the Stock Market, greed vs tangibles

[NovaMob03]

We've just experianced the largest stock losses in recent history. Good people have lost their homes & retirement funds to what appears to be corp greed & government do-nothingness. It is a very sad state of affairs for such a hard working, proud nation.
The last time the market tanked, I pulled everything out of my brokers hands & told him he'd lost enough of my hard earned money...told him I could lose it on my own from here on out. So, I bought cars. Things I could love, pass on to others & be happy about the path I chosen to live.
When I see the bastards that the American people have bailed out, so the can continue to live in luxury...their smug, emotionless faces on TV saying 'we didn't know anything we were doing was wrong' It makes me ashamed & so pissed off that I want to beat them within an inch of their lives.
So, what are we going to do? Watch America flame? Tell our children that it's not the way it used to be? That corrupt Americans shouldn't pull the nation down...but will continue to try? Or, have Americans been plain stupid with debt issues. http://www.yenko.net/ubbthreads/images/graemlins/frown.gif
It's the 'perfect storm'...debt...greed...incompetence & I'm glad I got my house in order and missed the boat
Sorry for the rant, but this is total http://www.yenko.net/ubbthreads/images/graemlins/bs.gif

[scott s]

Well said........ http://www.yenko.net/ubbthreads/images/graemlins/biggthumpup.gif

[Born30YrsLate]

I love those moron financial executives when they say "I've lost millions of dollars over this"...yeah, poor them, they make hundreds of millions of dollars over a number of years and lose a couple right now...yeah, poor them...like the idiot CEO from Lehman Brothers I think it was who made $242 million over 8 years as CEO and whe questioned about it tanking, his defense is "well I've lost millions"...priceless

[MosportGreen66]

I do agree that CEO compensation is out of control. But this is not a problem that has been going on for the last six months. It has been a wide spread issue that needs more intervention than any buy plan.

The stock market is not yielding high returns right now. If you need cash to make short term liabilities, get out of the stock market NOW. In fact, if you need money for long liabilities in the neighborhood of 2-3 years, buy out now as well because it might take that long to regain losses seen of recent.

The only places liquid assets (cash) should be is FDIC insured accounts, and treasury issued avenues. But while this is an issue that originated in the US, it is most certainly not restricted to the States. Looks at international markets, commodities markets, it is far from a beautiful day overseas as well!

-Dan

[TMagda]

A little random:

I think the problem is that under the current system CEO's/top mgt have absolutely no skin in the game. Nobody should get paid enough so after one year they are set for life. The argument that companies need to offer the gigantic comp packages they do to attract the top talent makes no sense to me. Offer a $1m (vs. many $m) salary and I am sure you will have plenty of applicants. How well would the next best choice perform? The CEO's select the board, the board sets the CEO comp - anyone see a conflict there? CEO's claim to be accountable to the board and the shareholders, but usually they control the board and the actual shareholders are spread so thin (thru funds) that, although they are the true entity owners, have no voice. With the money comes the power and the "haves" don't want to upset the current state for fear of losing what they have. Nobody ever complains in an up market. The system is broken and it will take more than one outstanding leader to fix it. I don't believe anything will change until people start to care about each other. This is a zero sum game. If your deal is too good, someone else's is bad. I have not met too many human beings that are wired properly to handle power. One idea I had was for the SEC to require outstanding common shares to be replaced with interest bearing preferred shares. This would enable investors to count on some reasonable return on investment and force accountability on the mgt teams. I lost at least a Z/28 last week but I am not complaining. I know the risk. Where else can I put my money?

[MosportGreen66]

I don't think we should talk about upper management and the stock market without mentioning short selling. Short selling, being the most illegal - legal stock market practice going, is the root cause for the majority of our current issues.

But with all the negative talk about CEOs I wish more could be like John Mackey, the CEO of Whole Foods. His yearly salary was cut to $1 to affirm his commitment to the company. Granted he makes a hefty compensation, it is reassuring to see someone in the business for a tangible besides money.

Things could be seriously worse in the States too... We could be like Iceland who is pleading with Russia to buy out their ailing credit structure. 5 Billion dollars is a nice gift to get from a neighbor.

[Mr70]

I'm with you Jude.
I saved every piece of junkmail I received over the last 6 years offering me free mortgages or credit cards with absolutely no money down,no W-2's needed,no background checks,no credit check,no interest,no fees,no cosigners,no questions asked.They didn't even know anything about me..who runs a company like that?..that's just assine!
To me that was a HUGE red flag of an infectious virus and a telegraphing of a house of cards waiting to collapse so I sold every single stock I owned right there and then during those days.Put all my money into tangible or insured ventures,regardless of how small the interest rate was.Told all my close friends & loved ones that there is a financial Tsunami coming the likes of which we have never seen before so get your house in order,especially to those I know over the age of 65 because their recovery time is limited.

