Posted on 10/10/2008 12:39:25 PM PDT by IndianPrincessOK
NEW YORK (AP) - When financial panic sweeps Bedford Falls in the 1946 movie "It's a Wonderful Life," the villain, Mr. Potter, moves to snap up the Bailey Savings & Loan, offering a fire-sale price of 50 cents on the dollar. "I may lose a fortune," Potter says with a smirk. The picture's hero, George Bailey, knows better. "He's picking up some bargains," he tells stockholders.
That kind of bold opportunism has made capitalists rich for centuries. Now, legions of like-minded bargain-hunters stand ready to do some Potter-style shopping of their own amid the nation's financial crisis.
"Vulture" investors, as they are called, have raised tens of billions of dollars over the past year in anticipation of opportunities to scavenge distressed assets and debt at discounted prices.
Speculators are eyeing potential profits in many of the same areas now at the center for the financial mess: real estate in foreclosure-plagued Florida, high-yield commercial paper, and pools of questionable mortgages.
Yet, so far, most have hesitated to swoop in. Instead, they have circled and watched for nearly a year as the turmoil worsened, wary about committing to anything with the financial system in chaos.
(Excerpt) Read more at breitbart.com ...
Yet, so far, most have hesitated to swoop in. Instead, they have circled and watched for nearly a year as the turmoil worsened, wary about committing to anything with the financial system in chaos. "
They ain’t seen nothin’ yet. Dow 5000 - you heard it here.
That's a heck of a name. I'd call them saviours. We just had our third round of layoffs in the last two months today at my plant. It's very sad for the people affected by all this. *praying*
...Please explain your thought process on “DOW 5000”. This should prove interesting.
Basically, everyone wants to know if an artificial earthquake is going to be imposed before they buy the land and build the house. Oceanfront property in Arizona, vs continental shelf in SF.
$500 trillion, maybe more, in credit default swaps outstanding. The entire globe as I am sure you are watching, is tanking. Many corporations are starting to be on the brink of default. Our auto industry is going under, and there are those debts along with massive credit card debts that everyone will be screaming to have bailed out. There has been nothing to sustain this huge of a run-up in our economy with the exception of real estate, which was a false run-up as demonstrated by the bad mortgages. There are going to be massive amounts of foreclosures, etc. If McCain gets in, the market will stabilize and will come back. But I’d bet the low is around 5000 to 6000 before a real come-back hits. It’s been a long time since there’s been any shake out and I have heard on places like CNBC there’s a good $10 trillion in unwinding to be done before we hit the bottom.
Possible, but extremely unlikely, barring a nuclear attack.
Right now, the S&P is trading at about 12 times earnings. If the recession hits earnings hard, 7000 would still be a good bottom for the market. Are you predicting a long term depression, with a 25 percent drop in GDP and unemployment over 15 percent? If so, you may be right. Otherwise, you are too pessimistic.
But my one caveat is -- if Obama is elected, he will try to socialize medicine, increase taxes, legalize the illegals, force lending into hard hit areas, socialize banks, impose hard requirements on employers, increase social services and take away your right to complain about it. If he succeeds, all bets are off. I'm not sure even a liberal congress would go along with him in a down economy.
Why invest in a market if you don't have a market economy?
Just to take this one aspect of your doom and gloom is to show its errors.
If GM goes under, its shareholders lose all their equity in the company, which is just a few billion at current market prices. However, it could be the best thing to happen to the American auto industry. GM's assets, employees and products would not disappear into thin air. They would be bought by someone, or taken out of BK under Chapter 11, and the entity that emerged would be the largest auto seller in the world, but with the ability to expand its production into cheaper labor markets without facing a strike, without onerous union agreements, and without the overhang of a pension that it cannot possibly pay.
GM has been described as a pension plan that makes cars and that is pretty much accurate. A new company that just makes and sells cars, opens newer, more efficient plants such as the Saturn plants, and retools its business will be back in to the top 3 in the world in no time, and ensure a US auto industry into the future.
There are downsides, sure. The poor pensioners will lose their pensions. Government will probably bail them out. GM will be leaner, and that means a lot of management will lose jobs. But those are bloated union jobs that would not have survived in a free labor market. The net effect on the stock market will be very positive.
There are some things even carrion birds won’t eat.
I am in fact predicting long term depression you describe, and Obama as fearless leader into communism.
I am betting there is no way the UAW would allow GM to cut wages or whatever. They don’t care if the company goes under. Same with Ford and Chrysler. If the scenario you describe happens, that would be great. But look at things this way. The AVERAGE American has a net savings rate of NEGATIVE 1.5% or more. And credit card debt into the thousands with only an average income of around $60K per year. We have been on a massive spending spree for years and it is now time to pay the piper.
By the way, a P/E ratio that high is out of healthy range if you’re of the “Austrian school” in Economics....
“But look at things this way. The AVERAGE American has a net savings rate of NEGATIVE 1.5% or more. And credit card debt into the thousands with only an average income of around $60K per year. We have been on a massive spending spree for years and it is now time to pay the piper.”
Could not have said it better myself...how much debt can be actually handled? The energy spike really pushed household budgets into the land of no return.
Some of the sharks circling, waiting for more blood in the water, before they buy good stuff cheap may be ethically challenged, but they aren't that stupid. <grin>
If anyone has any brains, by the way, they won’t be investing. The old market indicators don’t count here. I know a P/E ratio of 12 used to be an indicator that it was time to start buying again - but don’t let yourself get tricked. What used to be doesn’t count. That was when the the situation was different. Now, you have a scenario where everyone - the entire world - took out lots and lots of debt that they had NO intention of repaying. None. I’m not saying stuff money into mattresses, I’m saying personally I got the hell out a couple of years ago and I’m keeping my cash position for the foreseeable future - and tightening up for a major, world-wide depression with unemployment of at least 25%. Hopefully the powers that be will not follow FDR’s bad example, and cause all of this to be far more long term that needed.
If GM goes under, UAW won’t have any say in anything.
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