Financial Crisis

[Abrak]

let the banks fail instead of stabilising them and guarantee deposits?

See Naam here is what I see as a fraudulent argument on which you made a lot of money (and presumably you see as an obvious precursor to an argument on which you made a lot of money.)

So really the whole bank bailout is not about guaranteeing depositors it is about guaranteeing bond holders. Is there any evidence that any bank has actually been bailed out to the extent that it exceeds bond holdings? Now my natural assumption would be that bond holders should absorb losses before the tax payer takes them up before depositors.

yes Abrak, i made a lot of money this year because i bought and (mostly) sold again bank debt which -like bank shares- were hammered like never before. but none of the cash injections by the governments guaranteed any holder of bank debt that the repayment at maturity or the payment of coupons will be honoured. the guarantees worldwide are exclusively for the creditors who kept and keep cash in the banks instead under their mattresses.

wrong is also your assumption that bondholders did not absorb any losses because those who panicked (and sold to me) realised at the lows a 80-90% loss of their money. those who did not panic and kept their holdings are still 40-60% down. moreover, i was/am dealing in subordinated debt, took and still take the full risk of not getting paid neither interest (payable only when the financial institution makes profit) nor getting my money back at redemption as most subs are undated perpetuals.

needless to say is that i made indeed money piggy-backing on the bailouts but here too i took the risk because i bought BEFORE any bailout. i saw the opportunities, took the risk and cashed in the lion share of the profits.

I am still a bit confused. Current prices - 40-60% down - implicitly imply bond holder do expect to absorb substantial losses, I admit. But worldwide guarantees to creditors and the fact that Bear Stearns bond holders were paid in full would seem to imply losses limited to interest payments foregone. This incidentally should be fairly little because if a bank cant make interest payments it is unlikely to continue funding itself.

To some extent perpetual holders can even rest happy as their terms include 'step ups' in interest rates which are often so ludicrous say +13% at some point, that if they are not repaid, then the implied cost of financing the bank is so high as to render the equity worth 0 in which case you will get repaid on liquidation.

So to me the guarantee I understand doesnt imply a discount of 40-60%, so what exactly is the guarantee? The remains of the post is just waffle.

I ask this out of ignorance more than anything. You see as I see it the US has increased rather than decreased moral hazard in the financial sector. Goldman Sachs acquired a banking license, meaning reduced leverage and increased regulation, in exchange for access to Fed funds to solve liquidity problems. Now it apparently wants to give it back so that it has virtually no regulation and can have virtually infinite leverage on the back of government guaranteed debt. As this is a lunatics taking over the asylum end result to the financial crisis it cant really be right so obviously I am missing something.

The extent of the guarantees is quite important for the direction of the economy. A high loan deposit ratio in banking sector is points to an overextended and inefficient private sector and is destabilizing to the financial sector as the US has found - this usually leads to a painful deleveraging process. If the funding gap is being guarranteed by the government then increased leverage is being encouraged by switching private sector debt to off balance sheet public sector. This will boost short term growth (to the detriment of long term).

[Chaimai]

Economists have warned that businesses are unlikely to start recruiting again in earnest for at least a year. ( why ?what miracle is going to happen in a year? )

Oooh ! midas, you nearly had it there - the statement is amnother clear reference to the 'confidence factor' in recovery that says things will be better in 12 months time than. Spookily, that even ties in with what the IMF have been saying.

But, wait again, that confidence may be shaking a stick at us already:-

Househunters 'flood' back to market

2 hours 5 mins ago

There were four househunters chasing every property for sale during May as potential buyers continued to flood back to the market, research has suggested.

Full story here - http://uk.news.yahoo.com/21/20090618/tuk-h...et-6323e80.html

Health warning - even I recognise the slightly one-eyed view. Whilst it is true that 59% is a majority (relating to people who think house prices will be higher.....) there are still 41% who think they will not be (or are 'don't knows', of course).

[Abrak]

Naam,

To me the 'fraudulent' side to your argument and to the bailout is this.

