but what I don't understand is
why Greenspan isn't more aggressive in defending himself. I believe
that he has a good story to tell about warning the country about the
real estate bubble in 2005. He even talked about it being a bubble
in 2004, though at the time he thought that was a good thing. But by
the end of the 2005, he was predicting dire consequences.

I also think that his early 2005 speech reversing himself is one of
the most important financial speeches this decade, although it's been
almost completely ignored by the press. (In fact, I don't think I've
ever seen his reversal discussed anywhere except on this web site.)

I think he should start telling people, "Hey look, I warned you about
this, but you didn't listen."

I guess there are two problems with that. First, he'd have to throw
Bernanke under the bus. And second, he'd have to deal with the fact
that the worst is not yet over.

** Alan Greenspan reverses himself
** http://www.generationaldynamics.com/cgi ... span050206


** Alan Greenspan sings schizophrenic swan song
** http://www.generationaldynamics.com/cgi ... 30#e050830


** Ben S. Bernanke: The man without agony
** http://www.generationaldynamics.com/cgi ... 29bernanke


John
Higgenbotham
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Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

John wrote:I guess there are two problems with that. First, he'd have to throw
Bernanke under the bus. And second, he'd have to deal with the fact
that the worst is not yet over.

John
That's my thought and what shocked me about the comments I quoted was how close he really came to doing just that - throwing Bernanke under the bus, unless the whole thing was orchestrated to pin the blame for a drop in the markets on Greenspan, which I doubt. The Fed minutes have been saying for quite awhile that these zero percent interest rates and the Fed balance sheet will stay in place for an extended period. There's a Fed meeting next week after which a new statement will be released. What I interpret Greenspan's comments to mean is that it's time for the Fed to come up with a new stance, the markets be damned, because inflation is now the greater risk.

This is what the Fed has been reiterating for months:
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
http://www.federalreserve.gov/newsevent ... 91104a.htm

...versus what Greenspan said today:
There's just so much monetary policy and the central bank can do, and I think they've gone to their limits at this particular stage. And you cannot ask them to create more than is physically possible...I thought at that point was essential. The difficulty is there is a limit. And if the Federal Reserve does not, in fact, pull in all of the stimulus it's put into the economy, then down the road is inflation. It's a long way down the road and it's not immediate. But the question is, you cannot ask a, a central bank to do more than it is capable of doing without very dire consequences.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham
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Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
Higgenbotham
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Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

As you prepare for the upcoming holidays, do you anticipate you will spend more or spend less than last year, or spend about the same?
8 Spend more
47 Spend less
44 About the same
1 Not sure
http://media.bloomberg.com/bb/avfile/rZcGSAfhS0Tk

Poll conducted Dec 3-7 on many issues.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
gerald
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Joined: Sat May 02, 2009 10:34 pm

Re: Financial topics

Post by gerald »

wvbill wrote:Bill Moyers tonight on PBS:

http://www.pbs.org/moyers/journal/12112 ... file2.html

Indicates growing unrest against the banks and an interview with Howard Zinn...

The activism is not yet violent, but clearly increasing... It is going to get interesting...

Bill

A personal a observation-- the interview is very interesting and in many ways correct ,
how ever they fail to address at least three important issues.

One, they raise the 'social travesty issue' of the " pay day loan operators', the lenders of last resort.
Yes, their interest rates are very high, however the lenders also have very high levels of default. The people that go to them are desperate and bank loans or credit card loans are not available to them. They most likely also know the rates are high, but what can they do, if they need cash asap? Their friends or family may not have any money, So, do they go to an auto title loan company? the car has to be debt free. Go to a pawn shop? you need something of value to pawn. Commit a crime, like burglary or theft , get caught and go to prison? Go to a local mob loan shark , miss your payment and get your kneecaps broken? What can they do? So the goody two shoes want to remove one of their options, Nice.

The second issue is the community reinvestment act, that act forced banks to make loans to unqualified people, this was a disaster waiting to happen but lets not talk about that for it was for a social good.

And the third is that banks sold their loans.

Over the last 35 years of dealing with banks for loans on investment property ( more then four apartment units ) I have seen a change in their underwriting.

About 20 years ago I obtained a loan from a local "Chicago neighborhood bank" , this bank survived the depression, an older senior vise president one day explained the bank's philosophy regarding "commercial loans".

