Info Thread: Updates on US Financial Markets & Govt interventions

[Russ H]

DO NOT POST COMMENTS-- THIS IS A "OVERVIEW" THREAD
TO PROVIDE ACCESS TO ARTICLES ON WHAT'S HAPPENING
TO US FINANCIAL MARKETS.

Your comments are encouraged--
just start a new thread!

Thanks, Russ H.

If the Stock Market is not your area of expertise, it's easy to get overwhelmed or confused by all the talk about what's happening to the US Financial Markets right now.

On this thread, I'll post comprehensive daily summary articles that describe in simple terms what's going on.

Each takes about 5 minutes to read.

Here's the first-- which talks about all kinds of things-- AIG, Freddie and Fannie, why some of the other ones have been allowed to fail, and more:

http://finance.yahoo.com/banking-bu...t-Crisis-Since-1930s-With-No-End-Yet-in-Sight

Knowledge is power. Happy reading.

-Russ H.

 

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[Jonleehacker]

re: Info Thread: Updates on US Financial Markets & Govt interventions

As scary as "no end in sight seems" I can't help think that these are the times when smart investors get themselves positioned to make a lot of money.

How do you think the smart money is preparing to profit from all this Russ?

 

[michael]

re: Info Thread: Updates on US Financial Markets & Govt interventions

I'm sure a documentary investigating the causes of this meltdown would be something which would appeal to the millions of 'mom and pop' investors who have seen their retirement funds plummet and houses foreclose.

It is interesting to see all the people who simply entrusted their savings with a fund suddenly take an interest in the financial markets yet they seem to struggle to understand what is happening. No big surprise there, we struggle to comprehend it all. Something similar to I.O.U.S.A. which can explain the fiasco to even the biggest mug might be popular.

BTW as far as stocks go maybe it is time to start buying up brewery stocks :smx6::smx6: we may just see sales skyrocket soon.

 

[NoMoneyDown]

re: Info Thread: Updates on US Financial Markets & Govt interventions

I heard last night that a Chinese financial corporation is looking into buying WAMU(?) ... Talk about scary.

 

[ZenSatori]

re: Info Thread: Updates on US Financial Markets & Govt interventions

I was going to start a thread with a similar theme to what Jonleehacker alluded to. For the experienced investors out there, I know that you can't really predict when the markets (equity, real estate, etc) have bottomed out, but what signs do you look for that tell you, this is the time to start thinking of making a move?

Historically, after every major sell off, or downturn, the markets seem to come roaring back. Even now, it seems the markets are panicking so much, that even fundamentally sound companies are taking a hit (which in and of itself is an opportunity) because of the "guilt by association" mentality.

So basically, what I guess I am asking is, how are you profiting from the downturn, or what are you doing to position yourself to profit from the eventual recovery?

 

[Russ H]

re: Info Thread: Updates on US Financial Markets & Govt interventions

OK, more updates:

U.S. works on bank debt plan, UK targets shorts - Yahoo! News

It's going to be a busy weekend for the powers that be.

But it appears that a lot of professional investors are calming down a bit, and like where things are going.

-Russ H.

PS For those who have asked "how can someone profit from what's happening?", the answer is, on a large scale, be one of the banks that has swooped in and bought other investment entities (BofA buys Merrill, or Lloyds of London buying up England's largest mortgage lender, HBOS, in an all-stock deal:

"HBOS shares, which had slumped due to fears about its funding, soared 40 percent, and the British government promised to rewrite competition laws to let the deal go through.")

On a smaller scale, I'm really not sure. Sorry. :shrugs:

 

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[china]

re: Info Thread: Updates on US Financial Markets & Govt interventions

Even now, it seems the markets are panicking so much, that even fundamentally sound companies are taking a hit (which in and of itself is an opportunity) because of the "guilt by association" mentality.

What you have to worry about (with some of the companies that look fundamentally sound) is that they aren't huge holders of a failing company or that the failing company owns a huge number of shares in their stock.

I own a stock that makes a lot money from "financial investments." Unfortunately, they never tell us what these investments are so it was quite the shock when the stock took a major dive because they had invested in subprime mortgages. The company took a big hit but it didn't fold because these "financial investments" aren't the core thing for the company -- it's just what they invest their "extra cash" in.