(1) your statement 'let the bank fail and 'guarantee deposits''

(2) the bailout I believe is being funded by the FDIC of which I believe D stands for deposits and I stands for insurance

(3) given the extent of leverage in the banking sector and a loan deposit ratio of substantially over 100%, I believe that all banks could in theory have been allowed to fail, been restructured, with losses being absorbed only by equity and bond holders without any depositors being at any risk of losing any money.

(4) the bailout was therefore a bailout of of bondholders and equity holders and not to 'guarantee deposits' and to the extent public money was used it shouldnt have been the FDIC.

Using money meant to 'guarantee deposits' for any other use other than to 'guarantee deposits' I see as fraudulent. And the implication in your statement that actions were taken to protect depositors (when I dont believe they were really at risk) was why I refered to it as 'fraudulent'.

[midas]

Economists have warned that businesses are unlikely to start recruiting again in earnest for at least a year. ( why ?what miracle is going to happen in a year? )

Oooh ! midas, you nearly had it there - the statement is amnother clear reference to the 'confidence factor' in recovery that says things will be better in 12 months time than. Spookily, that even ties in with what the IMF have been saying.

Chaimai ok but tell me where exactly you see the job opportunities are going to be in one year ? Which

sectors ?

But, wait again, that confidence may be shaking a stick at us already:-

Househunters 'flood' back to market

2 hours 5 mins ago

There were four househunters chasing every property for sale during May as potential buyers continued to flood back to the market, research has suggested.

Full story here - http://uk.news.yahoo.com/21/20090618/tuk-h...et-6323e80.html

Health warning - even I recognise the slightly one-eyed view. Whilst it is true that 59% is a majority (relating to people who think house prices will be higher.....) there are still 41% who think they will not be (or are 'don't knows', of course).

The claims the NAEA are making are interesting......... but it doesn't quite tie in with what is being said here ............

Of course house hunting doesn't equate to transactions ?

House prices continue decline, says Land Registry

Such volatility in house prices is common when transaction levels are low, and the latest Land Registry figures for sales volumes confirm that the housing market all but ground to a halt in the early months of this year.

"The willing purchasers that are returning to the market are largely confined to the more wealthy areas of the country and limited to those buying with cash or who require low LTV [loan-to-value] mortgages.

"A broad based recovery in the housing market requires a broad base of buyers and the majority of would-be first time buyers remain excluded from the market."

http://www.guardian.co.uk/money/2009/jun/0...s-land-registry

[Abrak]

Househunters 'flood' back to market

2 hours 5 mins ago

There were four househunters chasing every property for sale during May as potential buyers continued to flood back to the market, research has suggested.

Full story here - http://uk.news.yahoo.com/21/20090618/tuk-h...et-6323e80.html

Health warning - even I recognise the slightly one-eyed view. Whilst it is true that 59% is a majority (relating to people who think house prices will be higher.....) there are still 41% who think they will not be (or are 'don't knows', of course).

What a crappy bit of reporting...

It turns out that the average estate agent has 4 times as many buyers registered on his books as he does houses for sale. Big surprise there. This happens quite naturally because...

(1) When a buyer goes looking for a house he registers with 4 or 5 different agencies

(2) When he has bought a house through one agency he doesnt usually bother telling the others

(3) When a seller sells a house the agency usually demands exclusivity

So presumably that statistic doesnt tell us anything at all. One interesting statistic though is that the average estate agency only has 69 house for sale which clearly implies no significant over supply of unsold homes and an oversupply of estate agents.

[Chaimai]

Chaimai ok but tell me where exactly you see the job opportunities are going to be in one year ? Which

sectors ?

I will guarantee that the finance sector will one area. Overall, my crystal ball is no better than yours but when/if CONFIDENCE is restored employers will employ. When/if DEMAND returns increased employment will follow.

The claims the NAEA are making are interesting......... but it doesn't quite tie in with what is being said here ............

Of course house hunting doesn't equate to transactions ?

Of course house hunting equates to transactions. Not many are people are just looking to fill in the voids in their life. Any sales process starts with ACTIVITY - house hunting equates to activity. Activity will result in sales, increased sales equals increased demand. Increased demand equals..... need I go on ?

