Secrets of the City

What this means for me is more people in the welfare system, particularly looking for Health Care. This causes a much bigger backlog in the totally underfunded system. This makes us look bad, the public gets upset, the legislature gives us more unfunded mandates and we fall further behind.

Related story from WCCO: Dow tumbles 330 points.

Friend at Travelers is saying that AIG needs to get a sale done to-DAY. If AIG goes down that’s worse than Lehman going down.

I know a couple of people at Lehman and have friends at other banks. Hopefully, the ones who’ve survived layoffs at so far have been planning ahead.

It means our nest egg just got scrambled. We’ve a lot of money on this market already this year (we are fairly conservative investors, too), now it will really hurt.

Deregulation: FAIL

How many times does this have to happen before people figure it out?

I have negotiated accounts with all the aforementioned firms:
positive: less work
negatives: less money

Bix. I think it was they had to line up $40 billion capitalization by this AM.

Let me try that again. We’ve lost a lot of money on this market…

I don’t think they will bob. They’ll just argue that the problem was still too many regulations.

In fact, over at Megan McCardle’s blog at the Atlantic, that’s exactly what they’re doing: “Regulations wouldn’t have stopped this, so it’s better that we don’t even try, and further deregulate.”

I think the Invisible Hand just gave Wall Street the shocker.

John McCain this AM:

“You know that there’s been tremendous turmoil in our financial markets and Wall St. And it is — people are frightened by these events. Our economy, I think still — the fundamentals of our economy are strong. But these are very, very difficult times.”

Got it? Now, GO SHOP!

Here’s a link to the McCain quote.

“I think still — the fundamentals of our economy are strong”

Sen. MacCain, Sept. 2008

“The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis”

President Hoover, Oct. 1929

Bob, what did I tell you, McCain is already calling for even more deregulation:

John McCain issued a statement today on the financial crisis in which he blamed government regulation for what happened: McCain declares, “We cannot tolerate a system that handicaps our markets and our banks and places at risk the savings of hard-working Americans and investors. Thats 1920s Republicanismand exactly what one would expect from a candidate whose chief economic advisor was former Sen. Phil Gramm.

Got it? Now, GO SHOP!

Man, that shopping is great. It fixes the economy and allows us to fight the terrorists over there so we don’t have to fight them over here. That’s why I went shopping after 9/11, right? Right?

The floor fell through six weeks too soon for the Republicrats.

Surpise, I’m not necessarily inclined to view deregulation as the bad guy. Key pull:

Indeed, executives of both companies maintain that one of the reasons the firms hold so many bad loans is that Congress has leaned on them for years to buy mortgages from low-income borrowers to encourage affordable housing. In 2004, Freddie Mac warned regulators that affordable housing goals could force the company to buy riskier loans.

And again, courtesy of HUD, which makes a reasonable case for more regulation, primarily against stupidity. It’s the usual government circle: Get involved, f*ck it up, have the arrogance to think you can fix what you f*cked up without actually making it worse.

The Davies-Folk Theorem strikes again!

The Folk Theorem in game theory states that any outcome of a repeated game can be sustained as an equilibrium if the minimax condition for both players is satisfied. In plain language, it can be summarised as stating that if we take strategic considerations into account, there is a game-theoretic rationale for practically anything. This formulation leads on to my contribution, the Davies-Folk Theorem, which states that if we take strategic considerations into account,there is a game-theoretic rationale for practically fucking anything

Business will continue doing whatever it pleases by getting their pet think tanks to dole out some new conventional wisdom. In the past year, we have all heard that refineries are running at 99.99999% capacity, so we need new refineries, but nobody wants to let one be built. Just this weekend, the new CW is that refiners are struggling on razor-thin margins and may even have to go negative. Seems like a scarcity of capacity should be improving margins, and who would want to pour billions into financing a refinery that can’t make money?

And kudos for “Holy Frick”

And, of course, kevin, you left off the very next paragraph:

Others, however, dismiss that explanation. Sure, its hard to deal with the pressures of Congress and shareholders and regulators, said a former high-ranking Freddie Mac executive. But thats why executives get paid so much. Its not acceptable to blame those pressures for making bad choices.

