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The Great Depression


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I short the market all the time. Shorting is good for the market. And it is not the problem with the market. The rally we currently have was started by short covering, that is shorting the market. What happens when you short something you are agreeing to buy it back at a lower price. So a stock goes down some and all the short sellers have to buy back in. It will not stop a stock from falling but it can slow it down. If there was no shorting the market would have fallen even faster and fallen more. The stock of broke companies tends to fall to zero because they are broke. This is not the markets fault. The real culprit was the widespread fraudulent practices that were going on in real estate. Putting it simply a crack head from Detroit could buy as many houses as they wanted. No job, no income no assets no problem. Then they stuck these crack head mortgages in a blender and mixed them up. This would have been ok if they labeled it blended crack head mortgages DDD rated. But they knew no one would have anything to do with something this risky without demanding a very high premium and even then it would have been hard to find any takers. What they did do is they put really good mortgages from people with perfect credit on the top. It's like getting a pile of crap and pouring chocolate on top and selling it as the best chocolate cake ever. AAA rated guaranteed super chocolate cake. To make matters worse banks heavily leveraged against this crap. This started a disastrous chain reaction when the crap mortgages turn to crap. To a professional investor risk management is everything. If you incorrectly understand your risk your in very big trouble. When these subprime borrowers, who borrowed as much equity as they could, there homes losing over half there value, they just defaulted. They felt why should I pay for a house that is not worth what I paid for it. They forget to add all the money I pulled out and spent. Lets just be honest these kinds of people rarely pay there debts. This was the starting point of these problems.

You can see The Ascent of Money on YouTube for more info.

 

People are speculating there will be another downturn. There is heavy buying of various bearish VIX's spreads. But they could be wrong, we will soon find out.

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Alan S

I dont think one can solely blame the borrowers.

Way back, when I was involved with banking, the standard "rule" was that, you lent money to a PERSON, for a reasonable PURPOSE, against ADEQUATE SECURITY.

All three of the highlighted terms had to check out, before a loan would be made.

 

The banks then went out pushing money at people irrespective of the three rules.

At one stage I was getting unsolicited offers of credit cards or loans, pre-approved, several times each week.

 

That is not prudent banking.

 

The rational of the banks was that a large percentage of the loans would be repaid, so that was OK.

Wrong.!

 

Still, we've no need to worry now. A group of wise(?) men have met in London and they are going to save the world.

They think.

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Wrong.!

 

Still, we've no need to worry now. A group of wise(?) men have met in London and they are going to save the world.

They think.

 

 

Yes, they will save the world "for a better good".

 

We all know where this one ended back in 1933-1945, only this time the crooks have the overhand.

 

.

Edited by scianna54
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breakfast
Yes, they will save the world "for a better good".

 

We all know where this one ended back in 1933-1945, only this time the crooks have the overhand.

 

.

 

There was no real solution. Plenty of feel good verbiage, but no real plan.

 

The crisis will plough on nonetheless.

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I short the market all the time. Shorting is good for the market. And it is not the problem with the market. The rally we currently have was started by short covering, that is shorting the market. What happens when you short something you are agreeing to buy it back at a lower price. So a stock goes down some and all the short sellers have to buy back in. It will not stop a stock from falling but it can slow it down. If there was no shorting the market would have fallen even faster and fallen more. The stock of broke companies tends to fall to zero because they are broke. This is not the markets fault. The real culprit was the widespread fraudulent practices that were going on in real estate. Putting it simply a crack head from Detroit could buy as many houses as they wanted. No job, no income no assets no problem. Then they stuck these crack head mortgages in a blender and mixed them up. This would have been ok if they labeled it blended crack head mortgages DDD rated. But they knew no one would have anything to do with something this risky without demanding a very high premium and even then it would have been hard to find any takers. What they did do is they put really good mortgages from people with perfect credit on the top. It's like getting a pile of crap and pouring chocolate on top and selling it as the best chocolate cake ever. AAA rated guaranteed super chocolate cake. To make matters worse banks heavily leveraged against this crap. This started a disastrous chain reaction when the crap mortgages turn to crap. To a professional investor risk management is everything. If you incorrectly understand your risk your in very big trouble. When these subprime borrowers, who borrowed as much equity as they could, there homes losing over half there value, they just defaulted. They felt why should I pay for a house that is not worth what I paid for it. They forget to add all the money I pulled out and spent. Lets just be honest these kinds of people rarely pay there debts. This was the starting point of these problems.

You can see The Ascent of Money on YouTube for more info.

 

People are speculating there will be another downturn. There is heavy buying of various bearish VIX's spreads. But they could be wrong, we will soon find out.

 

In my humble, non-expert opinion, I think we should let the free market system do what it does best - weed out the crooked and the losers who made the poor choices instead of using money we don't have to pay them off. Yes, it will hurt for a while but in the long run the new companies that emerge to provide the services that the cheaters/scammers no longer provide will be better. As for the big banks - same principle applies. There are so many smaller banks that have not done the stupid and reckless things the big boys have that I think the larger banks failing would boost some smaller banks into a much stronger position which would end up benefitting us all.

 

In other words, lets quit pissing away our great grandkids money!!!