The dampening factor in the current climate will be the supply of credit. At the current stage of the cycle that is perhaps, not a bad thing. First time for over 30 years that I have seen quotas in place.

I do agree that we need to see more first time buyers coming into the market, particularly as their psuedo replacement (the Buy to Let purchaser) is the sector hardest hit by the squeeze on credit.

[Chaimai]

It turns out that the average estate agent has 4 times as many buyers registered on his books as he does houses for sale. Big surprise there. This happens quite naturally because...

(1) When a buyer goes looking for a house he registers with 4 or 5 different agencies

(2) When he has bought a house through one agency he doesnt usually bother telling the others

(3) When a seller sells a house the agency usually demands exclusivity

So presumably that statistic doesnt tell us anything at all. One interesting statistic though is that the average estate agency only has 69 house for sale which clearly implies no significant over supply of unsold homes and an oversupply of estate agents.

1. and 2. True, but the report is highlighting the relative increase in those figures. Non-active people quickly fall off that register

3. Nonsense. Agents are in no position to dictate terms in the current market and multiple agencies are quite normal - dual pricing reflects sole versus joint. Personally, I prefer sole agency - in the UK the properties are placed on Rightmove.com so internet exposure is guaranteed.

You are correct about the 'no significant oversupply of unsold homes and an oversupply of agents' - of course there are too many agents for the reduced market that exists at the moment (although within the respective offices staff numbers have obviously reduced quite significantly). More interesting is the apparent shortage of supply on new properties. Many agents walls are still decorated with properties inviting prices of 12 months ago and they are desperate for 'fresh' products.

Agents do, of course, work for the buyer rather than the seller.

[lannarebirth]

Economists have warned that businesses are unlikely to start recruiting again in earnest for at least a year. ( why ?what miracle is going to happen in a year? )

Oooh ! midas, you nearly had it there - the statement is amnother clear reference to the 'confidence factor' in recovery that says things will be better in 12 months time than. Spookily, that even ties in with what the IMF have been saying.

But, wait again, that confidence may be shaking a stick at us already:-

Househunters 'flood' back to market

2 hours 5 mins ago

There were four househunters chasing every property for sale during May as potential buyers continued to flood back to the market, research has suggested.

Full story here - http://uk.news.yahoo.com/21/20090618/tuk-h...et-6323e80.html

Health warning - even I recognise the slightly one-eyed view. Whilst it is true that 59% is a majority (relating to people who think house prices will be higher.....) there are still 41% who think they will not be (or are 'don't knows', of course).

It is an historical fact that house sales pick up when there is a perception that interest rates have turned off a bottom and are once again climbing. That, in no way relates to whether or not house prices will be higher at sometime in the future. Three years down the road these same buyers may be the next bagholders who are underwater. Or maybe not.

[Electra]

Indeed, wise words Afterbirth.

An analysis of the press comments, certainly in the UK, during the last crash in 1991 onwards shows just how dependent the market is upon sentiment and how foolish folk were to base financial decisions upon it.

Long term rates are going to increase with a vengeance whereas employment and public expenditure will decrease. Recessions cannot be denied in much the same way water always finds its own level.

Edited June 18, 2009 by Electra

[AlexLah]

Talking about press comments.........ahum.

February 28, 2007 - Dow Jones @ 12,268

March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is "going to be painful to some lenders, but it is largely contained."

March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

March 30, 2007 - Dow Jones @ 12,354

April 20th, 2007 – Paulson: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom,"

April 30, 2007 - Dow Jones @ 13,063

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

May 31, 2007 - Dow Jones @ 13,627

June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect the economy overall.''

July 12th, 2007 – Paulson: "This is far and away the strongest global economy I've seen in my business lifetime."

August 1st, 2007 – Paulson: "I see the underlying economy as being very healthy,"

October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."

December 31, 2007 - Dow Jones @ 13,265

January 31, 2008 - Dow Jones @ 12,650

February 14th, 2008 – Paulson: (the economy) "is fundamentally strong, diverse and resilient."