The problem with Freddie/Fannie was the privatization of reward, and the socialization of the risk.

When FDR created the first one as part of the New Deal, it worked exactly as it were supposed to. Problems really didn’t start to show up until the 70s when they were spun off into GSEs, and became responsible for turning a profit for the investors. Unfortunately, with the implicit government backing, they had little incentive to pay attention to the risks of their actions.

Two things to remember:

1. It’s not a loss until you sell.

2. Buy low/sell high. The smart investor in 1987 recognized bargains after the market crashed and bought low … very low.

I had started moving some of my 401K into overseas funds earlier this year. Some of the best growth opportunities are still overseas. If you’re able to manage your own 401K/Roth/IRA/etc., you might want to look at the managed-fund opportunities that exist outside the US.

Also, new micro-loan programs (e.g. Prosper.com, Kiva.org) can give the investor opportunities to invest small amounts of capital that make a big difference in someone else’s life without a great degree of risk.

@Kwatt

Thanks.

in the wake of 9-11, we were facing a huge economic set-back / down-turn. However it happened, sombeody (congress, bankers, greedy investors, regulators, Greenspan, Bush???) realized that via getting American Homeowners to refinance and trade up, and to get new (and generally unqualified) homeowners into the market a whole ton of virtual money could be made to prop up the economy instead of letting it slide to where it belonged. Now we’re going to not only lose those artificial gains, but we’re going lose what we should have initially lost as well. It’s going to be a doubly painful market correction as this thing shakes out.

There was a combination of deregulation on the one side and artificial stimulation on the other.

my advice…buy gold. now. lots of it.

@noodleman: buy high, sell higher.

My advice:

1. Tears are a renewable resource and are free.
2. NINJA loans are still a horrible, horrible idea.

But seriously, I’m young and spritely but I’m worried about Mother Bixby’s (and all you other grown-ups) retirement fund. At least her job is secure. Which is a double edged sword but…

Hopefully, things will work themselves out sooner rather than later.

AKA the bigger fool strategy.

Earlier I meant Republicrat to be a portmonteau of Republican and Aristocrat, but ended up with something already claimed by the radical middle. Oops.

Others, however, dismiss that explanation. Sure, its hard to deal with the pressures of Congress and shareholders and regulators, said a former high-ranking Freddie Mac executive. But thats why executives get paid so much. Its not acceptable to blame those pressures for making bad choices.

I left that out b/c it’s more of an indictment on the inept CEOs than it is a comment on the fact that the government, always trying to do the right thing, kicked the sub-prime ball rolling. But I’m sure whatever solution they come up with this time will work out just wonderfully. It always does, like the time they wanted to get more people owning homes so they…oh.

There was a combination of deregulation on the one side and artificial stimulation on the other.

Just another Saturday night in the life of teucer’s mom.

eh-oh!

they won’t go the homeowner route again. look for another market to become the miraculous growth engine for the next bubble.

Kwatt, what percentage of subprime loans given to low income/high risk mortgagees between 1995 and 2005 were due to government pressure? And what form did this pressure take?

@grote

Sure, highlight the part that supposedly highlights the “government is the problem” and conveniently drop the part highlighting the incompetence of highly paid executives.

Getting low income people into homes does not require making loans with no standards. Low income /= bad loan.

eh…those losers @ the onion have nothing better to do than to sit around all day and predict my ideas for the next month. they should try working a real job and being clever at the same time.

Another bad economic sign – a Scandinavian shop in Willmar closes. But at least they’ll still be rolling out the lefse!

Good time to buy.
Bad time to sell.

Good time to buy.
Bad time to sell.

I once worked for a mutual fund company taking trade orders, and it was staggering how many people did the exact opposite.

The Great Depression was caused by something stupid: investors speculating on junk bonds.

The Housing Market Crash of the ’00’s was caused by something stupid. Risky mortgages.

