Full Version: For those who supported this bailout
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
QUOTE (TPS @ Oct 8 2008, 11:31 PM) 
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
I think the bailout was to prevent more bankruptcies and keep it from becoming a depression...
I don't think anyone who actually understood what was going on thought that it would prevent a recession.
QUOTE (meazza @ Oct 8 2008, 11:43 PM)
I think the bailout was to prevent more bankruptcies and keep it from becoming a depression...
I don't think anyone who actually understood what was going on thought that it would prevent a recession.
I don't think anyone who actually understood what was going on thought that it would prevent a recession.
Or prevent the stock market from going down.
QUOTE (TPS @ Oct 8 2008, 11:31 PM)
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
If you think the stock market is an accuracte reflection/barometer of the economy, I have some distressed assets I'd like to sell you.
QUOTE (Lurker @ Oct 9 2008, 09:51 AM)
If you think the stock market is an accuracte reflection/barometer of the economy, I have some distressed assets I'd like to sell you.
As I posted, the bailout was supposed to assuage the fears of the markets (financial markets), but didn't. I said nothing related to what you said I think.
QUOTE (TPS @ Oct 8 2008, 11:31 PM)
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
Maybe, maybe not - I personally think it does suck.
But the markets may also just be taking advantage of the slide to move to what they think is more accurate long-term value, once the liquidity crisis is over. They may simply think that the equities simply are not worth - even in stable circumstances - what we thought they were. That's the view I'm inclined to: our efforts might be infleuced by the temptation to hold the market at an artificially high level. It will be interesting to see what the P/E ratios are, assuming the markets level off in the next week or so.
QUOTE (TPS @ Oct 8 2008, 11:31 PM)
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
Good question! I think the level of fear mongering required to get this thing passed has had a very negative affect. People are scared. I mean Honda stock is down. Why would a company with obvious long term potential have its stock go down so much? Fear!
I have a question for you. Oil is down. The media has reported that it is because demand is down. Do you agree or do you think its just part of the same process driving down other stocks?
And read this:
http://blogs.tnr.com/tnr/blogs/the_spine/a...l-calamity.aspx
QUOTE
The financial alchemy took subprime mortgages, leveraged buyout loans, and other financial assets and turned them into Collateralized Debt
Obligations (CDOs), many of which received AAA ratings from agencies such as Moody's Corp. (NYSE: MCO) and McGraw Hill Companies (NYSE: MHP), Standard & Poor's (S&P), in a process of shopping for ratings which I described here.
The upshot is that investors in Asia and Europe -- eager for higher returns (estimated at 22 basis points above treasury yields) and comforted by the AAA rating -- recycled the cash generated from record energy prices and trade surpluses with the U.S.into these CDOs. There are roughly $2 trillion such CDOs outstanding against which those investors borrowed as much as 13 times the amount they raised in equity from investors, up from nine to 10 times as recently as late 2005--let's say $20 trillion--to amplify the returns on the CDOs.
The unpaid price is hard to quantify. The CDOs may be worth less -- let's say their true value is 10% of the $2 trillion book value, or $200 billion--but the banks that are clamoring for their $20 trillion would still be $19.8 trillion in the hole if they took possession of all the CDOs.
Can these investors find an additional $19.8 trillion worth of collateral? If so, what assets could they sell to come up with that much cash? Maybe these investors could sell stocks and government bonds, but I don't know whether they have enough to cover the whole $19.8 trillion. This amount exceeds the value of all U.S. stocks -- according to the Wall Street Journal [subscription required], the value of the Wilshire 5000 index of U.S. stocks was $17.7 trillion on August 17th.
Thus the banks will need to write off the balance of their bad loans--perhaps $18 trillion worth. Do the lenders have enough capital to survive such a write off? Do global bank insurers -- e.g., governments -- have enough capital to pay nervous depositors in these banks should they chose to withdraw?
Obligations (CDOs), many of which received AAA ratings from agencies such as Moody's Corp. (NYSE: MCO) and McGraw Hill Companies (NYSE: MHP), Standard & Poor's (S&P), in a process of shopping for ratings which I described here.
The upshot is that investors in Asia and Europe -- eager for higher returns (estimated at 22 basis points above treasury yields) and comforted by the AAA rating -- recycled the cash generated from record energy prices and trade surpluses with the U.S.into these CDOs. There are roughly $2 trillion such CDOs outstanding against which those investors borrowed as much as 13 times the amount they raised in equity from investors, up from nine to 10 times as recently as late 2005--let's say $20 trillion--to amplify the returns on the CDOs.
The unpaid price is hard to quantify. The CDOs may be worth less -- let's say their true value is 10% of the $2 trillion book value, or $200 billion--but the banks that are clamoring for their $20 trillion would still be $19.8 trillion in the hole if they took possession of all the CDOs.
Can these investors find an additional $19.8 trillion worth of collateral? If so, what assets could they sell to come up with that much cash? Maybe these investors could sell stocks and government bonds, but I don't know whether they have enough to cover the whole $19.8 trillion. This amount exceeds the value of all U.S. stocks -- according to the Wall Street Journal [subscription required], the value of the Wilshire 5000 index of U.S. stocks was $17.7 trillion on August 17th.
Thus the banks will need to write off the balance of their bad loans--perhaps $18 trillion worth. Do the lenders have enough capital to survive such a write off? Do global bank insurers -- e.g., governments -- have enough capital to pay nervous depositors in these banks should they chose to withdraw?
QUOTE (TPS @ Oct 9 2008, 10:29 AM)
As I posted, the bailout was supposed to assuage the fears of the markets (financial markets), but didn't. I said nothing related to what you said I think.
Why would it assuage their fears when the mechanism to buy up the assets hasn't even been established yet? People who understand the problem (like the "market") never thought confidence and economic growth would be restored with the stroke of a pen.
The media is adding fuel to the fire also, as "experts" are telling the average Joe to STOP contributing to their 401k....I am getting calls from people asking me this, because that is what they are being told....
QUOTE (molson_golden2002 @ Oct 9 2008, 10:47 AM)
I have a question for you. Oil is down. The media has reported that it is because demand is down. Do you agree or do you think its just part of the same process driving down other stocks?
The price of oil, and therefore gas, will go up after the election. Oil production will be cut to drive the price back up. The Saudis already said they would reduce production.
QUOTE (molson_golden2002 @ Oct 9 2008, 10:47 AM)
Good question! I think the level of fear mongering required to get this thing passed has had a very negative affect. People are scared. I mean Honda stock is down. Why would a company with obvious long term potential have its stock go down so much? Fear!
I have a question for you. Oil is down. The media has reported that it is because demand is down. Do you agree or do you think its just part of the same process driving down other stocks?
And read this:
http://blogs.tnr.com/tnr/blogs/the_spine/a...l-calamity.aspx
I have a question for you. Oil is down. The media has reported that it is because demand is down. Do you agree or do you think its just part of the same process driving down other stocks?
And read this:
http://blogs.tnr.com/tnr/blogs/the_spine/a...l-calamity.aspx
Read the first page of the thread I started on futures speculation last may:
futures speculation
QUOTE (TPS @ Oct 8 2008, 11:31 PM)
the markets obviously think it sucks. For those who supported it and essentially called the average American idiots for not supporting it, why didn't it have any positive impact on the markets?
Because people who supported it understand the difference between the credit markets and the equity markets.
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