Posted on 08/09/2007 12:48:38 PM PDT by Leroy S. Mort
The sad part is the money they just threw at the markets is ntoe going to help in the long term. This money will ge sucked up and hte beast will be begging for more. And this does nothing to stop teh arms reseting or foreclosures. I liken it to throwing a case of bourbon to a drunk, it will keep him for a bit but he will run through it in short order.
In the time it took me to type this, the US Government spent $16B. Yeah, we can handle that piece of chump change.
Now, the tighteneing credit market and a 10% correction in the Real Estate, Debt, and Equity markets...
Well, pretty soon you’re talking about real money.
LOL. A lot of Freepers still think the dollar is pegged to gold, too. Others, like Ron Paul, think it should be. Personally, I’d be happy if it were pegged to Pam Anderson’s boob size-—that would be about as reliable.
Just remember, two decades ago we were told the S&L “crisis” would be FOUR TIMES that much ($800 billion, in 1980 dollars). So $200 billion is, in today’s dollars, about one seventh or one eighth the impact of the S&L failures, which is to say, pretty meaningless.
That’s the estimated the S&L bailout insanely low initially, the tech stock burst low, as well.. the 200 BILLION estimate is grossly underestimated IMHO. When All is said and done, it will be much larger than the S&L.
My point is, as an investor, there are many companies that are beating earnings, forcasting better earnings, employment is high, inflation low, and interest rates have risen 17 times from the low, but are still 5.25%! Most of my life rates have been higher than that.
Until I see some sort of contagion, this is a blip in my book. Maybe a few hundred thousand lay offs later, I'll get worried. The whole world is growing now and I don't think a blip in the US is going to stop it. I will re evaluate when the China Olympics are history. 1.3 billion people buying our crap can't be too bad. GM and Harley Davidson are doing better in China( growth wise) than in the US.
It's good to worry, but sometimes you have to have a cold look at reality and invest like your money depended on it. The NYT should be at the bottom off your parakeet cage.
Just curious, were you alive and over say, 21, when Carter was president? I figure if you were under at least that age you were probably chasing women and getting drunk and didn't care about the people shooting people in gas lines and a 30 page fine print pull out of the Houston Chronicle of repo'd homes. I was buying brick homes for 50 cents on the dollar and had several CD's making 13%- 19%, depending on the time ladder. People literally bought things today because they knew it would be more money the next DAY! We are so far from that type of scenario now, I can't even see a comparison, yet people are talking like the end of the world is coming.
Something I've found over the years is there is an endless supply of money that comes from somewhere. When you are about to blow your brains out, a person come to you with cash from somewhere to steal your assets for 50 cents on the dollar. The people losing their homes will be the ones that had no job, not an adequate job, or had no idea what a zero interest loan with a 3 year balloon was. If someone lied to them, then let them sue, but I'll bet the mortgage company will produce a paper with their signature on it saying they understood all the ramifications of such loans. The truth is, most of these people figured they would buy their Mc Mansion, live in it interest free with low payments for 3 years, and then sell it for 30% more than they paid. Well, welcome to reality.
What is news to me is the companies and hedge funds that bought this paper without a clue they were ALL suspect. How can these Wall Street guru's plop down hundreds of millions and not know the risks they were buying? They DESERVE bankruptcy, and get NO sympathy from me. If they own the paper, they own the property. It can't be ZERO. The injected liquidity was caused by the market REFUSING to buy a pig in a polk. If you bought something for $1000, and no one wanted to pay you $1000 or above, then you must reduce the price. Nobody seemed willing to do that. If someone was trying to sell you $100 million in property backed debt obligations, why wouldn't you just offer them $50 million? When the fire sale starts in earnest, the crisis will be over. Somebody has to accept, they screwed up.( Just like Ameranth was long nat gas as it headed down 50%.)Why on earth would you ride something down 50% on margined money?
Yes, there will be losses, but they are spread around the world instead of just to U.S. financial institutions. That is what the new derivative instruments are all about.
Don't forget about inflation. $125B in 1990 is more than $200B today.
Don't forget that our economy is massively larger than 1990, so the problem as a percent of GDP is much smaller.
The problem may get much bigger, but it is still a small problem.
Certainly, there is a liquidity problem, but I question whether there is a credit-quality problem outside of the subprime market. The Alt-A market, which are NOT “well qualified borrowers” but are borrowers just above subprime credit quality, obviously should see some spillover. But again, it is only about 10-15 percent of the mortgage market even with the subprime portion. The prime market for 30 year fixed rate mortgages, which is more than 80 percent of the market, has delinquencies of less than 1 percent. If you see problems in this part of the market, then I’ll buy into your story, but not until then . . . . Oherwise, go back to shorting your stocks.
Noooooo, this was only a Repo. Short-term loan to inject liquidity. Uncle Sam gets repaid.
I was’nt discussing the Fed’s liquidity injection on Friday in post 62 — the original question was — Could the US economy take a $16B write off of the suspected sub-prime loans that are (or will be) non-performing paper?
My response to remind the person posting the question how big our economy, even the just the FedGov’s bloated chunk of it is, and that a 16B hit can’t even be termed a speed bump, let alone a catastrophe.
A panic in the markets OTH...
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