Sign of the Times

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Sep 26, 2008 3:58 pm

Could this be a predictor for Wachovia?


http://www.cnbc.com/id/26901584



Here's the even crazier thing:  Heard that investors are now buying insurance on their Treasury deposits!!!!!!!!!!
 
It's a good thing I'm a good shot, right Spiff?  At least I won't starve.  Now, if only I could make fire with sticks. 
Sep 26, 2008 4:28 pm

The sad part is that before Lehman went under, their insurance was several 100k's below Wachovia and Merril's debt insurance. I'm still pissed about the Lehman situation.  

After thinking for awhile on this, I think the damn rating agencies need their asses kicked.  If they would have rated the bonds the way they should have been, many small investors wouldn't have owned them. 
Sep 26, 2008 4:40 pm

There's a ton of blame to go around.  There could be an entirely new agency created just to figure all this crap out when blame time comes around.

 
A big problem was that EVERYONE'S hand was in EVERYONE else's pockets.  The investment banks paid the rating agencies for those ratings.  The whores.
 
Congress and Senate got paid too. 
 
As much as we feel for the small investors that owned it, I think the bigger problem is how the U.S. duped the international countries into buying the crap.
 
This business is based on trust.  There is a reason why this stuff was so widely held throughout the world.  For the CDO's, it was the AAA ratings.  For Freddie and Fannie paper, it was the implied guarantee from the government.  "Don't invest in Treasuries...buy Freddie and Fannie debt, it's just as good with a higher yield". 
Sep 26, 2008 4:46 pm

Desperation causes panic causes depressions...

Sep 26, 2008 4:50 pm
bspears:

Desperation causes panic causes depressions...

 
Which is why Paulson's plan should have gone through.  Our own elected officials are screwing us over.
 
The Fed has injected tons of capital.  They've open their discount window. 
 
Buy up the bad debt, restore some confidence.
 
Get the credit markets in order and get banks to loan money out.
 
Get rid of mark to market accounting for this crap.
 
Raise the FDIC limits so people don't go run on the banks.
 
Reinstate the uptick rule.
 
Refinance individual loans and freeze ARM adjustments.
Sep 26, 2008 4:52 pm

Add to that GREED...the firms were looking at great spreads and IF ALL WENT RIGHT.....Big Payouts for the Executives. Even a kid fresh out of University could have figured out the RISK FACTOR.

If they are suggesting one Monday morning they arrived at the office and called down to the Finance Department and asked to see the books.....and were Shocked and Surprised.
Horse Sht and that goes for the regulators too.
Sep 26, 2008 4:58 pm

I had a client who made a statement that if everything went to zero..he hoped he got cancer and died.  I just stared at him.......

 
Sep 26, 2008 5:05 pm

I JUST PRAY that if things get worked out and the markets go back to normalcy, we don't forget how incompetent the politicians are.  We can bitch on this forum, but if we don't keep pushing for a better way of doing things, then we only have ourselves to blame.  Here in my state we have a deadbeat Gov and one of the worst political systems in the country.  But, were is the outcry...to much to think about in their own lives to worry about government. 

Sep 26, 2008 5:22 pm

Bspears....I had a client in this morning ( she and husband in conservative investments ) and she is recovering from a serious illness and she in particular is " Shell Shocked ". You try to take the high road and be objective. Her immediate reaction ....should I sell and go to Cash. A lot of hand holding for some folks , in particular the Seniors or the people close to retirement.

Sep 26, 2008 5:35 pm

Bspears...on a positive note most if not all my clients are in the conservative investment group. The fact is that these are you clients and they have put their trust in your advise and you want to be there when Sh!t happens. Again dealing with emotions not logic. Seeing some of the posts it appears everyone is dealing with the emotional toll it takes on them when assisting their clients through the situation. And on that note....off to the house , a cold beer on the deck and a BBQ.

Sep 26, 2008 5:42 pm
norway401:

A lot of hand holding for some folks , in particular the Seniors or the people close to retirement.