February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street."

February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

March 16th, 2008 – Paulson: "We've got strong financial institutions . . . Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."

March 18th, 2008 - Bear Stearns Bailout Announced

May 7, 2008 – Paulson: 'The worst is likely to be behind us,”

May 16th, 2008 – Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning," he said.

May 30, 2008 - Dow Jones @ 12,638

June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned,

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized"

July 20th, 2008 – Paulson: "it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."

July 31, 2008 - Dow Jones @ 11,378

August 10th, 2008 – Paulson: ``We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

September 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

September 16th, 2008 - $85 Billion AIG Bailout “Loan”

September 19th, 2008 - $700 Billion Bailout Plan Announced

September 19th, 2008 – Paulson: "We're talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem," he said. "This is the way we stabilize the system."

September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon."

September 21st, 2008 – Paulson: "The credit markets are still very fragile right now and frozen", "We need to deal with this and deal with it quickly.", "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

September 23rd, 2008 – Paulson: "We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses, both small and large, and the very health of our economy,"

September 23rd, 2008 – Bernanke: "My interest is solely for the strength and recovery of the U.S. economy,"

October 31, 2008 - Dow Jones @ 9,337

March 31, 2009 - Dow Jones @ 7,609

Source: A blatant copy and paste job from the Austrian blog or something it's called.

Shall I post a few pictures?

[Naam]

let the banks fail instead of stabilising them and guarantee deposits?

See Naam here is what I see as a fraudulent argument on which you made a lot of money (and presumably you see as an obvious precursor to an argument on which you made a lot of money.)

So really the whole bank bailout is not about guaranteeing depositors it is about guaranteeing bond holders. Is there any evidence that any bank has actually been bailed out to the extent that it exceeds bond holdings? Now my natural assumption would be that bond holders should absorb losses before the tax payer takes them up before depositors.

yes Abrak, i made a lot of money this year because i bought and (mostly) sold again bank debt which -like bank shares- were hammered like never before. but none of the cash injections by the governments guaranteed any holder of bank debt that the repayment at maturity or the payment of coupons will be honoured. the guarantees worldwide are exclusively for the creditors who kept and keep cash in the banks instead under their mattresses.

wrong is also your assumption that bondholders did not absorb any losses because those who panicked (and sold to me) realised at the lows a 80-90% loss of their money. those who did not panic and kept their holdings are still 40-60% down. moreover, i was/am dealing in subordinated debt, took and still take the full risk of not getting paid neither interest (payable only when the financial institution makes profit) nor getting my money back at redemption as most subs are undated perpetuals.

needless to say is that i made indeed money piggy-backing on the bailouts but here too i took the risk because i bought BEFORE any bailout. i saw the opportunities, took the risk and cashed in the lion share of the profits.

I am still a bit confused. Current prices - 40-60% down - implicitly imply bond holder do expect to absorb substantial losses, I admit.

1. But worldwide guarantees to creditors and the fact that Bear Stearns bond holders were paid in full would seem to imply losses limited to interest payments foregone. This incidentally should be fairly little because if a bank cant make interest payments it is unlikely to continue funding itself.

2. To some extent perpetual holders can even rest happy as their terms include 'step ups' in interest rates which are often so ludicrous say +13% at some point, that if they are not repaid, then the implied cost of financing the bank is so high as to render the equity worth 0 in which case you will get repaid on liquidation.

3. So to me the guarantee I understand doesnt imply a discount of 40-60%, so what exactly is the guarantee? The remains of the post is just waffle.

I ask this out of ignorance more than anything. You see as I see it the US has increased rather than decreased moral hazard in the financial sector. Goldman Sachs acquired a banking license, meaning reduced leverage and increased regulation, in exchange for access to Fed funds to solve liquidity problems. Now it apparently wants to give it back so that it has virtually no regulation and can have virtually infinite leverage on the back of government guaranteed debt. As this is a lunatics taking over the asylum end result to the financial crisis it cant really be right so obviously I am missing something.

