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RE: "rescue package"? voisted down - 10/1/2008 3:46:53 AM   
LookieNoNookie


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quote:

ORIGINAL: Musicmystery

Today it rained. Surely this means it will rain forever.

The market goes up. The market goes down. It's people trading. And for everyone who sells in a panic, a buyer is happy to snatch up the bargain. For everyone exuberantly buying in a bubble, someone else is happily reaping profit. As long as that happens, we have a market---and its value is meaningless. The real value is in the long term asset and its potential---that doesn't really swing wildly day to day, just the imaginary value of speculative traders looking for short term profit. Wise investors these past few days did what they usually do---nothing but hold.

The credit market issue is different, as financial institutions are reluctant to lend to each other----not that the market is down, but rather that there increasingly is NO market (insufficient willing lenders for would be borrowers, despite terms---which are largely set by the Fed in this instance anyway)--i.e., there's money to loan, but not institutions willing to loan it, making credit tight to impossible.

Tomorrow's forecast calls for thunderstorms. Later in the week, sunshine.

And I'm sure it will rain again. But not forever.

The stock/commodity markets are a mirror of short term confidence, nothing more.

The credit market issue questions whether we'll still be able to have weather.


I wish more people were aware of the true events that are taking place here.

Of course we're going to have weather again.

This has nothing to do with whether or not weather will cease to exist.

It's about whether or not you can find a raincoat...anywhere.

Right now banks are hoarding all the raincoats.

Until the banks let go of some of the raincoats....when it rains, you're going to get wet.

(in reply to Musicmystery)
Profile   Post #: 41
RE: "rescue package"? voisted down - 10/1/2008 5:56:25 AM   
Musicmystery


Posts: 30259
Joined: 3/14/2005
Status: offline 		More like the flood is headed our way, but the lifeboats go to failed financial institutions under the theory that they can then build damns to contain it and control the water. But this metaphor is getting stretched too far.

The point was that the stock market is not the issue. The growing lack of a credit market is the danger.

(in reply to LookieNoNookie)
Profile   Post #: 42
RE: "rescue package"? voisted down - 10/1/2008 6:52:50 AM   
Marc2b


Posts: 6660
Joined: 8/7/2006
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quote:

Today it rained. Surely this means it will rain forever.

The market goes up. The market goes down. It's people trading. And for everyone who sells in a panic, a buyer is happy to snatch up the bargain. For everyone exuberantly buying in a bubble, someone else is happily reaping profit. As long as that happens, we have a market---and its value is meaningless. The real value is in the long term asset and its potential---that doesn't really swing wildly day to day, just the imaginary value of speculative traders looking for short term profit. Wise investors these past few days did what they usually do---nothing but hold.

The credit market issue is different, as financial institutions are reluctant to lend to each other----not that the market is down, but rather that there increasingly is NO market (insufficient willing lenders for would be borrowers, despite terms---which are largely set by the Fed in this instance anyway)--i.e., there's money to loan, but not institutions willing to loan it, making credit tight to impossible.

Tomorrow's forecast calls for thunderstorms. Later in the week, sunshine.

And I'm sure it will rain again. But not forever.

The stock/commodity markets are a mirror of short term confidence, nothing more.

The credit market issue questions whether we'll still be able to have weather.


I’m not sure if you’re agreeing with me or criticizing me since I did say that too much shouldn’t be read into yesterdays “recovery” in the stock market just as too much shouldn’t be read into the previous day’s “crash,” despite a lot of wailing and gnashing of teeth that this was the end of the world.  The wise investor is indeed holding.  Yes the problem is in the credit market and needs to be addressed there but you can’t dismiss the stock market altogether.  Stocks are bought on credit, after all.  The values of corporations fall if they can’t get credit.  In the general public’s mind the health of the economy is reflected in the stock market – they see it going down, they get nervous and start making decisions based upon that (and vice versa). 

edited to add: Incidentally, the stock market this morning is all ready down 107 points.  Some of the bargain hunters are selling in order to get that quick buck.  Other people may be selling while the think the getting out is good.  It will be interesting to see where it goes from here.


