Info Thread: Updates on US Financial Markets & Govt interventions

[andviv]

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

so lets say Joe goes out and buys a home for $500,000 at the top of the RE bubble.
...
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)

Actually, it does not.
The person who sold the house to Joe got those $150,000 (or at least part of it, if they sold for a profit).
what did that person do with that money?
Not all of them spent it.
Some (many) invest it wisely or have it available in some bank account.

The money is there.

Joe lost.
The bank (or whoever bought the paper) lost.
the one who sold to Joe in the first place made some. That is the money I'm looking for.

 

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[venom]

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

They bought houses for too much with money they didnt have.

The money didnt disappear just the value. Based on the value they were given even more money to invest.
A house of cards built upon a slippery slope.

Not like there werent perks . Some of the disappearing money was paid out....

Seems the avg wall street worker was getting paid in excess of 200k.

 

[andviv]

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

The money didnt disappear just the value.

I agree 100% with you, the money did not disappear...

so, where is it?

I need to know, to go get it and keep buying assets.

It is that simple!

 

[Russ H]

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

EXPERIENCED INVESTORS: IF I HAVE THIS WRONG, PLEASE LET ME KNOW!! THANKS! -RH

***********

Andviv,

To answer your original question:

Where does the $700M come from?

The govt bails out the banks for $700 M.

Where does the money come from?

The US Treasury prints up $700 M dollars.

It then gives this to the banks, and has an auction of "U S Treasuries"-- securities that people buy that is backed by the faith and strength of the U S Govt.

So the US Govt now has an additional $700M in debt to pay back.

This increases our national debt (by $700M), and we (American taxpayers) start paying off the interest on these Treasuries.

A significant part of each year's budget is now spent on paying off the interest on this debt.

(again, I am not a financial expert, nor do I play one on TV-- so if I've misstated anything here, PLEASE let me know!)

-Russ H.

 

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[JesseO]

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

Government pays 700 billion in USD. If they use current money, not problem...the average Joe will pay it off with their taxes for the next 10 years assuming we don't do anything stupid like go to war and spend billions per month.....

Besides that, we can just print more money! Yay! We will now have tons of inflation which helps average Joe out a bunch since his salary is the same but costs will go up. I think our president needs a good hard economics lessons, and I hope it doesn't come from the kind of people who frequent rental apartments, bed and breakfasts, stock markets, consumer websites, and the like.

Then again, I am a realist and perhaps always will be. Good times, bad times, every time deserves it's hero.
Forgive me and simply edit this post if I say R.P. has it right when it comes to economics and personal responsibility. Let these banks die if they've made bad choices...would you want to make everyone pay for your mistake if it cost millions or billions of dollars? Perhaps I need a new thread....

 

[Russ H]

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

Jesse0-

If I remove from your post above

-inflammatory rhetoric that complains but does not offer positive solutions
-statements/jibes about current administration
-assertions/sarcasm about money spent in Iraq/Afghanistan
-political reference to Ron Paul (RP)

What do I have left?

You tell me.

-Russ H.

PS I get this:

Government pays 700 billion in USD. If they use current money, not problem...the average Joe will pay it off with their taxes for the next 10 years.....

Besides that, we can just print more money! Yay! We will now have tons of inflation which does not help average Joe out a bunch since his salary is the same but costs will go up.

Then again, I am a realist and perhaps always will be.

Let these banks die if they've made bad choices...wouldn't you want to make others pay for your mistake if it cost millions or billions of dollars? Perhaps I need a new thread....

 

[randallg99]

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

Russ - it's 700BIL... not mil.... and you're pretty much on target in the grand scheme of things (besides being off by 699 billion dollars, lol) all of these numbers are so crazy big, that all of us here can't even fathom 700 mil vs 7bil, 70bil or 700bil. Hell, 7 tril!