Today I still have that pile of junkmail offers over 12" inches high and see them as the next "Beanie Baby" collectible in the future..LOL.."Remember when we would get these daily".
The banks did this on their own & have noone to blame but themselves.They should be held accountable for their greed and ignorance of handing out mortgages like they were christmas calendars to anybody who wanted one and enticing people to live way beyond their means when they had no business doing so.Now we sit here today watching the banks not claim responsibilty for their own actions while going under and it's magnified into a worldwide epidemic.
With Governments,(i.e.us & our offspring),hoping to try and bail them out as a company,while they ride away on their individual golden parachutes.

Look what happened to Lehman Bros.CEO Richard Fuld yesterday after appearing before a senate committee.I could see this becoming a daily epidemic too..
http://www.businessandmedia.org/articles/2008/20081006150152.aspx

[Fast67VelleN2O]

"The rich get richer, and the poor get poorer"

[427TJ]

"Socialism for the rich, capitalism for everyone else."

[NovaMob03]

In an attempt to do away with last yrs stash of Sierra Nevada Celebration Ale, to make room for this yrs batch, I think I overserved myself http://www.yenko.net/ubbthreads/images/graemlins/beers.gif and got angry at something I/we have no control over. I've always tried to live as my folk's taught me...'don't buy it if you can't afford it' and 'stay outta debt, except for a managable mortgage' and 'teach your children common sence & raise them to the best of your ability'. That generation got it right and we, as a group, seem to have gotten it wrong.
Anyway, I'll stick with having a few nice cars & some cash in the bank and if I get brave, after I sell something, I may try to snag a lot with a fishing pond & watch the world go by.
Time for lunch and another frosty Ale http://www.yenko.net/ubbthreads/images/graemlins/wink.gif

[ANDY M]

This crisis started at the grass roots level. In '93, there was a big drop in interest rates, prompted by Allen Greenspan lowering the prime rate. This caused a huge refinance boom, but this boom was mostly conforming Freddy and Fanny paper that the banks wanted, due to the fees they could get away with, like charging for points, etc.
When the investors saw this, it took about 2 years for the cycle to repeat itself. Only this time, the mortgage brokers were getting cheap money that theoreticily would bring much bigger profits if the underwriting guidlines were relaxed, thus creating the sub-prime market.
(As a neccesary foot note, remember back to the Carter administation when inflation drove the interest rates into the 18% range. As the rates came down, the demand for refinancing was created. BIG FOOTNOTE, the credit card rates NEVER came back down.)
By '96, the conforming refinance boom had dried up, but the greedy brokers had loan officers that were hungry for easy money. With the help of crooked appraisers creating bogus home equity, help by crooked title companies that got their hidden closing costs built into the loans, the sub-prime stampead was on it's way.

I have to pause here to interject where this market was coming from. Big corporate storefront loan sharks, like American General, HFC, Ford, Benificial, etc. had exploited the ignorance of basic arithmatic of the working class that they could use their home equity to borrow $$$ for whatever they wanted. Buy the American Dream, they said, with out mentioning that you were turning you house into a revolving line of credit at 18%. If the public didn't buy into this, they just ran up revolving credit card debt, and started paying the minimum monthly payments, at 10-18%. But if you missed a payment, the rates could jump up as high as 23%.

This is where the the picture starts getting fuzzy. There was no oversight on what you needed to become a loan officer. Guys who were selling used cars last week were now selling mortgages. All you needed were postage stamps and a telephone, and the knowlege of how to go to a county court house and make note of who had mortgages with the finance companies. Contact these borrowers, show them how to convert their bad Finance company loans into a "REAL" mortgage, saving them somtimes hundreds of $$$ a month on their payments. Or, pay off all of those credit cards using your new found equity to convert bad debt into good debt. BTW, these mortgages were being bought by the the big lenders, using a string of shell companys posing as funders for these loans, (think Coutrywide and New Century). The reality was that American General, HFC, Ford, GMAC and others were the real owners of this subprime paper. http://www.yenko.net/ubbthreads/images/graemlins/eek.gif Stealing from Peter to pay Paul? Not really, since they now owned a 30 year note on a piece of collateral that could be sold again on a secondary market. This was also true for new home purchases as well, like the "No money down" deals. http://www.yenko.net/ubbthreads/images/graemlins/thumbsdown.gif

