Large Scale Central

The cost of Congress' failure to act

General Discussion
#1

http://biz.yahoo.com/ap/081211/wall_street.html

The stock market has dropped almost 1000 points as a result of the failure to pass a loan package for the automakers. Almost 200pts. today and 777pts the first time.
This is real money that people’s 401K plans and pension plans have lost.
Another 1000pt drop is not out of the question if lawmakers fail to pass a bill.
The Southern Republican Senators want union workers pay reduced to the levels of non-union competitors in the South. Fine idea. But just as the cost of living in Alexandria,Virgina is higher than the cost of living in Selma, Alabama…the same holds true for autoworkers in the North and Midwest compared to autoworkers in the South.
I’m surprised the Senators don’t want to reduce their wages to that of their Chinese competitors.
Ralph

#2

“I’m surprised the Senators don’t want to reduce their wages to that of their Chinese competitors.”

There is probably some of those “Global Liberals” in Congress that do want it to be equal. What’s that little squirrels name that keeps running for President?. He’s got a tall wife. A reall “Mutt and Jeff” team. This would be just the type of thing he’d like. All of us living in small mud huts, one light bulb.

#3

Rocky and Bullwinkle???

#4

http://biz.yahoo.com/ap/081212/world_markets.html

Foreign markets dropped again today. Just wait until this afternoon and see what the New York market does.
Penny wise and pound foolish.
I wonder what the dollar value in losses is for a 1000 point drop in the market.
I’m just guessing…but I bet it makes $14 billion look like chump change.
Ralph

#5

This economy is worse than a divorce. I’ve lost half of my net wealth, and I still have a wife.

#6

http://news.yahoo.com/s/ap/20081212/ap_on_go_co/meltdown_autos
The White House is now considering tapping the “bailout” funds.
How many billions of dollars in market loses could have been avoided had they just taken this step to begin with?
Ralph

#7

(http://www.ibdeditorials.com/IMAGES/cartoons/toon120808.gif)

#8
Bob McCown said:
This economy is worse than a divorce. I've lost half of my net wealth, and I still have a wife.
Bob,

You’re in big doo-doo. When you got married your assets were halved, now they’re halved again and as you mentioned you still have a wife. If that keeps going you have to express it in decimals, fractions will get too tricky to understand. :wink: :frowning:

#9

I’m sick of people whining about losing half their “SAVINGS” in the stock market.

It wasn’t a savings account they were invested in, it was the STOCK MARKET, or a basket of stocks called a STOCK MUTUAL FUND.

Didn’t they read the prospectus before investing? YOUR RETURNS MAY BE LESS THAN YOUR INVESTMENT. In other words, it’s a crap shoot.

What protects you in this crap shoot? Nothing. Nothing but diversification. (Buying shares in a mutual fund instead of a single company’s stock, eg.)

Why take the risk? Because you believe in a historical pattern that says that in the long run, through the cycles of ups and downs, the stocks or stock funds that you invested in will be worth more than what you could have gotten in a risk-free FDIC insured bank savings account.

Note: Ups and Downs. Again: UPS AND DOWNS.

The only ones hurt are the people who have to cash out (or panic and cash out) of stocks in a down cycle. They turn the “Billions and billions of market (paper) losses” into real losses.

They should not be in this position. As they age their retirement accounts should have been shifted away from risky stocks towards safe bonds and insured savings vehicles.

Let the market correct and take care of itself. A low market is a buying opportunity, and the start of a recovery.

Sincerely,

Joe Satnik

Edit: spelling

#10

Joe:

Exactly what I have been trying to get across. Savings are what is under your mattress or in insured or otherwise guaranteed instruments.

The only thing I would add is the fact that the “MARKET IS GOING DOWN” hype is used to scare the crap out of stockholders who don’t understand what you wrote (that is many old folks) and they rush down to their broker to sell, sell, sell!

Of course the people they sell to do understand and seize the opportunity to fleece the unwary.

I have a close friend who is heavily into the stock market. He currently likes to say “. . . I lost (insert large loss) yesterday,” with all in hearing distance saying how sorry they are for him. In actuality, he has lost nothing, because he hasn’t sold anything. With his very long term purchase and hold strategy, on paper, he is still way ahead of sewing it into the mattress. There is still the risk of individual company bankruptcies, but he is really diversified, so that risk is minimized. In fact, he is cautiously buying small amounts at this time.

So the “market” goes down: So what? Why should my taxes be used to support what other people took as a risk? I didn’t cause them to put their money where they probably shouldn’t have.