Andviv - keep in mind, the "savings" mentality shifted from saving cold hard cash to saving in the form of assets/equity. cold cash money was not there initially for it to "disappear," only speculated value.

and Jesse, "letting the banks die" will potentially have harsher impact on the overall economy (says Paulson and Bernanke)... credit will be even harder to get and that alone can create a more depressed economic cycle

read the congressional testimonies for DD. They asked some pretty compelling questions.... it was on radio a lot today.

congress/senate will most likely pass the bailout in some form since they don't want to be responsible for delaying or making the crisis drag out or making it worse than it already is.... I personally don't see how much worse another week will bring to the economy (the markets will probably get whipped, though)

 

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[andviv]

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

Andviv - keep in mind, the "savings" mentality shifted from saving cold hard cash to saving in the form of assets/equity. cold cash money was not there initially for it to "disappear," only speculated value.

Actually, the money WAS there.

Joe bought a condo for $185K
Sold it for $325K
so, Joe made $100K after selling costs, etc

Where is that money?

Where are those $100K

That was REAL money.

Most people spent it.

But some others saved it somehow. There are many Joes out there with cash on their accounts.

The money is out there...

I'm not trying to track down the lost "value". I don't care about that.
I'm tracking down the real money.

If that money is not real then how come Buffett is investing $5B in the market today? That is REAL money. He's got way more than $5B sitting in the bank, and that is not "value", it is real cash.

401(K) and other pension plans keep bringing money in. What are they doing with it? How do I sell them an investment that makes sense to them?

Google, Microsoft, Berkshire Hathaway have cash.

Many successful doctors, lawyers, entrepreneurs are sitting on piles of cash. That is real money.

I have a few co-workers that have $100K or more on their savings accounts doing nothing.

How do I get to them? What investing can I put together that makes them want to invest again?

My research right now is focused on what investments are those that they want, so I can provide that to them.

If I can answer these two questions correctly I will make thousands, maybe millions of dollars:
a) Who's got the money?
b) What do they want to invest in?

 

[NoMoneyDown]

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

and Jesse, "letting the banks die" will potentially have harsher impact on the overall economy (says Paulson and Bernanke)... credit will be even harder to get and that alone can create a more depressed economic cycle

congress/senate will most likely pass the bailout in some form since they don't want to be responsible for delaying or making the crisis drag out or making it worse than it already is.... I personally don't see how much worse another week will bring to the economy (the markets will probably get whipped, though)

I keep hearing all this frantic call to action to get this package passed and the implications if it doesn't get passed NOW, but I saw a clip yesterday in a hearing in which one of the congressmen asked specifically to Bernanke and Paulson the *details* of all this collapse (since he wanted to know why it HAD to get pushed in days and not weeks), and was met with crickets.

Another thing that REALLY troubled me with the first draft by Paulson was the fact he wanted no legal ramifications to enter into the equation. Very suspicious, if you ask me. Very.

 

[andviv]

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

NoMoneyDown, conspiracy theories don't make things better.
They don't help you or anybody to move forward.
They don't have any positive outcome.

Probably we should be focusing on other questions, like: What will change when they pass they bailout plan? and, more importantly, How can I profit from it?

 

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[NoMoneyDown]

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

andviv - While I respect your input, I'd be hesitant to call them 'conspiracy theories' (especially after dealing with the attitude and directions of our government over the last 6 or so years). I do. however, agree with your last paragraph in how the outcome can benefit us and the US as a whole, although, even in it's form today we aren't exactly sure what will transpire.

 

[lee]

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

Probably we should be focusing on other questions, like: What will change when they pass they bailout plan? and, more importantly, How can I profit from it?

Imho, it will devalue the dollar driving oil and gold to new highs. So those two are my bets for the future, altough recessing economy will slow deman down for oil, OPEC will probably cut the output again and the relation of the dollar to oil is just to big of a factor.

And I don´t think bank will start giving out credits like before immediatly, nor will the general public take credits in the height of earlier times for a while.

Trust has been hurt and humans are forgiving but they need time.

All short term(1-3years) view.

oh and btw, imho trying to stregthen the economy just by giving out credits(or making credits easy available again) is, imho setting the stone for the next credit crisis. t´s like they´re trying to restart a software with a major virus in it.

