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The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules...

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smack Down

Diamond Member
Sep 10, 2005
4,507
0
0
Originally posted by: LegendKiller
Originally posted by: Vic
Originally posted by: senseamp
Ahh, yes, nothing like an injection of socialism to save capitalism from collapse.
Socialism is how capitalism got here.

I'm not defending what's happened here, just remarking that this has been as engineered an economic disaster as one could possibly imagine.
The article comments how capitalism would have let prices fall to the point that bargain seeking buyers would rush in (like you intend to do, as I know). What it failed to mention is that capitalism would never have let the market get this inflated to begin with.
The Fed is fixing the very same mess it caused. It's like getting handed an icepack from the guy who just punched you in the face.
I disagree somewhat, since nobody can "force" the market to stop doing something, especially when that market is trillions of dollars of capital flooding in.

Lets not forget that half the reason why there's a problem now is because this is an engineered crisis. Accountants thought it'd be a good idea to force people to value investments at short-term valuations, rather than fundamental ones. Thus, if the market suddenly drops in those investments, because one reason or another, you *have* to value your similar investments at those values, regardless of the underlying value.

This is akin to buying a brand new car for 80k with 16k down, then driving it off the lot whereby it's now worth 64k. Instead of just keeping your same loan parameters, the bank requires you to put down an additional 12k in capital because your asset was suddenly "marked to market". If the entire world worked like that we'd be stuck in a never-ending spiral of marks, as we are now.

People would have to sell their car to get out of the position, putting more "marks" out there. This would then depress the value of the car, forcing people to put more capital into the deal, forcing more "marks".

It's really a contrived collapse of the market for the sake of "transparency".

Now, if somebody really wanted to fuck with us, they'd simply buy up billions in "illiquid" assets and continually sell them for pennies on the dollar, forcing successive rounds of "marks". These short-term valuations would erode the capital bases instantly and force the banks into insolvency.

Yay for moron accountants overreacting (FAS 140, SarbOx...etc)
Yes lets have lair accounting to go with the lair loans. Right lets remove any transparency and put on our happy hats. I'm sure people will just be flocking to invest in finical companies now that they have no clue what that company is worth.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: smack Down


Yes lets have lair accounting to go with the lair loans. Right lets remove any transparency and put on our happy hats. I'm sure people will just be flocking to invest in finical companies now that they have no clue what that company is worth.
Lets base all of our accounting rules on short-term valuations of assets, great idea sparky.

Why anybody allows you to post when you can't even spell is beyond me.
 

dmcowen674

No Lifer
Oct 13, 1999
54,894
46
91
www.alienbabeltech.com
Originally posted by: brownzilla786
If the fed didtn save bear stearns the market would have went HAYWIRE^1000. It would have made such a big ripple effect and no one would have faith in the financial institutions. They did what had to be done
Why should the rich boys get preferential treatment?

The market should go haywire, it's their mess.
 

Vic

Elite Member
Jun 12, 2001
48,680
9,854
136
Originally posted by: smashp
Corporate Welfare and Wall Street Affirmitive Action is all this was

They Punished People who played by the rules, Didnt Take On extreme Risk, and Had properly positioned themselves to pick up the pieces of those that failed.
Yep. This is the problem. This is why the markets keep bouncing from one wild speculative boom after another.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
I don't get why people complain about the bailout all the time. Yes the government interfered, yes some fat ass millionaire Wall St. people got bailed out at the tax payer's expense (somewhat). But looking at the big picture, would you rather have severe a depression? Would you rather have hundreds of thousands, if not millions of job loss? Would you rather have Wall St. not able to perform it's function and every company in the US not be able to raise money for its operation, and many face possible bankruptcy because there is no cash available for them to meet short term obligations? Maybe you people who criticize the Fed action live in your mom's basement without a job and all the problem I mentioned don't impact you. But for the rest of us, I see this bailout as something that helps the economy as a whole, and everyone participant in the economy. Maybe it helps some Wall St. people more in the process, but so be it.
 

bctbct

Diamond Member
Dec 22, 2005
4,868
1
0
Originally posted by: Vic
Originally posted by: smashp
Corporate Welfare and Wall Street Affirmitive Action is all this was

They Punished People who played by the rules, Didnt Take On extreme Risk, and Had properly positioned themselves to pick up the pieces of those that failed.
Yep. This is the problem. This is why the markets keep bouncing from one wild speculative boom after another.
Exactly, very little risk to investors when the gov't will save them.
 

jman19

Lifer
Nov 3, 2000
11,183
610
126
Originally posted by: dmcowen674
Originally posted by: brownzilla786
If the fed didtn save bear stearns the market would have went HAYWIRE^1000. It would have made such a big ripple effect and no one would have faith in the financial institutions. They did what had to be done
Why should the rich boys get preferential treatment?

The market should go haywire, it's their mess.
It isn't just "rich boys" who would get hurt, Dave.
 

dmcowen674

No Lifer
Oct 13, 1999
54,894
46
91
www.alienbabeltech.com
Originally posted by: jman19
Originally posted by: dmcowen674
Originally posted by: brownzilla786
If the fed didtn save bear stearns the market would have went HAYWIRE^1000. It would have made such a big ripple effect and no one would have faith in the financial institutions. They did what had to be done
Why should the rich boys get preferential treatment?

