The $700 billion dollar bailout

Random Ramblings
21

I know we don’t like doom and gloom on the boards, and if you search, you’ll see my previous posts about depression part 2…

I don’t think the bailout package is enough. Call it women’s intuition, maybe my debt aversion… there’s pain, and it’s on the way.

Something just doesn’t feel right. Banks have been shady in their practices, who knows that they’ve come forth with all the write downs?

Durable goods orders were down at last report…but Christmas is around the corner… Hey, let’s approve this bailout package, and consider another stimulus pkg… and make the consumers happy long enough to get through the election. happy holidays everyone.

let’s see how retailers are doing…gap is closing stores last i heard. airlines are laying off. if people have any sense, they will not overindulge this holiday season. But of course, we know they do not.

22

I agree with realnew…This bailout package will be imho a huge failure…A wasted $700 Billion and will continue to make Americans the laughing stock of the world…We are in for a prolonged period of negative earnings…The refi wave has crumbled and there is nothing that can stop this from getting worse…There is simply too much debt…

23

Let’s remember a few things here…

  1. This bailout package MAY avert what Warren Buffets says is this country going over a precipice. It WILL NOT avert a severe correction in our economy.

  2. There is NO WAY AROUND the FACT that we are headed for a MIND NUMBING RECESSION. This MESS took years to develope and as Rookie has already said “this won’t be a V shaped recession.”

  3. The next phase of this will be MASSIVE job losses. This IS going to happen as the consumers our country runs on hunker down.

  4. The ONLY thing this bailout accomplishes is an ORDERLY repricing of risk and assets. Without it??? The repricing would be CATASTROPHIC.

  5. I fully expect housing prices to continue to fall as lending tightens. Foreclosures will continue to rise and with job losses. My guess is we could see a 50% drop in housing prices from peak to trough.

  6. Every person reading this post should make sure to look at the link Rookie attached to his post. I completely agree with that scenerio.

Finally…

What Mike Rossi has been warning about for years here is coming true. History NEVER repeats itself EXACTLY the same way, so we won’t see soup lines, and runs on banks because mechanical changes have been put in place to avert those scenerios. My personally thinking is that this FINALLY starts to bleed into the higher income levels. When you have a 2 year waiting list for new Ferrari’s something is not right with our world. That may seem like an overly simplistic view, but I can tell you that in my experience these events always end the same way.
Just because you make a PILE of money DOES NOT mean your any smarter with it than the average Joe. CNBC this morning had a interview with a VERY well known Wall St. expert. She related a story of a client with a 800 FICO score and a 7 figure net worth that applied for a $450,000 mortgage on a home in Darian Conn. He was approved for the loan with no problem…

EXCEPT for the 11% INTEREST RATE!!! :shocked :shocked

Welcome to the new world folks. A world of tight credit, high debt, BIG TIME unemployment, and a economy WORLD WIDE that will soon be on it’s knees.

The BRIGHT SPOT???

If you have been smart enough to stock pile CASH…the deals available to you in this enviroment will be talked about for GENERATIONS.

There was a very good reason for me NOT buying and holding properties for the last 3 years. I was and still am building cash. I had a HUGE advantage living in New England in the late 1980’s. We had the EXACT same version of what is going on NATIONALLY right in my backyard. The Banks here were closed by our Governor on Jan 1 1990. This completely STOPPED credit flows and was caused by WILD specualtion in real estate. What happened here was the same thing that is going to happen to our country now. BIG jumps in unempoyment. PLUMMETING RESIDENTIAL HOUSING PRICES which lead to massive lay offs. This flowed right into the commercial real estate markets a year later and it took 10 years for it to come back. I purchased 3 bedroom condos during this time for $10,000 EACH!!! They were selling for $140,000 during the boom. I bought 5 of them unfinished (drywall in but no finish plumbing, electrical, trim.) These condos were bought with CASH, rented and later sold in 2004- 05 for $200,000 each. I had a TOTAL of $100,000 into all 5 of them. Those day are coming back REAL SOON!!

This is going to get worse…but DO NOT be fooled. The bargains that will be laid at your feet with make the best deal you have ever found look like you over paid!!

BUILD CASH, BUILD CASH, BUILD CASH!!

24

I’ve been thinking a lot lately and wanted to put a few questions out there.

FD-

One of the things I see coming is inflation. That makes me leery of stockpiling cash. Gold is already very high, but could keep going? My main business is farming, and we are in a good position with a lot of cash reserves going into next year. I am trying to decide if I should be prepurchasing expenses(raw materials) to protect myself or sit on cash to watch for oportunities to buy and expand.