Greed, avarace, a sencence of entitlement, and con-artists convincing people of what a great deal they were getting.
Whether it was credit card debt, finance company bloodsuckers, hedge funds or derivatives, or credit "swaps", everybody was after the easy money. http://www.yenko.net/ubbthreads/images/graemlins/bs.gif http://www.yenko.net/ubbthreads/images/graemlins/bs.gif
Folks, the cows have come home. Now we all have to shoulder the load, or it will be 1929 all over again. A de-flationary depression that will take years to recover from.
History repeats itself, again and again. http://www.yenko.net/ubbthreads/images/graemlins/no.gif
JMHO http://www.yenko.net/ubbthreads/images/graemlins/scholar.gif

[Jeff Murphy]

I've got a slightly different take on the subject. See what you guys think of this:

The Source of It All: "Fannie Mae Eases Credit To Aid Mortgage Lending" NYTimes 9/99 (http://query.nytimes.com/gst/fullpage.html?res=9c0de7db153ef933a0575ac0a96f9582 60&sec=&spon=&&scp=1&sq=Fannie%20Mae%20Eases%20Cre dit%20To%20Aid%20Mortgage%20Lending&st=cse)

Look at who pushed us into subprime hell. Amazing McCain or Bush haven't brought this up....

[427TJ]

Oh we have the abiltiy to control this, we just didn't want to exert that control. It's called regulation. Carefully applied and vigorously enforced regulation is the key to any successful system. You don't over-rev your race engine (unless you don't care if it explodes) because you regulate how high you take the rpm. You regulate the rpm so as to preserve the life of the engine. I think the engine of our financial system was revved well past its redline and it just grenaded in our face.

Somewhere between unrestrained free-market forces and an over-bearing smothering federal government lies the acceptable manageable middle ground. That middle ground has been pushed aside in favor of free-market forces over the past 28 years and here we are.

In the 1987 movie "Wall Street," Gordon Gekko, played by Michael Douglas, said the famous line, "Greed is good, greed works." Well, until it doesn't work anymore. It's like saying, "Cancer is good, cancer works." Well, the human body can survive certain levels of cancer, beyond which the body dies. Same with unrestrained greed. The system supported it, with minor ups and downs, since 1981 but is now succumbing to cancerous greed allowed to thrive because of ignored, unenforced and abolished federal regulation.

Hey, I love to make money and I love watching my investments make money but the power players in our system have run it head-on into the iceberg and all of them took the cash-filled lifeboats and paddled away from the sinking ship, not ever looking back at the rest of us. (See: F--K YOU!)

But we Americans don't show outrage at the things that truly deserve our outrage. We tend to show our outrage at things that are "safe" to be outraged about, "popular" to be outraged about. Okay, so we showed a little outrage a few weeks ago when Henry Paulson tried to shove a no-limits, no oversight, no-questions-asked (ever) POS Wall Street bail-out* bill quickly down Congress's throat but the rest of us found out and put the brakes on...for a few days anyway.

We should have let the free-market work itself out. We should not have dumped yet more taxpayer money (pork-laden by both parties) down the Wall Street black hole. If the unrestrained free-market is so Go*-damn great then let's back-off and let it work! Let's let the sick and weak businesses and investments be eaten by the healthy strong free-market beast! Hey, that's how it works for 99% of us. If I stop paying my bills they sick the beast on me and take all my stuff away from me! Those are the rules that 99% of us know we have to play by in the American system. I love making money and I love paying my bills--and I love sleeping soundly at night. It's part of being a true American and a responsible American.

We have been assured and reassured that Wall Street was led by (mostly) responsible people and regulated and watched over by (mostly) responsible government servants but once again we are learning that the opposite is the case. Fool us twice, fool us three times, fool us four times...

Greed is good as long as it's smartly regulated and those regulations are enforced. If you don't believe in that then you put money in the stock market at your peril.