The extent of the guarantees is quite important for the direction of the economy. A high loan deposit ratio in banking sector is points to an overextended and inefficient private sector and is destabilizing to the financial sector as the US has found - this usually leads to a painful deleveraging process. If the funding gap is being guarranteed by the government then increased leverage is being encouraged by switching private sector debt to off balance sheet public sector. This will boost short term growth (to the detriment of long term).

Abrak,

1. you are picking out a single individual case (Bear Stearns) were an indirect bailout via JPM takeover helped that bondholders who did not panic did not incur any losses. i could counter with an individual case (Lehman) where bondholders suffered 100% losses.

2. wrong assumption. subs -whether dated or perpetuals- won't get most probably a single penny in case of liquidation and of course no interest no matter if their sub was cumulative or non-cumulative. if it was the other way round it would be paradise for yield hunters and i'd be looking to buy an island in the caribbean, replace the worn tires of my Learjet and allow my wife to have the engine oil of her Testarossa changed more than once a year

3. the guarantees cover depositors' cash only.

[Naam]

Talking about press comments.........ahum.

Shall I post a few pictures?

by all means Alex! but make sure the ladies have big knockers and big butts. no skinny miniies and no ladyboys! that the pictures have to show the ladies only "nekkid" goes without saying (i think).

p.s. i hope my fellow TV-members who are gay will not hold these demands against me

[Naam]

Talking about press comments.........ahum.

Shall I post a few pictures?

by all means Alex! but make sure the ladies have big knockers and big butts. no skinny minnies and no ladyboys! that the pictures have to show the ladies only "nekkid" goes without saying (i think).

p.s. i hope my fellow TV-members who are gay will not hold these demands against me

[Abrak]

Nonsense. Agents are in no position to dictate terms in the current market and multiple agencies are quite normal - dual pricing reflects sole versus joint. Personally, I prefer sole agency - in the UK the properties are placed on Rightmove.com so internet exposure is guaranteed.

Come off it, Chaimai, the comment that 'agents usually demand exclusivity' I assume isnt 'nonsense' because I am yet to come across an agent anywhere who hasnt asked for it. Obviously a lot of people do use sole agency because you the seller can dictate better terms and I doubt that many use more than 2 or 3. You are right to point out however that of the 69 sellers probably half arent really sellers at all but merely have their house on the market at a totally unrealistic price. On the other hand I guess there are potential sellers out there simply waiting for a decent market to return.

Normally you cant call a bottom to a market until you see some decent volume in transactions - that will certainly be the case in the US with its oversupply I would guess. If supply is so low in the UK, I guess the low may be marked by low volumes. In any case Strutt & Parker put out a press release the other day saying that volumes were up 30% and properties for sale down 30% yoy in May. (Also I cant help but feel those numbers dont reflect foreclosures properly.)

The only reason to be bearish is that the futures are pointing to prices being 10% or greater lower in 5 years time, so you are better off buying them than a house.

[Abrak]

Abrak,

1. you are picking out a single individual case (Bear Stearns) were an indirect bailout via JPM takeover helped that bondholders who did not panic did not incur any losses. i could counter with an individual case (Lehman) where bondholders suffered 100% losses.

2. wrong assumption. subs -whether dated or perpetuals- won't get most probably a single penny in case of liquidation and of course no interest no matter if their sub was cumulative or non-cumulative. if it was the other way round it would be paradise for yield hunters and i'd be looking to buy an island in the caribbean, replace the worn tires of my Learjet and allow my wife to have the engine oil of her Testarossa changed more than once a year

3. the guarantees cover depositors' cash only.

Ok now that makes infinitely more sense. (And I vaguely recall with Bear Stearns that even equity holders received a few cents.)

One last question then I will go away. Where does an ordinary bank bond holder (not subordinated but not secured) rank relative to a depositor in liquidation? I do realize the depositor is guaranteed but that does not necessarily mean deposits are ranked higher.

Naam, we all know you are keener on seeing naked women than remaining on topic but no need to post twice (I would be too but last time all we ended up with was minge.)