< Message edited by Marc2b -- 10/1/2008 6:59:00 AM >

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(in reply to Musicmystery)
Profile   Post #: 43
RE: "rescue package"? voisted down - 10/1/2008 6:58:33 AM   
Musicmystery


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Joined: 3/14/2005
Status: offline 		I'm sort of agreeing, but not entirely.

In the short term, the stock market is irrelevant. In the long term, yes, credit problems would hurt the truth value of these businesses.

But the day to day fluctuations in the market are meaningless---short term reactions by day traders, the tail wagging the dog, trying to predict the future reactions of other traders who are trying to predict the future before the next guy. It's just a snapshot of mood.

But there IS a stock market---buyers and sellers. The credit issue is the increasing LACK of institutions willing and able to buy and sell credit---i.e., NO market.

(in reply to Marc2b)
Profile   Post #: 44
RE: "rescue package"? voisted down - 10/1/2008 7:10:06 AM   
Marc2b


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Joined: 8/7/2006
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quote:

But the day to day fluctuations in the market are meaningless---short term reactions by day traders, the tail wagging the dog, trying to predict the future reactions of other traders who are trying to predict the future before the next guy. It's just a snapshot of mood.


Yes.  I agree!  My point, however, is that the mood is based upon people’s perception of reality.  My grandfather, the wisest man I ever knew (and a damned good, long term investor), once told me that most recessions occur because we as a nation worry ourselves into it.  When people see the stock market going down dramatically – they worry.  They worry and they start cutting back on expenses meaning less spending, meaning lower profits for businesses, meaning job losses, meaning more people spending less money, etc, etc, etc.

< Message edited by Marc2b -- 10/1/2008 7:12:08 AM >

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Profile   Post #: 45
RE: "rescue package"? voisted down - 10/1/2008 7:18:48 AM   
meatcleaver


Posts: 9030
Joined: 3/13/2006
Status: offline 		Surely the main problem in this crisis is the financial industry selling bad debt as AAA and banks buying that debt not knowing what the fuck they were buying. Meanwhile value of assets increase to a point everyone knows assets are way over valued, banks look in their portfolios and find that their 100 billion of assets is really ownly worth 40 billion. No other bank will lend to any other bank because they don't know which banks are secure or whether their asset base is as bad as their own so no one is willing to give anyone credit. Meanwhile, the market seizes up. So much for Adam Smith's invisible hand in the market place! 

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Profile   Post #: 46
RE: "rescue package"? voisted down - 10/1/2008 7:28:56 AM   
Musicmystery


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quote:

ORIGINAL: Marc2b

quote:

But the day to day fluctuations in the market are meaningless---short term reactions by day traders, the tail wagging the dog, trying to predict the future reactions of other traders who are trying to predict the future before the next guy. It's just a snapshot of mood.


Yes.  I agree!  My point, however, is that the mood is based upon people’s perception of reality.  My grandfather, the wisest man I ever knew (and a damned good, long term investor), once told me that most recessions occur because we as a nation worry ourselves into it.  When people see the stock market going down dramatically – they worry.  They worry and they start cutting back on expenses meaning less spending, meaning lower profits for businesses, meaning job losses, meaning more people spending less money, etc, etc, etc.


Yes--people confuse symptoms with causes.

meatcleaver is also correct.

Tim

(in reply to Marc2b)
Profile   Post #: 47
RE: "rescue package"? voisted down - 10/1/2008 7:38:12 AM   
rexrgisformidoni


Posts: 578
Joined: 9/20/2008
Status: offline 		I can toot and have the market go up and down. cleaver also has it down pat too, the loans all bundled up and sold are pretty much worthless, no real dollar backing any of them. It will hurt for a while I am sure, but there is always light at the end of the tunnel so to speak. Things get bad enough, I imagine I'll grow me some taters and hunt a bit more. and wait for the markets to come back. 

