bailouts

[GoldenBoy812]

Are you saying that you think the government will make money on this bailout? I see how it might work with AIG given the terms of the loan and the equity stake --- if the company does not actually go under, then we could make money.

But where is the profit in the new proposed bailout? As you mentioned, we are sorting through the shit for the smelliest nuggets. Hopefully after we buy them we can resell them for something. But do you really think we could make money buying this crap and reselling it later? If that is really the case, then why can't these companies do the same?

Right now the "crap" is being sold in a bear market for pennies on the dollar. This is mostly due to the fact that it is trying to be sold, which tends to send prices lower as sellers are trying to liquidize. Uncle Sam does not want to buy it at "wholesale" price because that would kinda be unfair given their unlimited money, but could purchase it at an arbitration point, that is market orientated of course.

The bailout is in essence trying to give people a fresh start. The purchasing of bad debt could in fact provide incentive's to mortgage holders so to restructure various mortgages. This is a win win, because the value's of certain holdings will go up, and this foreclosure that has been a plague to the financial institutes will decline. Will it decline enough to yield a profit, of course that is the $700 billion question.

You have to remember, the "bailout" is in theory designed to replenish investor confidence to the US markets. Say they were to purchase all of the zombie debt from holders, until the terms of the contract are either fulfilled, or voided, we the tax payers will be paying the liability aspect, as these things most likely have a cost associated to holding. That means $700 billion of bad paper is not going to be purchased. Instead, say $50 billion to start, and have another $650 billion to pay interest as well as potentially purchase more. If there are tweakings that need to be done in that time, a few weeks later they buy $50 billion (now holding $90 billion and paying contractual obligations of it). And so on, and so forth.

Foreign investors might even start getting interested (a goal of this plan) along with private investors and that's all they are trying to accomplish. Take the load off of some of these "banks" so they can do normal business and if things improve, and it does go as they plan, the load will be profitable.

[rebgirl420]

Well goldenboy, your a new fave in the politics section (at least in my book). Great posts.

[GoldenBoy812]

That means $700 billion of bad paper is not going to be purchased. Instead, say $50 billion to start, and have another $650 billion to pay interest as well as potentially purchase more. If there are tweakings that need to be done in that time, a few weeks later they buy $50 billion (now holding $90 billion and paying contractual obligations of it). And so on, and so forth.

Oops, a mini typo. What i was trying to illustrate is that if they tweak things, rational response would be to buy less in the next transaction. So they would be buying 40, instead of 50, and if they still need to tweak, they would buy say 35 the next time etc... The inverse is also possible if they start off with good results.

[painretreat]

It is said that this will cost each taxpayer between 200 and $300.00 a month! Hold on to your wallets and anything else you value! Weez in for some hard times.

Grow your own! :jointsmile:

Golden Boy, great understanding and explanations! I sold an investment house (bought with a friend) for $300,000.00 when I knew I paid $50,000. for it 9 years prior! I figured, in a few years, I can buy several more of the same, if I so desire! That house is most likely worth less than 50% of what I sold for! WHO DID NOT SEE ANY OF THIS COMING! I DID!! I am not a financial genius, just a good observer! :rastasmoke: PR

Since, Insurance Co's just piss me off so much I would rather fix my own stuff than deal with them; I surely resent this bail out of companies that don't even provide the service's they sell! :wtf: well, my B/P just got over 98/46!!!:thumbsup: I can go to the Dr. and not have my arm squeezed off taking my Blood pressure, thanks to bailouts!

If we filed bankruptcy, we would have a very hard time holding on to more than just the necessary assets we needed to provide for our families, homes, etc!

I'd like the job sorting this shit out! I would start at the top! Oh, but we are in the process of changing that with the election, anyway! It was shocking that it took so many thumps by these corporations to get the politicians on economics! We have been in trouble for many years in this country!

The only way I can live with it, is to ignore it and balance my checkbook, hide my money and hope I make it through! When CD's over $100,000.00 paid less than 3% for 12 mos. someone had to figure that out, over a year ago! What happened to calling for re-inforcement (Greenspan) when we really needed him?