Edited June 18, 2009 by Abrak

[RoganDoss]

The whole capitalist world is crumbling around us. Where is Sir Fred (the Shred) Goodwin these days we wonder? Well, apart from fleeing to France, he's allegedly still shredding away according to

www. youtube. com /watch?v=0gnOVwtXHlg

Insane! He just can't stop shredding...

Jx

[BlackJack]

the cracks are appearing -

The Japanese and Russians have two of the biggest piles of US bonds in the world. Only China has more.

What would you say if you owned $800 billion worth of bonds? Wouldn't you tell the world what a great investment they were...and then sell them quietly, when no one was looking?

Most likely, the feds will be forced to do what they don't want to do. They'll have to buy bonds to keep rates down. Then, they'll have to buy more...because others will be selling them. Finally, they'll have to monetize a huge percentage of them...ultimately causing inflation rates to soar.

BY BILL BONNER @ THE DAILY RECKONING - 18/06/2009

Edited June 18, 2009 by BlackJack

[Chaimai]

The whole capitalist world is crumbling around us. Where is Sir Fred (the Shred) Goodwin these days we wonder? Well, apart from fleeing to France, he's allegedly still shredding away according to

www. youtube. com /watch?v=0gnOVwtXHlg

Insane! He just can't stop shredding...

Jx

Oh ye of little faith ! Even Fred is doing his bit :-

Sir Fred offers to cut pension by £200k

Helen Pow - 18-Jun-2009

Former Royal Bank of Scotland chief executive Sir Fred Goodwin has offered to reduce his controversial pension by £200,000 a year, according to the BBC.

The move would cut the value of his pension pot by around £4m but he would still be left with £350,000 a year.

[flying]

Normally you cant call a bottom to a market until you see some decent volume in transactions - that will certainly be the case in the US with its oversupply I would guess. If supply is so low in the UK, I guess the low may be marked by low volumes. In any case Strutt & Parker put out a press release the other day saying that volumes were up 30% and properties for sale down 30% yoy in May. (Also I cant help but feel those numbers dont reflect foreclosures properly.)

The only reason to be bearish is that the futures are pointing to prices being 10% or greater lower in 5 years time, so you are better off buying them than a house.

There is oversupply to be sure in these parts. Speculators are doing a bit of selling here but it is called short selling. Who will be holding the promise on the balance owed on on the construction loans I don't know.

Also in many cases the short sales are falling thru at the supposed close of escrow when the buyer comes to their senses.

Example.....: A not too plush area but nice that use to sell homes new for 260-360 thousand USD. Now has short sales at 100k

Sounds great eh? It does actually....

But most still sit. I think the carpet baggers may make out but obviously not as a resale anytime soon.

Because like LB said none know if or when prices will return to a shadow of their former selves.

So that leaves the rental market....A pretty scary place to be these days. Scary because the only folks looking for rentals are

1) angry that they lost their own home to foreclosure.

2) poor/welfare recipients ....Not bad since you get paid by the State but sadly the renters don't seem to care about keeping a welfare supplied home in nice shape.

Lastly the rent for a nice home like this is less than what your mortgage payment will be. Even when your paying only 100k !

Then you need to still buy insurance etc. etc. etc.

Edited June 18, 2009 by flying

[AlexLah]

And some more quotes from the very well respected Krugman can be found here:

http://blog.mises.org/archives/010153.asp

[Naam]

Abrak,

1. you are picking out a single individual case (Bear Stearns) were an indirect bailout via JPM takeover helped that bondholders who did not panic did not incur any losses. i could counter with an individual case (Lehman) where bondholders suffered 100% losses.

2. wrong assumption. subs -whether dated or perpetuals- won't get most probably a single penny in case of liquidation and of course no interest no matter if their sub was cumulative or non-cumulative. if it was the other way round it would be paradise for yield hunters and i'd be looking to buy an island in the caribbean, replace the worn tires of my Learjet and allow my wife to have the engine oil of her Testarossa changed more than once a year

3. the guarantees cover depositors' cash only.

Ok now that makes infinitely more sense. (And I vaguely recall with Bear Stearns that even equity holders received a few cents.)