If they could not drive to the property, inspect it, and return to the bank the same day they would not make the loan.
The borrower had to have good credit and have experience, that is start with a small property and work one's way up to larger properties, as large as a small one hundred unit building.
They felt Ma's and Pa's were considered good risks since they were personally responsible , knew their tenants and would do all they could to maintain the property and service the loan. The amount of the loan was generally less then 75% of the property's value, and it had to have a good a debt service ratio.
The debt service ratio is figured as the total amount of possible rent that could be collected, less vacancy, less all expenses ,( insurance, real estate taxes, maintenance, utilities, replacement reserve , etc,) this remainder amount had to be greater then 1.2 to as much as 2 times the amount of the mortgage payments.
Also the bank asked them selves if the borrower defaults can the bank get all of its money back?
At this time it should be noted the bank held the loans and did not sell them to some one else , thereby keeping a closer watch on the loans, for they were on the hook if the loan went bad.

This bank was later taken over by a large bank and business practices were changed, they are currently in trouble.

About 15 years ago I dealt with another bank (which also survived the depression,) they prided them selves on servicing ma's and pa's because they were considered a good risk. About 5 years later, I noticed they were going after the Big fish, and a junior VP (in his early 30's and a graduate of an ivy league school) said so (the ma's and pa's were forced out through higher fees, less service etc.) After all, why service several dozen small ma's and pa's when you can write one large loan for the same amount to a corporation or sophisticated partnership and employ fewer personal?. There by increasing your bottom line. --- Well, they recently ran into problems , and to keep the show going they committed fraud, like possible jail time. The long and the short, the FDIC took a hit and liquidated the bank.

I think the above also helps substantiate the generational dynamics theory.

On a slightly different note, a friend of mine was notified that his commercial loan was being called, he has always been current with his loan and the property provides good security and cash flow for debt servicing. He was given 12 months to find a new lender .Commercial loans are a little hard to find but hopefully doable, His bank is one of the big banks that received TARP funds. Nice.
The above scenario is similar to my attorney's dad who lost a building during the depression because he could not refinance.

Variations on a theme.
Higgenbotham
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Joined: Wed Sep 24, 2008 11:28 pm

Dubai Debt Repaid

Post by Higgenbotham »

While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
John
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Re: Dubai Debt Repaid

Post by John »

Higgenbotham wrote:Abu Dhabi bails out Dubai World

http://news.yahoo.com/s/nm/20091214/bs_ ... epayment_2

According to the people I quoted in my article last week,
Abu Dhabi will provide just enough bailout money to turn
the screws on Dubai and bring them into line. We'll see.

John
Higgenbotham
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Joined: Wed Sep 24, 2008 11:28 pm

Re: Dubai Debt Repaid

Post by Higgenbotham »

John wrote:According to the people I quoted in my article last week,
Abu Dhabi will provide just enough bailout money to turn
the screws on Dubai and bring them into line. We'll see.

John
That appears to be right. This is starting out like the Bear Stearns hedge fund debacle. It seems as if I recall Bear Stearns had initially provided some support to the funds before they gave up on them.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
John
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Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
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Re: Dubai Debt Repaid

Post by John »

Dear Higgie,
Higgenbotham wrote: > That appears to be right. This is starting out like the Bear
> Stearns hedge fund debacle. It seems as if I recall Bear Stearns
> had initially provided some support to the funds before they gave
> up on them.
The comparison with Bear Stearns is interesting, because the collapse
of the "High-Grade Structured Credit Strategies Enhanced Leveraged
Funds" hedge fund turned out to be only the beginning of their
troubles.

There's an interesting article in today's NY Times that paints a very
dark picture of what's happened to Dubai in the last few months.
It's a very interesting article, and well worth reading in its
entirety. Here's one of the concluding paragraphs:
> Dubai has become what it is today partly through defiance of
> normal expectations: here are islands shaped like palm trees, the
> world’s only seven-star hotel, the world’s richest horse race. But
> the result is a place that lacks coherence, both physically and
> psychologically. In many ways, it resembles a glorified film set,
> awaiting the arrival of the swashbuckling hero to tie all the
> loose strands together and give this fantasy some credibility. But
> this most unconventional of places is not immune to reality. How
> Dubai negotiates this rite of passage will determine whether it
> will ever be taken seriously. That we are being told this is all
> just negative publicity, merely a marketing blip, is not a
> promising sign.

> http://www.nytimes.com/2009/12/14/opini ... .html?_r=1
John
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