 

[cmartin371]

re: Info Thread: Updates on US Financial Markets & Govt interventions

I heard last night that a Chinese financial corporation is looking into buying WAMU(?) ... Talk about scary.

Ouch!

 

[Russ H]

re: Info Thread: Updates on US Financial Markets & Govt interventions

I heard last night that a Chinese financial corporation is looking into buying WAMU(?) ... Talk about scary.

Ouch!

Are you sure it wasn't Morgan Stanley you heard about?

"Morgan Stanley is in merger talks with U.S. bank Wachovia Corp (WB.N) and at the same time discussing the possibility of Chinese sovereign wealth fund China Investment Corp raising its stake to as much as 49 percent from the 9.9 percent it acquired in December, sources familiar with the plans said on Thursday."

All of this is in the links I posted above-- these are long articles, but they do an excellent job of summarizing what's going on.

-Russ H.

 

[Russ H]

Re: Due Diligence: Here's what's happening to US Financial Market

OK, here's the next update:

Toxic-debt plan and short-selling curbs lift markets - Yahoo! News

Looks like things are headed in the right direction.

-Russ H.

 

[AroundTheWorld]

Re: Due Diligence: Here's what's happening to US Financial Market

As scary as "no end in sight seems" I can't help think that these are the times when smart investors get themselves positioned to make a lot of money.

Here are some of the "things" I've been reading about and hearing that other's are doing...

Get $ (and yourself) out of US... (Jim Rogers)
Invest in alt energy and alt energy infactructure type companies
Invest in gold and commodities
If your market is REI - - - invest for cashflow. Invest in properties that will continue to have tenants during difficult economic times.

 

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[NoMoneyDown]

Re: Due Diligence: Here's what's happening to US Financial Market

Are you sure it wasn't Morgan Stanley you heard about?

"Morgan Stanley is in merger talks with U.S. bank Wachovia Corp (WB.N) and at the same time discussing the possibility of Chinese sovereign wealth fund China Investment Corp raising its stake to as much as 49 percent from the 9.9 percent it acquired in December, sources familiar with the plans said on Thursday."

All of this is in the links I posted above-- these are long articles, but they do an excellent job of summarizing what's going on.

-Russ H.

It's very possible as I just heard a sound bite on a news program while on my laptop (I'm not that good of a multi-tasker - at least in that sense of the word). I could have sworn the announcer specifically said a chinese financial corporation was looking into purchsing WAMU, but could have been mistaken.

 

[Russ H]

Re: Due Diligence: Here's what's happening to US Financial Market

NoMoneyDown-

I'm guessing you heard that WaMu had put itself up for sale (big news) and also heard that Morgan Stanley was considering selling up to 49% of its shares to China Investment Corp (they already own 8.9% of MS).

Again, both are big news.

-Russ H.

 

[venom]

Re: Due Diligence: Here's what's happening to US Financial Market

Learn how to speak Chinese ?

Stay away from "funds"
Look at buying specific companies that are sound and will do well with a crummy economy
In the past I have done well in the market by buying when the market is rocked. Look for great companies that go down as collateral damage. Example is maybe etrade goes down because its a brokerage company.
Motley fool is saying this is bigger than Enron and I would have to agree.
Rob

 

[AroundTheWorld]

Re: Due Diligence: Here's what's happening to US Financial Market

Motley fool is saying this is bigger than Enron and I would have to agree.
Rob

Bigger than Enron? They are fools over there then. It isn't even in the same planet.

 

[yveskleinsky]

Re: Due Diligence: Here's what's happening to US Financial Market

Here are some of the "things" I've been reading about and hearing that other's are doing...

Get $ (and yourself) out of US... (Jim Rogers)
Invest in alt energy and alt energy infactructure type companies
Invest in gold and commodities
If your market is REI - - - invest for cashflow. Invest in properties that will continue to have tenants during difficult economic times.

Sonya,

What do you think of this advice, and are you and Doug planning on implementing any of it?

To be honest, I don't know much about the stock market but I do know what I see around me day-in and day-out (which may be a microcosm of what is happening in the stock market/big companies going under), and that is almost everyone carrying a crippling debt load with no way to pay it off except by borrowing more and more money.

I don't see a solution to this epidemic, and it scares the holy hell out of me, because I don't see how if our Country continues on the financial path it's on we can bypass another great depression.

It's enough to make me want to buy a private island and start my own Country!