 

[J_PAL]

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

Has anyone seen "Zeitgeist - The Movie: Federal Reserve" ? It explains a lot what's happening on the market and what may happen next. It's a lot about conspiracy so I'll include only the first 2.

Knowledge is power

[ame="http://www.youtube.com/watch?v=_dmPchuXIXQ"]YouTube - Zeitgeist - The Movie: Federal Reserve (Part 1 of 5)[/ame]
[ame="http://www.youtube.com/watch?v=lBZne09Gf5A"]YouTube - Zeitgeist - The Movie: Federal Reserve (Part 2 of 5)[/ame]

If anyone interested then Part 4 talks about new currency called Amero and "New World Order" aka "One World Government".

 

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[Russ H]

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

. . . trying to stregthen the economy just by giving out credits(or making credits easy available again) is, imho setting the stone for the next credit crisis. t´s like they´re trying to restart a software with a major virus in it.

I agree, and disagree.

I think that some folks (Bernanke and Paulson) are trying to prop up the financial markets to restore trust. Others are trying to look at the sources of the problems (e.g., one being people walking away from their loans). If we address the sources of the problems, and figure out how to correct them (or at least prevent them from continuing to happen), then we are on our way to a "cure", IMO.

-Russ H.

 

[venom]

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

Of course it will improve things. Its done by the guvernment and they always get it right

Goes back to Rk saying that we have a currency and it needs to keep moving. Unfortunately our "economy" is based on spending and if people arent spending......

So has Buffet lost it in his old age. Or is buying into MS a good thing ? It sure looks like the fat cats will make out ok.

 

[venom]

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

andviv
whats your product ? Doesnt matter how much money is "out there" they have to want/ need your product. Or you need to be a "salesman" and sell it to them.

I keep thinking of the joke about the gold rush. The sure way to make money was to be the one selling the shovels / pans.

So who will be building those offshore platforms. Who makes the drills ? etc

 

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[RJP]

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

What the Aussies think of the Bail-out:

Michael West on why the US government's bailout plan should include salary caps

A couple things that stand out:

"The four biggest investment banks on Wall Street, which included Bear Stearns and Lehman Brothers, shelled out $US30 billion in bonuses last year".

"Paulson himself has shares in Goldman whose value was estimated at $US700 million. He is a direct beneficiary of his own bail-out proposal blind trust or no blind trust".

 

[unicon]

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

Major companies have committed to massive stock buybacks including Microsoft.

One would suspect that this commitment to equity purchases are to get a better return and buy stock at a discount before more inflationary impact.

This along with Buffet letting loose of cash would be a beginning push for equities and giving up on cash as an asset.

 

[china]

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

One thing about Buffett's billions though... He gave most of them to charity in the last couple of years. He's probably playing with money he pledged to them right now. (And he gave it to Bill and Melinda Gates' charity, so they may be playing with charity money too.)

This bailout is not good for most of us.

The most peculiar thing about it is that it is being sold to us exactly like the War in Iraq was.

 

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[andviv]

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

"Paulson himself has shares in Goldman whose value was estimated at US700 million. He is a direct beneficiary of his own bail-out proposal blind trust or no blind trust".

:bsflag:​

When a person takes office (meaning, he accepted a government position like his) they are mandated to sell all holdings. He did have a tax break when taking his position, though:
From Fortune Magazine:
One fringe benefit was the capital gains tax exemption given to federal appointees who have to sell holdings before they take office: When Paulson sold his $500 million of Goldman Sachs stock, he saved tens of millions of dollars.
sorry, couldn't find a link to the article online, but check it out for yourself: Fortune, Vol. 158. No. 6, September 29, 2008, page 76

One thing about Buffett's billions though... He gave most of them to charity in the last couple of years. He's probably playing with money he pledged to them right now. (And he gave it to Bill and Melinda Gates' charity, so they may be playing with charity money too.)

Another one....

:bsflag:​

I want to believe this statement is being made out of pure ignorance and not with mean intentions...

Warren Buffet did NOT buy shares personally... the company he controls, Berkshire Hathaway, inc, is the one that bought the shares.
The money he pledge to the Bill and Melinda Gates Foundation is his, not his company's.