(in reply to Musicmystery)
Profile   Post #: 48
RE: "rescue package"? voisted down - 10/1/2008 7:44:17 AM   
meatcleaver


Posts: 9030
Joined: 3/13/2006
Status: offline 		There's no party without a hangover and there's been one hell of a party and it looks like we're in for a hell of a hangover. We'll be lucky if painkillers relieve the morning's pain. Those that have always lived modestly and know how to live modestly will find it easiest to manage.

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Profile   Post #: 49
RE: "rescue package"? voisted down - 10/1/2008 7:57:42 AM   
Musicmystery


Posts: 30259
Joined: 3/14/2005
Status: offline 		Trouble is....we weren't invited to the party.

(in reply to meatcleaver)
Profile   Post #: 50
RE: "rescue package"? voted down - 10/1/2008 8:05:38 AM   
blacksword404


Posts: 2068
Joined: 1/4/2008
Status: offline 		I started telling everybody i knew in the beginning of 07 shit was coming. But i sounded like an idiot then because the experts said everything was great. But i put all money into foreign mutual funds. And bought me a little stock of food. Now i just got to get me some precious metals and ill be set. Time to go to walmart and buy more hollows.

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Profile   Post #: 51
RE: "rescue package"? voted down - 10/1/2008 8:33:16 AM   
justgemmie


Posts: 246
Joined: 8/24/2008
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quote:

ORIGINAL: Musicmystery

The assets are still there. Just a question of who owns them, and how long we're willing to wait for market corrections long overdue (and whether we can afford to wait through the correction).



quote:

ORIGINAL: Marc2b

We wait.

Relax people.  The world is not coming to an end.  It is simply changing.  Just like it always has and always will.



thank You Master Tim and Master Marc2b.  the truth is i was wondering the same question myself and it took 2 pages for anyOne to actually answer the OP.

well wishes to You and Yours,
gemmie

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(in reply to Musicmystery)
Profile   Post #: 52
RE: "rescue package"? voisted down - 10/1/2008 9:38:00 AM   
UncleNasty


Posts: 1108
Joined: 3/20/2004
Status: offline
quote:

ORIGINAL: rexrgisformidoni

I can toot and have the market go up and down. cleaver also has it down pat too, the loans all bundled up and sold are pretty much worthless, no real dollar backing any of them. It will hurt for a while I am sure, but there is always light at the end of the tunnel so to speak. Things get bad enough, I imagine I'll grow me some taters and hunt a bit more. and wait for the markets to come back. 




Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. Some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."

At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality.

Follow the money. Average Joes and Janes are not the holders of the other side of complicated, over-the-counter derivatives contracts. Rather, hedge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.


http://www.time.com/time/business/article/0,8599,1845209,00.html


Main Street Turns Against Wall Street

"Washington hath no fury like Middle America scorned"

http://money.cnn.com/2008/09/26/news/economy/easton_backlash.fortune/index.htm

What happened is over the weekend the Street got over the quick fix euphoria of government protection and realized the bailout didn't address the leveraged exposure of the fact that the mortgages themselves control many times the debt of the mortgages themselves. It makes far more sense to add liquidity to the backing of the leveraged debt than to purchase the leveraged debt itself.

The problem is that these mortgages were converted into securities many times the value of the mortgage (30-60) creating hundreds of trillions in uncollateralized or undercollateralized debt. Paulson and Bush want the taxpayers to pay off the leveraged debt of hundreds of trillions with taxpayers money instead of just maintaining the liquidity of the mortgages.

Uncle Nasty

(in reply to rexrgisformidoni)
Profile   Post #: 53
RE: "rescue package"? voisted down - 10/1/2008 9:39:49 AM   
Musicmystery


Posts: 30259
Joined: 3/14/2005
Status: offline 		Well said!