I previously worked for a tiny company that (shortly after I left) went public in the over the counter market. Very little regulation or oversight there. The company had virtually no assets and was probably a half million in real debt. The company "bought’ a corporate shell that had 100,000,000 (that’s 100 million!) shares authorized for a few thousand dollars, got some of the owner’s friends to purchase some shares at $4.50 / share, thus setting the company’s capital value at $450,000,000 virtually overnight. Added some great marketing hype and folks were lining up to buy. Anytime that stock price goes down, the guy who controls the company puts out another glowing press release which is immediately picked up by the media that supports that kind of hype market. Then the price stabilizes and they sell some more shares at a higher price. As long-term reality has set in, the stock price gradually went down, with the latest closings around $0.12 to $0.20 / share, but someone often comes along and buys 5 or 10 thousand shares (usually directly from the mastermind of this scheme) at $0.25 to $0.50 / share. This is reported as “looking really good” or “this is the beginning of an increase in this stock,” or “better get in now!” Just another way the stock market fleeces the unwary!

To repeat Joe’s statement: THESE ARE NOT SAVINGS: THEY ARE MONEY PUT AT RISK, AND SUBJECT TO GOING LOWER AS WELL AS HIGHER!

Happy RRing,

Jerry

#11

This WORLD is headed for a depression big time. I quit buying traind gor now. Only buting the 3 Gs, Gas, Guns and Gold! When the sh*t hits the fan what I can’t buy I can take!

#12
Roger Crooks said:
When the sh*t hits the fan what I can't buy I can take!
Roger:

Works for me! As the Boy Scouts say: “Be Prepared.”

I truly hope it doesn’t come to that, but with the level of government stupidity, corruption, intrusion into our lives, and the overall greed factor, it is certainly a possibility.

California is very near bankruptcy, the legislators have been unable to come up with any plan that would curtail spending and / or increase revenues, and our unemployment rate is soaring. But this morning’s Santa Rosa Press Democrat headline is “State OKs tough rules to cut emissions.” Sub-head: “Regulations to affect factories, appliances, cars, housing; businesses warn of higher costs.” The story details the increased costs to existing businesses and customers, along with the fact that some will be forced out of business. Just what we need when things are already on the ropes, but the legislators and rule makers are totally immune, as they get large salaries, even larger expense money, free cars and fuel, etc. etc. etc. Along with all the graft they can find. This kind of runaway regulation does not put any burden on them in any way, but the working folks are further screwed to the wall.

We voted a State Assemblywoman out of office in November. She was ineffective, goofy and an apparent (prescription) drug addict. One of her grandstand acts was to crash her state supplied SUV into several innocent cars (over several miles) while speeding up the freeway, going the wrong way to a supposed meeting. When the CHP finally stopped her, she said they couldn’t arrest her as she was a state official, on official business. That seems to be a prevalent attitude among lots of our politicians across the country.

Earlier this week our governor solved this woman’s impending unemployment by appointing her to the State Waste Management Board. The salary is $132,000 plus all expenses and benefits for 12 meetings / year. That’s $11,000 / day plus expenses for doing basically nothing. They really protect their own!

Are we supposed to be happy with this kind of blatant abuse of the public’s trust and money?

Happy (Rant Suspended) RRing,

Jerry

#13

If’n you want to gamble and lose it don’t come whingeing and moaning to me.

Assuming of course I was important enough to warrant such “interest”. So to speak.

It is the straight out gambling on the stock market that is the root cause of the current economic problems.
Dodgy loans given to unlikely recipients who, as it turns out, cannot pay, are then packaged up and sold to the “investors” (read mugs) around the World by lying ratings agencies, is but one of the real causes.
This thing will never turn around until the real crooks are jailed and the whole system flushed out of the carpetbaggers that infest the system.

#14

I never mentioned money lost on the market as savings.
But the failure of Congress to act decisively has caused a large lack of confidence as well as the loss of a large amount of money. Because it is investment money subject to risk doesn’t matter. It is still money lost, and it could have been avoided.
One Senator from the South said we never did anything to help the Textile Industry. No we didn’t. We all know where the jobs and the machinery went.
Maybe we should learn from our past failures.
The US Government has pumped untold billions into the financial sector in order to free up credit.
Instead, credit is getting tighter. Credit Card companies have announced a cumulative credit line reductions of $3 trillion.
The other day they sold a record number of Treasury Bills at 0%. Rather than free up credit, they are parking the money with the Treasury, earning nothing.
Ralph

#15

Aaahhhhhhhhhhh!!!