The market should go haywire, it's their mess.
It isn't just "rich boys" who would get hurt, Dave.
Every single American deserves to suffer.

We let this all happen.
 

jman19

Lifer
Nov 3, 2000
11,183
610
126
Originally posted by: dmcowen674
Originally posted by: jman19
Originally posted by: dmcowen674
Originally posted by: brownzilla786
If the fed didtn save bear stearns the market would have went HAYWIRE^1000. It would have made such a big ripple effect and no one would have faith in the financial institutions. They did what had to be done
Why should the rich boys get preferential treatment?

The market should go haywire, it's their mess.
It isn't just "rich boys" who would get hurt, Dave.
Every single American deserves to suffer.

We let this all happen.
Then why did you say this is just about letting "rich boys" off the hook? :confused:
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
Originally posted by: Vic
Originally posted by: senseamp
Ahh, yes, nothing like an injection of socialism to save capitalism from collapse.
Socialism is how capitalism got here.

I'm not defending what's happened here, just remarking that this has been as engineered an economic disaster as one could possibly imagine.
The article comments how capitalism would have let prices fall to the point that bargain seeking buyers would rush in (like you intend to do, as I know). What it failed to mention is that capitalism would never have let the market get this inflated to begin with.
The Fed is fixing the very same mess it caused. It's like getting handed an icepack from the guy who just punched you in the face.
I completely agree.

Anyone vaguely familiar with modern economic theory should be fairly familiar with Harry Markowitz's Efficient Frontier and Modern Portfolio Theory. The idea is that the market adapts to economic indicators so quickly that it is efficient and that it is not feasible to consistently take advantage of market indicators.

The theory isn't perfect because we've seen a huge increase in market intervention by the government, and because we have an increase in emotional investors.

Young adults also are overconfidently and optimistically buy tech stocks in companies that they purchase products from, and bloat things up. More than in the last 50 years of history, starting in the mid to late 90s.

Yet the market eventually corrects itself. Those that invest in small, value, and low price-to-book ratio outperform the herd in the long run.

The reason why we have a credit crunch is because the Federal Reserve stopped a market correction for the .COM and Growth crash in 2001-2002. All this does is delay the correction, dilute the dollar, and reward incompetence. While it doesn't prevent the market from eventually correcting the situation, it does hurt the general value of stocks in the USA. I'm focusing on international right now.
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
Originally posted by: ayabe
If anything this should finally show once and for all that sound and prudent regulation is required in order for our economy not to eat itself from within due to greed.
Mal-investment due to behavioral financing (overconfidence, baseless optimism, herd mentality, and loss aversion) is not greed. It's just emotional (bad) investing.

I think loss aversion is the biggest thing now. People don't want to have a bear market, so they want the government and their bastard child (Federal Reserve) to bail them out by taking their money and giving it to incompetent businesses. It's like a drug addiction.

In a free market, the .COM/growth bust in 2001-3 would have continued, and incompetent businesses would have been replaced by good ones. Then the economy would boom on efficiency. Many economists glaze over the value of the work force as an economic indicator, but it's important. And the Federal Reserve's Corporate Socialism is reducing the quality of the work force.


Having the Federal Reserve take your money and give it to their buddies in other corps is greed.
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
Originally posted by: rchiu
I don't get why people complain about the bailout all the time. Yes the government interfered, yes some fat ass millionaire Wall St. people got bailed out at the tax payer's expense (somewhat). But looking at the big picture, would you rather have severe a depression? Would you rather have hundreds of thousands, if not millions of job loss?.
That's not how I see it. I see the correction now around the level of a 1987 crash.

By delaying it and adding incompetence to the work force and to fiscal policy, we could very well have a 1929 crash 10 years into the future when the new bubble bursts again, and the dollar is too weak to bail out people again.

Edit: Let me give you a chart to demonstrate the value of your money over the past couple of years:

http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

The interest rate cuts, tax breaks (without spending breaks), etc aren't free.
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
Originally posted by: bctbct
Originally posted by: Vic
Originally posted by: smashp
Corporate Welfare and Wall Street Affirmitive Action is all this was

They Punished People who played by the rules, Didnt Take On extreme Risk, and Had properly positioned themselves to pick up the pieces of those that failed.
Yep. This is the problem. This is why the markets keep bouncing from one wild speculative boom after another.
Exactly, very little risk to investors when the gov't will save them.
Oh, but there is risk. They're not just trying to get returns in USD. They're also having to now fight monetary inflation. When the dollar index goes down 50% over 10 years, those gains suddenly become losses.

Besides, the people that need that sort of cushion shouldn't be investing in stocks, as Warren Buffet always says. These sorts of investors are emotional and end up preforming much worse than S&P500.

Real investors, aside from the talented few that can gauge value (Buffet), rely on diversification to remove unsystematic risk (ie, some crazy event happened which hurts a single industry, not a problem with diversification). Real investors aren't afraid of international stocks to reduce unsystematic risk.
 

nergee

Senior member
Jan 25, 2000
843
0
0
bankers making profits while taxpayers share the losses.....good job Comrade Ben.........
 

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