(in reply to UncleNasty)
Profile   Post #: 54
RE: "rescue package"? voisted down - 10/1/2008 12:07:43 PM   
Marc2b


Posts: 6660
Joined: 8/7/2006
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quote:

Surely the main problem in this crisis is the financial industry selling bad debt as AAA and banks buying that debt not knowing what the fuck they were buying.


I’ve already addressed this.  It’s called fraud.  Which is probably why the FBI is investigating.


quote:

Meanwhile value of assets increase to a point everyone knows assets are way over valued, banks look in their portfolios and find that their 100 billion of assets is really ownly worth 40 billion. No other bank will lend to any other bank because they don't know which banks are secure or whether their asset base is as bad as their own so no one is willing to give anyone credit. Meanwhile, the market seizes up. So much for Adam Smith's invisible hand in the market place! 


You appear to misunderstand what Smith meant by the invisible hand.  That’s okay, most socialists don’t understand simple economics (if they did, they wouldn’t be socialists).  I glanced at the Wikipedia article on it and it seems to know what it is talking about, particularly this excerpt: 

“Contrary to common misconceptions, Smith did not assert that all self-interested labour necessarily benefits society, or that all public goods are produced through self-interested labour. His proposal is merely that in a free market, people usually tend to produce goods desired by their neighbours.”

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Do you know what the most awesome thing about being an Atheist is? You're not required to hate anybody!

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Profile   Post #: 55
RE: "rescue package"? voted down - 10/1/2008 12:11:48 PM   
Marc2b


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Joined: 8/7/2006
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quote:

thank You Master Tim and Master Marc2b. 


You're welcome. 

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Do you know what the most awesome thing about being an Atheist is? You're not required to hate anybody!

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Profile   Post #: 56
RE: "rescue package"? voisted down - 10/1/2008 4:23:35 PM   
LookieNoNookie


Posts: 12216
Joined: 8/9/2008
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quote:

ORIGINAL: Marc2b

quote:

But the day to day fluctuations in the market are meaningless---short term reactions by day traders, the tail wagging the dog, trying to predict the future reactions of other traders who are trying to predict the future before the next guy. It's just a snapshot of mood.


Yes.  I agree!  My point, however, is that the mood is based upon people’s perception of reality.  My grandfather, the wisest man I ever knew (and a damned good, long term investor), once told me that most recessions occur because we as a nation worry ourselves into it.  When people see the stock market going down dramatically – they worry.  They worry and they start cutting back on expenses meaning less spending, meaning lower profits for businesses, meaning job losses, meaning more people spending less money, etc, etc, etc.


You're describing Rock Soup.

(in reply to Marc2b)
Profile   Post #: 57
RE: "rescue package"? voisted down - 10/1/2008 4:28:11 PM   
LookieNoNookie


Posts: 12216
Joined: 8/9/2008
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quote:

ORIGINAL: Musicmystery

Trouble is....we weren't invited to the party.


Ah, but indeed, we all were.

Every dollar you've earned in the last 9 years has been predicated on those that others have earned, outsized or less so.

Whether or not you sup'ed at the bar is immaterial, it was a party paid for by everyone's excess (as well as the savers...those that did not sup...but provided the assets to sup with)...and now...there will be a hangover for all.

Those that drank a lot will feel the pain for a bit longer...those that drank not at all...unfortunately, are in for a hangover, nonetheless.

(in reply to Musicmystery)
Profile   Post #: 58
RE: "rescue package"? voisted down - 10/1/2008 5:25:01 PM   
Musicmystery


Posts: 30259
Joined: 3/14/2005
Status: offline 		This makes no sense.

(in reply to LookieNoNookie)
Profile   Post #: 59
RE: "rescue package"? voisted down - 10/1/2008 6:12:41 PM   
LookieNoNookie


Posts: 12216
Joined: 8/9/2008
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quote:

ORIGINAL: Musicmystery

This makes no sense.


Well then, there you go.

(I'll remove the marbles next time I talk).

(in reply to Musicmystery)
Profile   Post #: 60
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