I see. That is where the guvmint is getting all the money to give to them to bail them out.

Neat little go round eh??

Time for a Government bank?

Like we used to have here in Australia.
Very successful they were too, until the bad guys running the country started selling them off cheaply to raise money to waste on “stuff”.

#16

Tony,
What do you think happened here. Bad guys selling off Fanny Mae and Fanny Mac plus trashing regulation and oversight…himmmm. We will wind up with a National Bank here soon enough. Gvmnt owns a large chunk of some of the major players through bail out. And of course it is the other guys fault…not ours or so say Pelosi ,
Frank, Clinton etc etc. The other guys say that they tried to correct it but the other side would not play along ect ect. Australia is looking better and better. Actually North Island New Zeland would be my choice. Great trout fishing I understand plus some very interesting railroads.

#17

Years into the Great Depression, FDR’s secretary of the treasury, Henry Morgenthau, declared (quoted here verbatim): ‘We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!’

#18

I see this guy Bernard Madoff, a former SEC Chairman, was running what he has described as “an unsophisticated Ponzi scheme” that has now crashed to the tune of over $50 billion in losses. Seems everyone he fleeced is now upset that they lost money, when he had been producing great returns (always more than 12%) while us little people were getting around 1% at the bank.

According to the newspaper, Madoff ripped off hundreds or perhaps thousands of mostly wealthy folks and do-nothing financial organizations. There are some big names in the growing list of losers, including some major league football and baseball team owners, the Chairman of GMAC Financial Services (that would be the banking and investment arm of General Motors), numerous foreign and domestic financial and banking institutions and experts, major charity organizations, and even the town of Fairfield, CT. One of the charities “. . . lost their entire $8 billion dollar endowment fund,” and the town of Fairfield reported it lost $42 million from their retiree pension fund. The charity says they are probably going out of business, and the CT city will probably have to raise taxes to meet their obligations.

All these financial geniuses are quoted as saying things like “They had no idea they had exposure,” And “These people are sorrowful. These people are angry, And many are now destitute.”

Meanwhile Madoff is (temporarily) in jail. Should we assume that his incarceration is mostly to protect him from his “investors” who seem pretty unhappy to have lost their “savings?”

With all the high profile names involved, are there any bets on how long it will be until there is a call and an agreement for a government backed bailout for these poor folks who just didn’t understand that there isn’t any free lunch?

Happy RRing,

Jerry

#19

Jerry,
I’m afraid we will be seeing a lot more of this type of fraud come to light.
I am still dumbfounded by the fact that the banking industry has been paying almost nothing for their money, lending it at up to 33% interest, and has still managed to lose their a**.
As a child over 40 years ago I received 4% interest on a savings account. Mortgages were 8%, and the banks made money.
Now they are saying bad mortgages are approaching $1 trillion. They have already spent well in excess of that amount.
As I said before, mortgages are not the problem, just the scapegoat.
They had to find some way to blame their failings on the poor.
Ralph

#20

Dear All,

Capitalism.

Business plan.

Borrow money to build workplant(s) and workforce(s) that will produce goods and/or services that when sold, will earn enough money to pay back the loan.

Note that in all these Ponzi schemes, there are no goods and services produced. (That would be directly related to the “E” of the “P/E” rating of a stock.)

Note that we need money made from the sale of goods and services (I’ll call “earned” or “good” money) to retire debt, of which the interest portion (“lost”, or “bad” money) dissapears.

Businesses: If you cannot sell your goods and services at a rate to pay back the loans, then you have to borrow more money, which causes more interest to disappear. If this cycle is not broken, bankruptcy eventually occurs.

Workers: If you cannot sell your goods and services (your labor) at a rate (hourly wage) to pay back your personal loans, then you have to borrow more money, which causes more interest to disappear. If this cycle is not broken, bankruptcy eventually occurs.

I contend that the fed lowering interest rates to make loans easier will not necessarily get the economy going, at least for those who aren’t confident they’ll have a job (with enough earnings) to repay said new loans.

A large part of the housing loans were made with the thought that house prices would always rise, with there never being a need to pay off the loan. Well, the bubble burst.

So, mathematically,

Roaring Economy = “I’ll always have a good paying job” + “I’ll never have to pay off this house loan.”

“Ninja” or “liar’s loan” Roaring Economy = “I’ll never have to make a payment on this house loan.”

Hope this helps.

Sincerely,

Joe Satnik