 
Up until recently I was freaking out for people that were close to retirement.  It's not easy for me to see accounts down 15-20%.  It's not easy for some of them to see it either.
 
But I don't think we're too far (if we haven't been there already) from the worst of this.
 
Many of the big names have fallen or are close to falling, yet we're still here.  There are bright spots out there when you get away from the financial sector, but there's too much fear for it to show.
 
What's happening now, thanks to low prices throughout the market, are companies buying back their stock.  This is called the death of the stock market.  People need to realize they can capitalize too.  Take advantage of these prices from companies that have large amounts of cash on hand.
 
The world is not coming to an end.  McDonalds will still serve burgers.  Pepsi will still serve soda.  The world is still growing, which ultimately will be it's downfall, but not in our lifetime.  
 
New innovations will be created and we'll move on.
 
Personally, for my soon to be retired clients, I was worrying too much what the value would be on the day they retired.  But time horizon still exists.  We still need equities 15 years from now...20 year...maybe 30.  Some of my accounts are broken down by time horizon.  It sucks to be down, but we'll make due. 
Sep 26, 2008 9:01 pm
snaggletooth:

There's a ton of blame to go around. There could be an entirely new agency created just to figure all this crap out when blame time comes around.



A big problem was that EVERYONE'S hand was in EVERYONE else's pockets. The investment banks paid the rating agencies for those ratings. The whores.



Congress and Senate got paid too.



As much as we feel for the small investors that owned it, I think the bigger problem is how the U.S. duped the international countries into buying the crap.



This business is based on trust. There is a reason why this stuff was so widely held throughout the world. For the CDO's, it was the AAA ratings. For Freddie and Fannie paper, it was the implied guarantee from the government. "Don't invest in Treasuries...buy Freddie and Fannie debt, it's just as good with a higher yield".





Realistically, we are in such dire straights because of the Credit Default Swap market and teh amount of leverage being used. Do you realize there are over $60Trillion in CDS in the market right now???? This is FAR more than the face value of the underlying bonds they are securing. That means that for every $Billion in bonds that defaults, there are MANY $Billions in CDS's having to be paid up. Worse yet, leverage was used to purchase the swaps, firms did not place the full potential liabilities on their books, so nobody knew what the true potential liability was. There are firms with $500mm in total capital, that have underwritten BILLIONS in CDS contracts. So all it takes is a fraction of those to default, and the firms are FUBAR. On top of that, the original CDO's (backed by subprime loans) were purchased with often times almost no capital. You could buy 100mm of CDO's for $1mm in capital. Your CDO goes from $100mm to $101mm, you DOUBLE your money (which is why firms were making money hand over fist on these, and everyone was doing it). HOWEVER, if the value drops from $100mm to $99mm, you've lost your investment. Imagine when the CDO is written down from 100 to 50. You just lost $49mm on a $1mm investment. Ouch.

Sep 26, 2008 9:56 pm
B24:


Realistically, we are in such dire straights because of the Credit Default Swap market and teh amount of leverage being used. Do you realize there are over $60Trillion in CDS in the market right now???? This is FAR more than the face value of the underlying bonds they are securing. That means that for every $Billion in bonds that defaults, there are MANY $Billions in CDS's having to be paid up. Worse yet, leverage was used to purchase the swaps, firms did not place the full potential liabilities on their books, so nobody knew what the true potential liability was. There are firms with $500mm in total capital, that have underwritten BILLIONS in CDS contracts. So all it takes is a fraction of those to default, and the firms are FUBAR. On top of that, the original CDO's (backed by subprime loans) were purchased with often times almost no capital. You could buy 100mm of CDO's for $1mm in capital. Your CDO goes from $100mm to $101mm, you DOUBLE your money (which is why firms were making money hand over fist on these, and everyone was doing it). HOWEVER, if the value drops from $100mm to $99mm, you've lost your investment. Imagine when the CDO is written down from 100 to 50. You just lost $49mm on a $1mm investment. Ouch.

 
So what's your plan B24?  How many more failures do you see?  Any specific insurance companies or banks you see failing?