I also keep asking myself if slow death is preferable to just letting things melt down. I have thought for quite a while that what many in this country need is a good recession/depression to learn from. Would it be painful? Yes. Would people come out of it with a whole different approach to finance and business? Yes. Look at the strength in the generation that went through the Great Deppression. That experience as much as WWII is what propelled us into superpower status in the world.

Another thought I had is: If our going down is taking down everyone else, (Russia’s, China’s, Europe’s, markets are also taking a beating). Who gains ground in a meltdown? In other words, if we all go down equally, our standard of living won’t change relative to others, right? The adjustments will be long and painful, but in the end what will have changed?

Lastly, the prosperity of countries has historically been tied to two things. The amount of natural resources that it posesses, and the stability of its government. We have had both of these things in great quantity, but with prosperity came a belief that we didn’t need to use our resources for various reasons. While things were going great, we didn’t mind being dependent on other countries for our resources, and as a result we are now shifting a lot of our wealth to others. In a resession, this will have to stop and we will have to go back to producing our own energy.

The only real debt that I am worried about right now is debt that I have on a development that I am involved in. If lots quit moving, I start bleeding interest.

My dad sat outside of his finance guys office at Merril Lynch back at the start of these problems and came away sobered. His guy was phoning client after client telling them three things. Live below your means, get out of debt as fast as you can, and hold on tight.

DB

25

These bargains are already here in Dallas. =)

26

ds-brown,

I agree with your opinions on this situation. I have always believed that IF the U.S. States DID NOT have the depression of the 1930’s the outcome of WWII may have been completely different. I think you hit it on the head. The brutally tough times Americans endured for over 10 years before entering the War probably made all the difference. That generation didn;t know anything BUT SACRIFICE. That was NORMAL to them. What we have now is the POLAR OPPOSITE. NO sacrifice, not even the THOUGHT of it. I want EVERYTHING, and I want it NOW.

I also believe that a real DEPRESSION could teach a lot of dopes here how money REALLY works. The problem with that scenerio is it will take a LOT OF US down with it. I would much rather see us doing what looks like this bail out. Let this balloon deflate, but… at a CONTROLLED PACE, rather than just jamming a knife into the side of it. A controlled drop WILL take longer, but at least it should have some order to it. The thing we all need to remember is… IF this was let to it’s own devices it would have blew up in a completely UNCONTROLLED EVENT that would have literally affected every economy on this planet.

As far as what YOU should be doing???

I really don’t see a scenerio where prices for commodities rise at record levels during the next few years . This is due, in part, to the already RECORD prices commodities have already come off. Couple this with what NOW is being recognized as a GLOBAL SLOWDOWN. The interesting part of this slowdown is what happened BEFORE the commodity bust. As I’m sure you know, businesses involved in commodity production have spent the last 4 years ADDING capacity to cope with higher and higher DEMAND. That demand now looks like it is NO LONGER THERE. Yet all the infastructure has already been added to produce MORE of everything.
In this scenerio I could see the exact OPPOSITE of what everyone else expects…

DECREASED DEMAND + ADDED CAPACITY = LOWER PRICES

We’re actually seeing this already.

Gold looks great to me for a bomb shelter. But…I wouldn’t be up to my eyeballs in it. Look at OPTIONS on gold indexes. You can buy far out of the money calls for very little money and IF we get some type of hype inflationary event those options will SOAR in value. Your basically buying an insurance policy by doing this. If you use the leverage options provide your ability to tread water in any economy should be solid. Sure your stocks may fall, but those gold options would be risingat the same time.

At this point in time it’s about KEEPING what you already HAVE and being ready to put that Capital to work once the dust clears.

27

fdjake…

You suggest to build cash. If you only have 10K to “play with” where do you put it…ford or save for a house deal?

Brian

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Right now???

You make DAMN SURE that $10K is in a SOLVENT bank that is FULLY FDIC INSURED.

29

It’s in a ing direct orange savings account. So you’re suggesting to hold on to it at this time?

30

I would seriously buy $1500 worth of an aggresive growth stock fund at the end of the day today with that 10k…then next month buy $1500 more…then the next 4 months do the same…You will look smart as hell 24-36 months from now…But if that 10k is your only savings I would suggest doing nothing…

31

I don’t have a suggestion about your savings, but I have another suggestion: BUY FOOD! We’re overdue for runaway inflation and if things get REALLY bad, FOOD will be a popular thing to have around. I have a big stack of canned food in the basement. If there’s a real crisis (depression, bird flu, nuke goes off in the US, etc), that food may come in very handy. If there’s not a crisis, you still eat it!!! I know, I know - it could never happen! Of course, I bet they thought that every other time in history when it DID HAPPEN!

Or, if you don’t want to buy food, buy a wheelbarrow so that you can carry enough cash to the grocery store to buy a loaf of bread! Runaway inflation is always the end result of the fiat currency system we have now (thanks to the Fed)!

Mike