Oops! Greenspan wrote a book and said we would face this in 2008!!! No one was listening. I couldn't forget! imp: running the pig pen! :rastasmoke:

[flyingimam]

my B/P just got over 98/46!!! I can go to the Dr. and not have my arm squeezed off taking my Blood pressure, thanks to bailouts!

:S2:

greenspan knew it for sure, i dont care if he is at fault here in any way or not, but im sure the man can pwn bernanke any moment in knowledge and experience

btw if i were u, i would switch savings and investments to gold and real gold not certificate and not anything held in a bank that can be screwed if the bank goes under. perhaps in a very secure and high net worth bank in a safe deposit box or a foreign bank with much less risk than most american banks in current situation.

If i had any major savings or investments i would be switching all to gold, despite the high prices and would keep them there until the mess and laws regarding stock market clear up...

the only traders who can always make money on stocks are savvy swing traders. day trading is also not a bad choice if u know whats up, but it is indeed a very risky and time consuming type of trading. buy n hold = aint gonna fly anymore with me.

although fundamentally it would work, but since there are very few safeguards in regards with how bad it can get and how long it can remain that way, i just find the trade off not worth the risk...

just my 2 cents

[daihashi]

:S2:
the only traders who can always make money on stocks are savvy swing traders. day trading is also not a bad choice if u know whats up, but it is indeed a very risky and time consuming type of trading. buy n hold = aint gonna fly anymore with me.

being a business major does not make you an investor. People make money by not selling their investments and enduring these hard times. If I sold my shares of HP/Compaq or other stocks that had significant drops over the years I would have lost 10's of thousands of dollars.

Investment is not about jumping ship when times get hard. Granted there are times you do this and it's correct to do so, but majority of the time the right thing to do is to hold onto your investments; or sell them and rebuy the stock after it's stable and bottomed out.

Many investment guru's would say the same, but to each his own. Really if your portfolio diversified then situations like this are not a real issue.

[flyingimam]

Being a business major doesn't make me an investor, but it sure helps me understand things better and I don't buy the free trade and free market (with or without regulation) promise anymore. when I'm a millionaire I may partially invest in stocks but it will certainly not be my first choice.

its not about "jumping" ships. I wouldn't get on this ship in the first place when it has no "lifeboats" sure it may be the most luxurious ship in the economy when its maintained correctly, but still i wouldn't wanna ride it when there are safer ways.

there are far more secure ways for investment, ways u can have more control over and take less risk. Gold, land, owning small businesses, owning rental property, offshore investments in tourist resorts. China & India offer great deals for foreign investors, why? cuz they are developing countries and can afford paying much higher interest rates despite the fact that there is no such a thing like FDIC there.

Pickens: Natural gas, Warren Buffett could ease nation's woes - CNN.com
see, the more money and capital u have, the better u can position yourself for stock market and perhaps take short-term hits.
But I'm afraid if we don't change some policies around, we ought to expect another major crash in future which scares the hell out of me.
and some1 like him, probably has investments in at least 10-20 different fields from stocks to land to whatever u can think of

but u r correct people gamble and do make money, its just the matter of how much of a hit u can take and stay good. Some investors know what they are doing and even they have to cope with hard times, and some have no idea and get hit hard. I don't like 1-2 years of paranoia over money every 10-15 years, and we have had this trend happen eversince great depression

List of recessions in the United States - Wikipedia, the free encyclopedia


remember that no1 can guarantee how bad or long each downturn will be or take. and thus i find it quite risky to have your money in a market that can go down with just 1 bad statement by 1 famous man. its psychologically a very paranoid market, it goes up this way and it goes down this very same way.

[dragonrider]

This is one of those markets where cash is a huge asset.