For future reference, whenever there is a change in presidential administrations the wealthy gradually pull out of the stock market in a long practiced "wait-and-see" manner. Gradually so that they don't spook the rest of us into causing a stock market and/or banking collapse. They wait and see which political party will be elected and thus which financial playbook will be put into use. Once that new (or same) playbook is in place they carfully re-invest accordingly. That's why the wealthy rarely lose money on the stock market while the rest of us take it in the shorts every time. The tech bubble burst at the end of the Clinton years as the wealthy got out of over-valued tech stocks and thus the market tanked. The bubble was so large that as the wealthy pulled out the bubble burst. Much the same thing has been happening as Bush nears the end of his term, only this time the system is collapsing under the immense weight of incredibly bad financial policy decisions such as sub-prime mortgages and a total lack of federal regulatory oversight, not to mention the massive amount of debt we Americans have too-easily run-up in the past decade. Money has been too cheap for too long. (I wanted to borrow against my house to buy a sweet '66 427/390 Vette five years ago but I decided not to. I couldn't afford it and it would have put a huge strain on the family budget. Two years later I took a 33% pay cut. Dodged a bullet there.)

Let's pray to God that there are very, very smart people hard at work trying to stop the massive bleeding that has stricken the global financial system.

"The fatter the pig the more danger he is in." Seems like a good rule to use when investing in the stock market. Another rule I use is whenever there is money involved NOBODY can be trusted 100%. As Ronald Reagan said, "Trust but verify." We didn't verify that Wall Street was being watched by regulators and our engine went KABOOM.

*Socialism for the rich, capitalism for everyone else.

[427TJ]

[ QUOTE ]
Amazing McCain or Bush haven't brought this up....

[/ QUOTE ]

Because both of them are complicit in this, as are all the wealthy Democrats and Republicans. That's why the pork-laden Wall Street bail-out bill basically whistled through congress with only a little "outrage" last week. The only politicians who voiced outrage last week are those who are in close re-election races back home and they are playing the safe-outrage card. Both sides have to play this catastrophe VERY carefully because 1) most of these politicians don't know what the hell to do (nor does Wall Street, except to hope for more federal bail-out money), and 2) the American people are now watching them all very closely.

[ANDY M]

Bill, tell us how you really feel. http://www.yenko.net/ubbthreads/images/graemlins/eek.gif
Jeff, I have no disagreement with what you added, but please include all of the crooked real estate agents who made those homes sales happen. http://www.yenko.net/ubbthreads/images/graemlins/thumbsdown.gif http://www.yenko.net/ubbthreads/images/graemlins/stupid.gif
There is no real law against owning both a real estate brokredge and a title company. Having a tight relationship with a mortgage broker is par for the course. With the permission of the Fed, (run by a republican, Greenspan), the tap was opened and the pigs lined up at the trough. http://www.yenko.net/ubbthreads/images/graemlins/thumbsdown.gif
I could go on, (and on) http://www.yenko.net/ubbthreads/images/graemlins/no.gif, but what we really need now is that vision thing we were promised, or this sucker is going down. (qoute from George W. Bush) http://www.yenko.net/ubbthreads/images/graemlins/bs.gif

[Jeff Murphy]

[ QUOTE ]
We should have let the free-market work itself out.

[/ QUOTE ]

Unfortunately, that would be a one way ticket to 1929. We face a very real problem that has nothing to do with bubbles or rich getting richer, no matter what the root cause is.

The system is so shaky at present that banks won't even lend to other banks overnight (the interbank market) due to capital hoarding and mistrust of counterparties' solvency. The recent raising of the FDIC guarantee is simply there to prevent runs on banking deposits that would make the matter worse.

If the banks don't lend to each other, they don't lend to the largest AAA or AA rated companies (witness AT&T and GE saying that they can't access the short term lending market, "commercial paper".)

If the highest grade borrowers can't get access to funds, they can't generate sufficient cash flow to buy inputs or meet the payroll. GM has closed its European plants until year end as a result. If they can continue they end up stretching payables out to 60 or even 90 days, which destroys the small and medium enterprises (SME) who supply these inputs and have even less liquidity than the big guys.

These SME companies are facing 30-50% higher margins on their borrowing costs on their overdraft or revolving credit lines, if they can keep them open. Their margins get pinched and they go out of business due to liquidity shortfalls. As we all know, it is the SMEs that employ most of a developed country's labor force.

The problem gets worse for farmers and others relying heavily on credit to get through seasonal ups and downs.

Good luck getting any consumer credit.

If the government doesn't unlock the system at the top, the whole thing falls apart. Wall Street is Main Street, like it or not.

The real worry is that due to political brinksmanship, everything that is being done may be too little too late. The markets continue to react very negatively on a daily basis despite unprecedented, and I mean never before seen, actions like the coordinated central bank interest rate cuts that happened today.

Even if they can get things moving again from a liquidity perspective over the next few months, we have a significant chance of sustained recession (we are already in one) because the US and global consumer is tapped out and won't be able to spend us to growth.