One last question then I will go away. Where does an ordinary bank bond holder (not subordinated but not secured) rank relative to a depositor in liquidation? I do realize the depositor is guaranteed but that does not necessarily mean deposits are ranked higher.

besides the usual priorities (salaries, social insurance, taxes) which might vary depending on the jurisdiction depositors first, by assets secured/covered loans second, bondholders third (amongst them priorities vary), shareholders and bondholders of subordinates last.

[badge]

If you think this is bad check this out.....................

http://www.thaivisa.com/forum/Global-Finan...ts-t249302.html

More like a blog site though.....

Indeed.

The intentions of folks on TV clearly differ from mine; when a rambling thread with conjecture about fiscal policy and links has so much interest with no conclusion, and a succient thread with trade ideas that have caught the majority of the leaders in the equity market bounce in UK and US, and the subsequent sell off, along with the USD bounce, has so little.

What is the point of discussing the financial crisis if not for a financial end?

Its not my business to promote financial markets though, so have a pleasant day all!

[flying]

Indeed.

and a succient thread with trade ideas that have caught the majority of the leaders in the equity market bounce in UK and US, and the subsequent sell off, along with the USD bounce, has so little.

Modest too

Listen if you throw stones.....folks tend to toss a few back

http://www.thaivisa.com/forum/Financial-Cr...90#entry2812690

[badge]

Quite.

If people want no more than to exchange links and mull over financial markets then who am I to stop them, They're very interesting.

Im however interested in taking money out of financial markets.

Just a different MO

Bon Chance

[midas]

Chaimai ok but tell me where exactly you see the job opportunities are going to be in one year ? Which

sectors ?

I will guarantee that the finance sector will one area. Overall, my crystal ball is no better than yours but when/if CONFIDENCE is restored employers will employ. When/if DEMAND returns increased employment will follow.

The claims the NAEA are making are interesting......... but it doesn't quite tie in with what is being said here ............

Of course house hunting doesn't equate to transactions ?

Of course house hunting equates to transactions. Not many are people are just looking to fill in the voids in their life. Any sales process starts with ACTIVITY - house hunting equates to activity. Activity will result in sales, increased sales equals increased demand. Increased demand equals..... need I go on ?

The dampening factor in the current climate will be the supply of credit. At the current stage of the cycle that is perhaps, not a bad thing. First time for over 30 years that I have seen quotas in place.

I do agree that we need to see more first time buyers coming into the market, particularly as their psuedo replacement (the Buy to Let purchaser) is the sector hardest hit by the squeeze on credit.

Banks refuse 16000 mortgages a month

Council of Mortgage Lenders (CML) economist Paul Samter said: ‘Underneath the headline gross lending figure, it’s likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals.

‘While recent signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months.

‘Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders’ limited access to funding will constrain activity for some time yet.’

The lending figure contrasts with a recent run of positive data on the housing market after The National Association of Estate Agents released data showing that there were four potential buyers chasing every property for sale during May.

[flying]

If it is any consolation........ Cramer is calling a bottom to the housing

You know what that means

Means all this other stuff is wrong??

tracking this

http://research.stlouisfed.org/fred2/series/HOUST

[Abrak]

And some more quotes from the very well respected Krugman can be found here:

http://blog.mises.org/archives/010153.asp

What a totally bogus blog!!

A bunch of quotes (all taken from 2001) arguing that Krugman's view for low or even lower interest rates caused the housing bubble. Just so totally bogus and bearing no relation to the historic truth.

Bear in mind

(1) Krugman is an economist rather than a policymaker so he didnt cause anything and he just the sort of economist that Greenspan doesnt listen to.

(2) Back in 2001 the housing market wasnt that obviously overvalued, given the usual 18 month lag between a stockmarket fall and a housing fall, I suspect many people were quite nervous about it.

But the underlying policy mistakes and the reason that Krugman cant be blamed - are based on the arguments that can be seen in these charts. Here is Fed interest rate policy.