 

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[Russ H]

Re: Due Diligence: Here's what's happening to US Financial Market

Motley fool is saying this is bigger than Enron and I would have to agree.

Ah, Spidey, always the kidder.

Your comment reminds me of the line by Lina Lamont in Singing in the Rain: "Why I make more money than Calvin . . . Coolidge . . . . . . . Put together!"

Yeah, it's bigger than Enron.

Enron was prob a couple hundred billion, all told.

This is going to be over a trillion-- possibly 2 trillion worldwide.

Beats the alternative, though!

-Russ H.

 

[china]

Re: Due Diligence: Here's what's happening to US Financial Market

To be honest, I don't know much about the stock market but I do know what I see around me day-in and day-out (which may be a microcosm of what is happening in the stock market/big companies going under), and that is almost everyone carrying a crippling debt load with no way to pay it off except by borrowing more and more money.

It's funny you should post this.

I read this somewhere else today: "The problem is quite simple, all over the West: there is too little earned income at the foundation of the economy to support massive debt and thus overinflated asset prices. Looking at American households alone, in 1978 their total debt came to 79% of total employee compensation (wages, salaries, pension contributions, etc.). Today, this figure has more than doubled to 174%."

Obviously people cannot afford to carry 174% debt compared to compensation. Debt needs to be lower, therefore assets need to cost less.

This government plan to "buy" worthless assets only stalls correcting the problem, but it seems our government is good at that. They apply bandaids to all bleeding, whether it's from a cut or from a severed aortic artery.

People do profit during downturns, but it remains to be seen what will happen in this downturn.

 

[AroundTheWorld]

Re: Due Diligence: Here's what's happening to US Financial Market

Here are some of the "things" I've been reading about and hearing that other's are doing...

Get $ (and yourself) out of US... (Jim Rogers)
Invest in alt energy and alt energy infactructure type companies
Invest in gold and commodities
If your market is REI - - - invest for cashflow. Invest in properties that will continue to have tenants during difficult economic times.

Sonya,

What do you think of this advice, and are you and Doug planning on implementing any of it?

We are implementing some of this. And, considering others...

Here are some interesting resources: Hot Commodities and Bull in China (I think that's it) by Jim Rogers.

itulip.com for the alt. energy idea.

the dollar crisis is a tough - but good read.

 

[andviv]

Re: Due Diligence: Here's what's happening to US Financial Market

I am 100% sure that I don't understand money.

If there will be 1 trillion or two in losses... then I'd expect that somewhere there was a couple of trillions in gains (there has to be something in there before it "disappears").

Where is that money now?
Who's got it?

It did not get "recalled" and the government put it out of circulation, right?

So, where is it?

 

[NoMoneyDown]

Re: Due Diligence: Here's what's happening to US Financial Market

NoMoneyDown-

I'm guessing you heard that WaMu had put itself up for sale (big news) and also heard that Morgan Stanley was considering selling up to 49% of its shares to China Investment Corp (they already own 8.9% of MS).

Again, both are big news.

-Russ H.

I remember back in the 80's when the U.S. economy was seeing high inflation and Japan was at the top of the tech world, it was an almost daily news item to hear some Japanese firm buying another chunk of U.S. real estate. Even some cities and universities started tilting more Japanese (e.g., a university near my hometown at the time changed their name from Salem University to Salem-Taekyo University and the town in which the university was located would routinely advertise it's Japanese "sister" city). I vaguely recall some people thinking we were slowly headed to a Japanese "take over". Japan eventually started going downhill, the university and town I mentioned reverted back to their original names, and so on. I think China sits in a better (albeit different) position now than Japan back in the 80's, however, I don't think we have reason to fear of a wide spread "take over". I figure China will continue to enjoy a strong economic status for the short term, but their lead will eventually erode, too.

 

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[unicon]

Re: Due Diligence: Here's what's happening to US Financial Market

Debt on this scale is not complicated, it is paid back by the lendor or borrower, but it is always paid back

If you are the responsible party it takes greater management time to manage debt, multiply management time X times the debt

The greater the debt (uncontrolled) the more uncertainty

Debt increased by lawlessness and character flaws is either faced up to or pushed off by temporary restructuring creating more uncertainty

An individual with investment funds will decrease his debt in this enviornment to increase his certainty as a non-normal market place is dangerous

You have contraction and less real production

Since the govenment has a capacity problem it can only print money buying time after lending to its capacity for bailouts

With no upside and no rules you have no assets (but yourself) all assets are at risk of turning into liabilities so cash reserves must go up.