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breakfast
In my humble, non-expert opinion, I think we should let the free market system do what it does best - weed out the crooked and the losers who made the poor choices instead of using money we don't have to pay them off. Yes, it will hurt for a while but in the long run the new companies that emerge to provide the services that the cheaters/scammers no longer provide will be better. As for the big banks - same principle applies. There are so many smaller banks that have not done the stupid and reckless things the big boys have that I think the larger banks failing would boost some smaller banks into a much stronger position which would end up benefitting us all.

 

In other words, lets quit pissing away our great grandkids money!!!

 

Logic won't work here, I think. The big banks may be heading towards a critical point in their future. They cannot be bailed. This is a time where we need Eggnoggin. :D

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Huck Finn
Are you sure?

 

"Commentator in tears at HSBC plunge

 

HONG KONG (AFP) - A veteran Hong Kong stock commentator burst into tears during a live television broadcast as she saw HSBC's shares plunge dramatically seconds before the end of Monday's trading. "

 

http://www.google.com/hostednews/afp/artic...r51C1XiANrdEp3A

 

A sure sign of where she had all of her money!

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Huck Finn
I heard that the reason Bush went to war with Saddam was because he was going to start using Euros instead of Dollars. Okay I heard this at a kids party but it was by one of the parents.

 

Always go with the best most reliable source. he-he

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Huck Finn
At the risk of possibly upsetting you and a few other Americans, let me give you the impression I have as a Brit. Can you advance any good reason why my 18 year-old daughter, who recently became a tax-payer, or my 83 year old aunt, a tax-paying pensioner, should repay debts incurred thousands of miles away to the west - because that is exactly what they have to do!

 

You havn't upset me at all old boy! As you said, it was terribly foolish of the British banks. I wouldn't be terribly excited about having to repay any debts incurred by anyone other than myself. Who is governing those banks of yours? Americans?

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Alan S
Who is governing those banks of yours?Americans?

 

No, morons.

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rainymike

I don't think we have to end up in a great depression, but when I read all the negative stuff in the news, I think that the hysteria feeds the likelihood that this kind of stuff will occur.

 

My 403 nest egg took a hit, but when I retire next month, I'm just yanking it all out and not waiting for a recovery. I'll use it to pay off debt and taxes and use the balance as my nest egg. The loss is inconsequential to me, it was just a mechanism to save money and hide it from my spending ways. So now I have a nice nest egg, and the market loses another buyer.

 

I've lost confidence in American banks, so am diversifying. Putting a chunk in Filipino banks. Keeping some in smaller banks. When I have enough, I'll convert to property. Makes more sense for me to prop up the Philippines economy now than the American ... I've done enough of that over the years, and it was just pissed away. Yeah, I know all about Philippine's corruption, but I don't feel like allowing anymore corrupt American money managers earn money off me. American money grubbing makes Filipino money grubbing look like penny ante stuff. So the American economy loses another consumer and my earnings will flow into the Philippines - a one man foreign aid program.

 

I have a state pension from my current job and I will collect on Social Security in another 4 years. I'll let the American worker support my San Miguel tastes. Fortunately for them, I don't have champagne tastes ... lol ... for as long as SS lasts. The more the gov't fails to reform SS, the more I will pull whatever I can out as young as I can.

 

Hehe ... let the bubbles burst. Let the government try to stimulate. I'm pulling out of the market. I'm not consuming American goods. I will start taking more out of the country than I put in, and deploying that cash to Asia. I'm getting out of credit and debt and adopting a cash only lifestyle. I'm adopting a more 'green' life and not purchasing as many manufactured, processed, and imported goods as I know do. I'm exercising and eating well, and plan to live a long life and pull more out of SS and my pension than I ever put in. Sure, we are in a global economy and there will be a ripple effect. But I'll be distancing myself from it the best I can. I've propped up bad economic management all my life, and it's time for me to get my payback and run.

 

Stock market? Depression? Economic stimulus plans? Bah humbug. Another cold San Miguel please ...

 

Now if suddenly, 100 million Americans begin to think like me ... then you start worrying about a depression and a real global economic meltdown. But judging from my peers, they still have their noses to the grindstone. So I think we'll be safe -- for now.

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Huck Finn
Now if suddenly, 100 million Americans begin to think like me ... then you start worrying about a depression and a real global economic meltdown. But judging from my peers, they still have their noses to the grindstone. So I think we'll be safe -- for now.

 

As I was reading this post I was thinking you have no idea how many of us think the way you do..... it's basic survival skills 101.

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Vince Runza

Let me weigh in here with an interesting finding: the closer the elite are to the suffering of the poor, the more likely that society will survive. The more insulated the elite are from the ills of society in general, the more likely the elite will end up with a revolution.

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thebob

The only way to protect against the hard years ahead is by buying good productive farmland!

 

Increasing population means more demand for food. Food is one of the few commodities that will keep up with hyperinflation.

 

If you have land now, plant mangoes, and raise goats! Plant camotes and raise pigs.

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Not a good idea to go short here when a potential turn (many cycles converge soon) is coming. Nobody knows if that's the bottom but eventually the downward spiral will end.

 

Friday was a good day for the market as he job news were really bad but the market ended up on a positive note. Many may say this happened due to short covering during the last half hour but the downward momentum was just not there on Friday.

 

Also keep in mind that 30 year support for the Dow is at 6,100 points, very close as we were at 6,400 on Friday. I am getting the feeling that professionals are starting t buy here. Many amateurs will get "killed" during the next rally, make sure it is not you.

 

.

 

Just a reminder that we are now 24 % higher about one month later and on our way to 9,000 in the DOW.

 

.

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