Fed rates were still being dropped at the end of 2003 and werent raised until the end of 2004. By which time the housing bubble had gained so much momentum that prices had practically doubled from 2000 levels and unemployment, a lag indicator, had already fallen substantially. Krugman, BTW, had already issued many warnings that it would end in tears.

The 2000 recession came to an end officially in 3Q 2001 (or maybe 4q) but look what happened to unemployment. It kept on rising for more than 2 years (which is an unusually long lag). Krugman was absolutely right to be bearish about the recovery in investment and given what happened subsequently to unemployment, I dont see why it would have been right to raise interest rates at end 2001.

[midas]

If it is any consolation........ Cramer is calling a bottom to the housing

You know what that means

Means all this other stuff is wrong??

Ah Cramer .........well if people still believe what he says then they deserve to lose

Evidently there are still believers in " green shoots " out there as well because the markets rallied again last night

based on these headlines ................

Total Jobless Claims Drop To Near 6.8M

First Drop Since January, Sharpest In Seven Years; New Claims Rise Slightly To 608,000

http://www.bloomberg.com/apps/news?pid=206...id=aQWI5f7Zdyro

But isn't amazing how no one in the mainstream media has even mentioned unemployment insurance doesn't last for ever and possibly people just have simply exhausted their benefits. And if the labour market is really improving why didnt the weekly claims number fall ?

Edited June 19, 2009 by midas

[Abrak]

If it is any consolation........ Cramer is calling a bottom to the housing

Flying,

I think this one chart pretty well sums up everything I think about the US economy. About 3 or 4 months ago a lot of charts looked like that, some have recovered some have flatlined.

To me if Cramer is saying that housing starts have bottomed it just isnt a big call. You see if you look at the chart the worse figure in a previous recessions was 800,000 in 50 years and now the figure is 456,000 which is so gut wrenchingly awful that predicting it to go down further is a big call. Saying it will go up means nothing, if you are wrong one month, you will probably be right the next.

If they go up 50% they still will be worse than the worst other month in any previous recession in the past 50 years. While this is seen as a green shoot, it just looks to be a very feeble response to almost unprecedented monetary and fiscal stimulus.

The other point to note is that the market is currently flooded by record (or near record) vacant homes. This was not caused by a huge amounts of housing starts out of line with any other boom. The boom resulted because while real underlying growth was actually declining, actual demand increased due to sub-prime mortgages etc..

So to the extent there is recovery it does seem extremely unlikely it will be to the mean and beyond as the Government assumes.

[AlexLah]

Uuuurrrrrrr, Abrak, I clearly said: "Here a few quotes from very well respected"

I did not say I agreed with the headline of the writer of that log.

I have looked up a bit of the works of Mr. Krugman and must say he is a bit of a character. Just go through his stuff on his NYT blog and stuff from his books. He does talk about politics and sometimes uses parts of other peoples quotes (without mentioning) and gives a bit of a spin sometimes bad sometimes good, and has a bit of a problem (it seems) with people that criticize him or question his views.

Anyway I just often question myself why such highly regarded people say the things they say as I also tried to show with the quotes from Bennie boy and Hank the tank.

Anyway last night I couldn't sleep well as I was thinking about the average middle class family situation let's say in the seventies and around the start of 2000 maybe a bit later. I remember that in the seventies normally one income was enough to run an average family of 4. So what happened that a lot of those average households needed 2 incomes/jobs and thought about the consequences of mom and dad both having a job. I just sum up a few things that went through my mind but will digg some more into it this weekend.

- Both parents work so there is some need for childcare

- Most likely now two cars are needed

- Parents want the best schools for their kids so did they move to areas where the better schools are but houses are more expensive

- Why has there been such an increase in HC cost

- Why are (or it seems) so many people treated (with stuff like Prozac and such) for mental disorder.

I am looking at US situation as it seems there is a lot of info available on the net and I found already a few very interesting things that indeed

point to a (planned) destruction of the middle class. However what I am trying to get is why that would be done as a strong working middle class is needed for a healthy economy. So I am gonna look at a lot of stuff and hope to post some questions here and perhaps post a few links to other sources than blogs.

Sorry no pictures of naked girls...