So many good investments can be had at a bargain price right now. For example, the entire mortgage/forclosure/financial market crisis has put thousands of real-estate properties on the market at the best prices in years. If you have access to cash, you can make a fortune, because this is the time to "buy low." These kinds of buying opportunites did not exist a few years ago when real-estate was booming --- that was the time to "sell high." A lot of people have that backwards. They get attracted to an investment when it is booming, which is really too late. They jump in at inflated prices, then as soon as it tanks, they panic and jump out.

Do not overreact to short term changes in markets. The stock market swings a week ago are a great example. You had a couple days of HUGE drops in the market. If you panicked and sold on Wednesday, you missed the gains on Thursday and Friday. You effectively locked in your 8% losses from the first part of the week and missed the 8% gains of the last half of the week. If you just planned your strategy before we were in a crisis, and held steady through it, you came out almost exactly even. If your strategy included faith that the market will do well long term, and included a plan to have cash ready to buy on dips (instead of sell on dips), you came out ahead.

I personally think real estate in my area of the country is going to always recover because this area is an engine of job growth and more people always come here. Prices are way down now because they went so high during the boom. I'm thinking about investing in some rental properties now if I can find some with the cash flow to be self sustaining until the next boom. The problem is cash, and that is what this whole financial crisis is about. My credit union is not processing any real estate loans at all right now. Without access to credit and without huge piles of cash money sitting ready, you cannot take advantage of opportunites like this. If the credit sqeeeze did not exist, these prices would not be as low as they are, and without more credit coming into the market, no one will be able to step in and take these properties off the market, even at bargain prices.

Bottom line: In my opinion, this is a great market for opportunites, if you have the stomach for it, and access to cash or credit.

[dragonrider]

They just got out of the meeting with the White House, Congressional leadership of both parties and both houses, plus honored guests Obama and McCain.

Looks like everyone is on board with the comprimise worked out so far, except for some Senate Reeps and most of the House Reeps. Ha ha! This is a Republican President pushing the idea that this is a crisis and proposing the initial plan, Democrats understanding how urgent it is and working bipartisanly to back a plan, McCain wanting to suspend the campaign because of the urgency of getting a plan approved --- and it's the Republicans in congress refusing to commit to cleaning up this mess!

Hahahahhaha! Why does it always look like it is Democrats who have to clean up Republican messes? Hahahahahaha! Can't Republicans ever step up?

Personally, I am pissed livid about this crisis and the need to commit so much to fixing it, expecially since we've been told for so long that the economy is so "fundamentally strong" by the same Republican adminstration who is now acknowledging a serious economic crisis. However, I think this is a REAL crisis, and we will need congress to put up the money to stabilize it. I knew Bush and McCain were lying all along with their happy talk about the healthy economy, and I definitely believe them now that they claim we are in crisis. We've been in a growing crisis for a long time, and it has just finally come to enough of a head that they have to acknowledge it. I am not surprised by this at all, just pissed.

What do you think is the deal with these Reeps not supporting the deal? Is it that they have been lied to so many times by Bush they don't believe this thing is real? Understandable --- it's hard to believe when you've been burned so many times. Or do you think they really do believe it is a crisis, but they don't want to do anything about it? Sounds pretty typical. I guess it could be either one.

Maybe McCain can actually do some good in Washington --- it's not up to him to shape the plan, but maybe he can get his dumbass party members to take this crap seriously!!!

[thcbongman]

being a business major does not make you an investor. People make money by not selling their investments and enduring these hard times. If I sold my shares of HP/Compaq or other stocks that had significant drops over the years I would have lost 10's of thousands of dollars.

Investment is not about jumping ship when times get hard. Granted there are times you do this and it's correct to do so, but majority of the time the right thing to do is to hold onto your investments; or sell them and rebuy the stock after it's stable and bottomed out.

Many investment guru's would say the same, but to each his own. Really if your portfolio diversified then situations like this are not a real issue.

I very much agree with you and Dragonrider.

Recessions are the time to buy! In anything basically, there's deals all around. I been researching a wide variety of stocks, financials, real estate. Buy low, sell high.