Our chief economist (oh BTW, for those of you that don't know, I work for one of the largest investment banks) is predicting that the US Government, regardless of who is in the White House, will have to undertake massive infrastructure projects to get things moving just like during the 30s (TVA, highway system, Hoover dam, etc.). They are also predicting that global GDP growth over the next 12-18 months will almost entirely be driven by the Chinese consumer/economy.

Rosy picture, huh? http://www.yenko.net/ubbthreads/images/graemlins/eek.gif


[ QUOTE ]
I think I overserved myself and got angry

[/ QUOTE ]

Jude, I think everyone deserves the occasional booze induced rant http://www.yenko.net/ubbthreads/images/graemlins/beers.gif

http://www.yenko.net/ubbthreads/images/graemlins/flag.gif

[Mr70]

Also interesting is how this "Made in America" crisis has so vastly effected the rest of the world in such a short time.
We,The United States Of America,did to ourselves and now the entire globe for that matter,what Bin Laden was just hoping to accomplish here on 9/11.

[SBR]

I think the problem started with the Community Reinvestment Act under Jimmy Carter. This paved the way for cheap credit, placing mandates on banks to right these loans. Combine this with deregulation and you have a recipe for big trouble. It you had money in the market on 1929 and held it through the 1933 crash it took you 22yrs to recover your money. I will be happy if I recover the money that I lost in 10yrs. I say we need a viable third party and term limits http://www.yenko.net/ubbthreads/images/graemlins/mad.gif

[GRB]

[ QUOTE ]
I think the problem started with the Community Reinvestment Act under Jimmy Carter. This paved the way for cheap credit, placing mandates on banks to right these loans. Combine this with deregulation and you have a recipe for big trouble. It you had money in the market on 1929 and held it through the 1933 crash it took you 22yrs to recover your money. I will be happy if I recover the money that I lost in 10yrs. I say we need a viable third party and term limits http://www.yenko.net/ubbthreads/images/graemlins/mad.gif

[/ QUOTE ]

Even the mighty Oak starts out as an acorn or is it ACORN? http://www.yenko.net/ubbthreads/images/graemlins/blush.gif I was involved in a de novo bank in 1990 and I can tell you for a fact that we were told by the OCC that we WOULD make loans in so-called 'red-lined areas' if we wanted to expand and borrow at the lowest fed rates. We scratched our heads in loan committee meetings, bit the bullet and made what we knew were bad loans.

We were capitalized at about $10mil. at that time so I can only image the quantity of bad loans mega banks had to make. This was the first I had seen of the Community Reinvestment Act up close and personal. CRA......... sounds harmless enough doesn't it?

[Kim_Howie]

Both pol. sides are at fault. A few years ago we baled out the S&Ls now we are doing the same thing again. Sorry but you can't borrow your self rich. Stinken thinken. http://www.yenko.net/ubbthreads/images/graemlins/bs.gif

[1968 nova ss]

bin Laden ,did exactly what he intended to do;along with bad loans etc.it is a mess;and 1929 not far away as Jeff said.i have seen my credit line cut down from 20,000 to 2500.00;so most people if they get in trouble making a house payment or whatever have no way of just keeping their house its a mess;glad to see others on this site are releasing some steam.chris

[WILMASBOYL78]

[ QUOTE ]
Both pol. sides are at fault. A few years ago we baled out the S&Ls now we are doing the same thing again. Sorry but you can't borrow your self rich. Stinken thinken. http://www.yenko.net/ubbthreads/images/graemlins/bs.gif

[/ QUOTE ]

You also can't tax yourself into prosperity http://www.yenko.net/ubbthreads/images/graemlins/no.gif...that kind of thinking is like the guy who is standing in a big pail and thinks he can lift himself up by the handle http://www.yenko.net/ubbthreads/images/graemlins/scholar.gif

Think about that when you pull the handle in November!!

[SBR]

The last president to raise taxes in an economic downturn was Hebert Hoover http://www.yenko.net/ubbthreads/images/graemlins/eek.gif

[Kim_Howie]

A goverment big enough to give you everything, is also big enough to take everything you have. Thomas Jefferson Think about it when you go to vote http://www.yenko.net/ubbthreads/images/graemlins/biggthumpup.gif

[firstgenaddict]

Amen Howie!
Send banking back to the states... if one state screws up regulation the whole house doesn't crumble... that is why our country was set up as a REPUBLIC of states. Each state was to be a separate incubator of design and trials they were to decide upon their own regulations, so all the eggs were not in one basket... hmmm it's almost as if the founders could see into the future...

May be the the reason the interest in the Constitution is so high right now...