Warren Buffet is not the same as Berkshire Hathaway. They are two different legal entities. It is not that difficult to understand, really.

Same applies to Bill and Melinda Gates.

The most peculiar thing about it is that it is being sold to us exactly like the War in Iraq was.

Unfriendly reminder... we don't discuss politics here.

 

[andviv]

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

andviv
whats your product ? Doesnt matter how much money is "out there" they have to want/ need your product. Or you need to be a "salesman" and sell it to them.

I keep thinking of the joke about the gold rush. The sure way to make money was to be the one selling the shovels / pans.

So who will be building those offshore platforms. Who makes the drills ? etc

Correct, and that is why I am asking.
If you want people to invest with you, you need to provide them with what they are looking for.

My targeted audience right now is passive investors, small business owners that generate excess of cash and have not time to manage their investments. That is where I see the opportunity. These entrepreneurs spend their productive time managing their businesses, and want to have a better return on their cash investments.

 

[RJP]

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

The quote I referenced - Re: Paulson and his Goldman shares, was a quote from the article I linked. I really have no idea in regards to Paulson and his Goldman shares. I do remember hearing Bob Brinker say that Paulson had them in a blind trust. (I believe this is what former treasury secretary and Goldman alumnus, Robert Rubin did). (I don't know if members of the executive branch are forced to divest, or if they can in fact use a blind trust. I believe it comes down to the judges decision). I know at the time of the appointment, there was a lot of talk going both ways. (and probably a lot of magazine articles, etc...)

Remember, this bailout money, in the end, comes from us. (Joe tax payer). So ... if Paulson goes back to Goldman in four months, his salaries and bonusus may be comming from us. We may pay for it in devalued dollars by way of high inflation. (emphasis on "if").

 

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[Double D]

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

Wow. Alot of spirited debating on this issue. I am far from being any expert on this matter but I do have a little common sense. I believe we can debate what got us here and point fingers and such but reality is this bailout must happen. Now I dont have an exact time frame as to how soon but I am guessing every financial market on the globe is watching and waiting. My biggest concern is will this work and if so for how long. How much more is out there that we dont know about? I mean really, how can they put a number out there so quickly. Like I said I am far from an expert but I believe this thing could blow up to be a few trillion. Then there is the auto industry........... :smx4:

 

[Russ H]

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

WaMu (US' largest Savings & Loan, ~ $310B in assets) seized/sold:

http://www.nwcn.com/topstories/stories/NW_092508BUB_wamu_sale_jpmorgan_chase_TP.b085ac2e.html

-Russ H.

 

[randallg99]

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

Russ - you better update that article.... looks like the "deal" fell through...

the bail out stinks on a few different levels- philosophically, in a free market enterprise, the government is only to rule the law of the land without interfering with capital markets.

financially, the government should not be the first line of creditors.... the companies who risked their capital and profited from it should be the ones who lose their bets...

ideally, whatever the gov't makes from the bailout should be distributed to the masses if they choose to lay the money out ...

700 bil = $2400+/- for every man, woman and child in USA.... staggering numbers...

 

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[RJP]

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

In regards to Buffett's Goldman deal:

Buffett bought prefered shares yeilding 10%. He also gets warrants to purchase 5 bil of common at $115. (Goldman plans to sell 2.5 bil of common to the public also). I read Goldman announced that the issue price of their common will be $123 per share, giving Buffetts warrants a $8 per share boost right off. He's got the capitol to get the deals and is a keen negotiator. That's why he gets 20% yoy for 40 or so years. Did he do it just to bring confidence to the market?? Who knows. If the market falls, he stands to loose a bundle. I'm sure he knows his financial history well ...... the Rockefellers were heavy buyers in 1929 also. What to think about this?? Are we seeing the "big" guys comming out to try to save the market, or just simple shrewd investing?? Or is he convinced Goldman will survive to gooble up the smaller banks? Plus .... he's worth what ..... like 62 bil. What's 5 bil. to him?? Besides, who's money was it. Was it his or Berkshire Hathaways? Does anybody know? I don't think I have see it spelled out either way. As far as "his money" or Berkshire's money" .... seems like a moot point. I read that he keeps 90 precent of his net worth in Berkshire stock (someone correct me if I am wrong; it's just what I read) Or .... is he a pimp and a shill for stocks?? Was this an orchristated move to lure us simple schleps into buying the financials as some have suggested?? I don't have a clue.