The banks fails and there’s suprise? Pffft. See you at the bread line.

In fact, over at Megan McCardle’s blog at the Atlantic, that’s exactly what they’re doing: “Regulations wouldn’t have stopped this, so it’s better that we don’t even try, and further deregulate.”

Sounds great, so why are all of the finacial institutions going to the federal government for a bail out. I love corporate welfare. These guys come out in good times and love the market but when they lose cash they become some of the biggest communists I have ever seen. The U.S government is now the biggest holder of mortgages in the would and these morons want us to bail them out even further. Let it crash. I called this last year when the foreclosures started to rise. If you use your home like and ATM and a bank is ok with that then they all deserve to go broke, both the lender and the borrower.

as david says…we’ve privatized rewards and socialized risk in the name of the wealthy corporations that run this country. that’s how more wealth continues to concentrate at the top.

Swandog has a point. I think I’m slowing becoming a libertarian.

The unfairness of it all is that everyone’s houses lose value, not just the ones who use their house as an ATM

That being said, I didn’t think the gov’t should have bailed anyone out. Funny that I didn’t hear too many economic conservatives getting all upset about it.

It’s ridiculous to blame community reinvestment programs for the crisis. Nobody forced banks to go into predatory lending. It was greed, same as always.

We now have the largest gap between the rich and the ppor since the Great Depression.

“Earlier I meant Republicrat to be a portmonteau of Republican and Aristocrat, but ended up with something already claimed by the radical middle. Oops.”

Might I humbly suggest the following;

Aristopublican

that feels good.

oh come on, my teucer’s mom joke was awesome. Deregulation on one side, artificial stimulation on the other! ba-boom!

Meh, we already knew the economy was in the toilet, but now the non-business press and the folks in businesses unrelated to the housing bubble know too. When all these third and fourth order consequences start piling up, the only thing for us proles to do is take bets on what sector is next. I call dibs on affordable luxury and so called ‘traiding up’ sectors failing.

I had started moving some of my 401K into overseas funds earlier this year. Some of the best growth opportunities are still overseas. If you’re able to manage your own 401K/Roth/IRA/etc., you might want to look at the managed-fund opportunities that exist outside the US.

Funny, we were just talking about this in my Finance class a couple of weeks ago. People should also keep in mind the foreign exchange rate if they’re going to invest in other countries, especially with the weak dollar.

If only Warren Buffet was a Twitterer, I’d know which cheap stocks he’s buying all day today.

Please, whatever you do, don’t sell. You’ll be breaking the fundamental rule of investing.

I once worked for a mutual fund company taking trade orders, and it was staggering how many people did the exact opposite.

Well yeah, people are shorting like mofos.

Waiting to see what happens to several hedge funds. Well, not so much waiting, just a bit curious about what happens.

The Oracle of Omaha doesn’t need twitter Everybody knows he’s investing in undervalued companies, as always.

Props to MinnIndy for the best photo illustration to describe the crisis.

It’s nice to see the feds finally making wall street sleep in the bed they made.

Now hopefully the dems will drop this ridiculous idea of a second stimulus and we can take our licks now and get on with life.

Waiting to see what happens to several hedge funds. Well, not so much waiting, just a bit curious about what happens.

didn’t they get to “unwind” over the weekend?

Those who were complaining, only months ago, that excessive regulation was making American markets uncompetitive, had it exactly wrong. It was a lack of regulation of the shadow financial system and its players that allowed this to happen. The regulators might not have gotten it right if they had tried to put limits on leverage, or assure that it was clear what risks were being taken, in the world of derivatives and securitizations. But deciding not to even try, and assuming that risks traded secretly would somehow end up in the hands of those most able to bear them, reflected ideology, not analysis.

Floyd Norris, NYT Chief Financial Analyst

As far as the regulation/deregulation argument goes, I think consistency is what is needed. Investors need to know if they can expect government bail-outs when huge companies fail or if those companies will be left to their own devices when they screw up. This new practice of bailing out some companies and not others and the selective ban of naked short-selling for only certain companies doesn’t instill much faith in government regulation practices. It looks as if the government is not concerned with protecting the average investor, but instead protecting only the wealthiest of companies (and their shareholders).