We are going into contraction with low interest rates while printing money to nationalize debt

Slow growth debt management with liquidity until certainty is attained once again

No rules = No asset = No control = No leverage

No choice for even the most knowledgable investor to contract and survive for that matter

The discipline now is Balance - In "Spades"

 

[Russ H]

Re: Due Diligence: Here's what's happening to US Financial Market

Wow- another big change:

Last major investment banks change status - Yahoo! News

More to come.

-Russ H.

 

[RJP]

Re: Due Diligence: Here's what's happening to US Financial Market

You can't make this shit up..................... We're toast!!!

Invest safely ....... buckle in ............. weather the storm.

Rock-on

 

[AroundTheWorld]

Re: Due Diligence: Here's what's happening to US Financial Market

You can't make this shit up..................... We're toast!!!

Invest safely ....... buckle in ............. weather the storm.

Rock-on

Hey RJP - It would be really helpful to me (and I would guess other's here) if you would explain what this particular change means to you - - - rather than just stating it is bad. I've appreciated your insite into these other news stories.

 

[RJP]

Re: Due Diligence: Here's what's happening to US Financial Market

Sorry......... sometimes emotions take over.


For one thing it meant that the "temporary" lending facilities the the fed created will become permanent.

"...Being a bank holding company would also give the two access to the discount window of the Federal Reserve. While they have had access to Fed lending facilities in recent months, regulators had planned to take away discount window access in January..."

And from Bloomberg:

The change suggests the inclusion of instruments such as car and student loans, credit-card debt and any other troubled asset. That may force an eventual increase in the size of the package as Democrats and Republicans in Congress negotiate the final legislation with the Bush administration, analysts said.
``The costs of the bailout will be significantly higher than originally considered or acknowledged,'' said Josh Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. ``How, given these changes, can the administration and Federal Reserve believe they are being forthright in their unrevised expectation of future losses?''
In another change today, the Treasury said it would limit its $50 billion plan for insuring money-market funds to those held by investors as of Sept. 19, excluding any subsequent contributions."

 

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[andviv]

Re: Due Diligence: Here's what's happening to US Financial Market

wow, what a smart move. If my current company's status would not be advantageous but there is a way to change it, then go ahead. Another proof of how the smart money moves. Can't find money in the current market? Change your company so that you can get the money that is available...

Now, how can I do something similar and get access to the money that has been made available?

 

[Russ H]

Re: Due Diligence: Here's what's happening to US Financial Market

Good explanation of what's happening:

Investment bank model abandoned; bailout debated - Yahoo! News

-Russ H.

 

[venom]

Re: Due Diligence: Here's what's happening to US Financial Market

Turning Japanese turning japanese I really think so ....lala
Hmm maybe its japenese we should learn ?

"Japanese Invasion! Mitsubishi Financial Group Investing $8.4 Billion In Morgan Stanley "
Japanese-Financial-Group-Saves-Morgan-Stanley

There were Chinese companies trying as well.

Not all companies are swimming in debt . Many companies have cash . Like Nike, Microsoft, Aventis etc

All I know for sure is all this government regulation is not good.

Rob

 

[g-dogg]

Re: Due Diligence: Here's what's happening to US Financial Market

I am 100% sure that I don't understand money.

If there will be 1 trillion or two in losses... then I'd expect that somewhere there was a couple of trillions in gains (there has to be something in there before it "disappears").

Where is that money now?
Who's got it?

It did not get "recalled" and the government put it out of circulation, right?

So, where is it?

the way i see it is, a few years ago interest rates were low, credit was easy and people were able to get mortgage loans for next to nothing, so everyone was buying house way out of there reach. the decrease of supply and increase of demand on houses raised the prices of these houses. so lets say Joe goes out and buys a home for $500,000 at the top of the RE bubble. Unfortunately Joe only makes $60,000 so he soon realizes he really cant afford this house, he tries to sell the house but fails because the market is drying up. Joe ends up declaring bankruptcy, so the house goes back to the bank. the houses value is now $350,000. the bank looses $150,000 (i.e. the money literally disappears) and is now stuck with a house that they cant move so its price continues to go south. now picture the bank having like a million of these cases.