There is this:
Sept. 24 (Bloomberg) -- Billionaire Warren Buffett, calling turmoil in the markets an ``economic Pearl Harbor,'' said his $5 billion investment in Goldman Sachs Group Inc. is an endorsement of the Treasury's $700 billion bank rescue plan...

Can someone give this guy a call????????

 

[memenode]

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

This whole crisis has caught me right in my first steps towards the achievement of my goal, which is a specific amount at a specific date next year (a year from now basically). All of a sudden I find myself wondering if the dollar will be where it is by that time. I ended up translating my goal into the silver equivalent.

I no longer believe in "money" as such. It's all so worthless in the long term and all that's really valuable is the actual real stuff, from the chair you're sitting on to gold bullions and real estate. Money? It's just a sinking boat and it will always be a sinking boat, something you jump on while it still floats as you run towards the REAL wealth.

The reason I pose this analogy is because as I came to understand it recently, all money in the western world is backed by a single thing: someone's pledge of debt. When someone borrows 100 000 USD from a bank, the fact that he owes it to the bank is really the only thing which gives those 100 000 USD any value. It's a debt based economy. This is also how the central bank can print money out of thin air. As long as there is someone pledging debt to it for the given amount, they can print that amount.

And this is long-term unsustainable.

Anyway, not to rant any further, I would suggest this documentary: [ame=http://video.google.com/videoplay?docid=-9050474362583451279]Money as Debt[/ame] and for news and commentary on economy: LewRockwell.com. Some might consider it to be a "fringe" source, but I believe them to be right.

My call on the bail out: It's a bad thing. It will make the final bust even worse than it otherwise would. Government and the Fed should stop interfering and let the market clean itself up.

Meanwhile, I am putting some of what little surplus I have into silver and more stable currencies. I don't think USD can last much longer.

 

[china]

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

Unfriendly reminder... we don't discuss politics here.

Then why are we even discussing Washington DC and this bailout plan? The bailout plan is nothing but politics. It's being formulated by politicians, not by corporate or community leaders.

I didn't mention either party and I think both are responsible so I'm not sure what you mean about discussing "politics" much less the "unfriendly reminder."

 

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[Russ H]

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

china-

Andviv's "unfriendly reminder" was specifically to YOU, since you have been called on breaking forum rules before. I thought he put it rather nicely.

These are not the richdad forums. Coming here and spouting completely undocumented assertions is not welcome (or tolerated, for very long):

The most peculiar thing about it is that it is being sold to us exactly like the War in Iraq was . . .

One thing about Buffett's billions though... He gave most of them to charity in the last couple of years. He's probably playing with money he pledged to them right now. (And he gave it to Bill and Melinda Gates' charity, so they may be playing with charity money too.)

We had hoped that, over time, you (and other richdad alumni) would see that much of what we talk about here is:

1. How things are happening (the reason for this thread)
2. Why things are happening (with politics removed, by design)
3. How we can anticipate the next moves, and prepare accordingly.

China, this site is chock full of really great people from all walks of life who unselfishly contribute their expertise and thoughts on things financial, esp as they relate to financial freedom, and accelerated plans (retiring in 3-8 years, as opposed to working for 30 years).

We're trying to help each other.

That's the focus.

-Russ H.

 

[memenode]

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

To be honest this world would be better off if it was rid of politics altogether, just like on this board.

Free Market, and nothing but the Free Market!

My political views are that I am apolitical. Unfortunately, sometimes when you try to avoid politics, it wont leave you alone, which might be part of the reason it sometimes seems hard to restrain political comments.

That said, back to (trying to) be apolitical.