Not even necessarily their shareholders, tara_r.

IMHO ML is pretty heavy into wealth mgmt of fairly high end clientele. They didn’t bailout Merrill which is why Merrill went running into the hands of BOA.

The lack of consistency seems to be more about how much bad news they believed the “market” could handle at any one given time.

All you have to do is drive out to Minnetonka to see that trickle down economics is working…

I am totally joking, of course.

It looks as if the government is not concerned with protecting the average investor, but instead protecting only the wealthiest of companies

bingo. it’s like rats on a sinking ship. every rich man for himself.

One of the arguments for bailouts has been that a firm was “too big to fail.” Makes one wonder if there should be a cap on the size of some of these firms to keep them from reaching a point where a failure can have such a huge impact on the broader economy.

That being said, I didn’t think the gov’t should have bailed anyone out. Funny that I didn’t hear too many economic conservatives getting all upset about it.

I agree, the silence is defining. I have yet to hear someone invoke Milton Friedman in recent months. I know he would advocate letting them fail. The hypocrisy of this whole thing is more dangerous than the market correction. People need consistent market mechanisms if you do not have that, it is a socialized system. Both the democrats and the republicans are to blame, they have let this thing slide for years. What I can’t understand is the general population is just sitting buy and accepting the whole thing. Where is the outrage? Their is more outrage about lipstick and pigs than our economic system collapsing.

What I can’t understand is the general population is just sitting buy and accepting the whole thing.

At this point, I think most people realize that, as bad as it is, it would have been even worse if the government had simply sat on its hands and done nothing.

Either that, or they don’t want Phil Gramm to call them whiners again.

But yes, consistency is important. Making these kinds of decisions with no set criteria is not good.

It’s nice to see the feds finally making wall street sleep in the bed they made.

Now hopefully the dems will drop this ridiculous idea of a second stimulus and we can take our licks now and get on with life.

I think it’s the press pushing a “second stimulus” more than Democrats are. They were foaming at the mouth over it last week with Dana Perino. The Washington reporters get antsy for something to happen there this time of an election year, cause they see all their friends having fun gallopping across the country and want in on the action. Cook up a little fighting between Congress and the White House and all of a sudden they’re players again. Woohoo!

o hai thar, mnspeak. sorry, I was too busy shorting all day and becoming one of those wealthy americans that won’t have to worry about the economy to post.

just jk, I was at a job interview.

wayne was sharting all day? gross.

seriously I wish I had some money to play around with. I could have made so much money off the market in the last few months using just common sense and reading the news.

If that were true, you’d probably have money to play with then because you would have applied your newspaper analyst ways to make money long ago.

I could have made so much money off the market in the last few months using just common sense and reading the news.

Uh huh. And you didn’t becasue . . .

Oh, I could be wrong, but I bet Wayno is plugged into the financial world the way Archie Rybak is plugged into ultimate fighting.

BTW – Oil was trading UNDER $100/barrel today. I blame Bush. Oh, wait . . .

I blame the speculators who voted Bush into office.
Not for the oil being under $100 today but for their other speculating BS and for voting Bush into office.
You’re really bad at the Bush blame game, you gotta think of it as the Kevin Bacon game.

this point, I think most people realize that, as bad as it is, it would have been even worse if the government had simply sat on its hands and done nothing.

Either that, or they don’t want Phil Gramm to call them whiners again.

yep, this is bad.

People should also keep in mind the foreign exchange rate if they’re going to invest in other countries, especially with the weak dollar.

A weakening dollar can mean overseas profits even if the overseas market doesn’t move up. E.g., US$1 invested in a Euro-based fund @ EU$1.41 (today’s rate) earns 10% if the US$ weakens further to EU$1.55. In January, 2007, the EU$ was worth US$1.29, so any US$ invested then would have already have earned 10% in the past 18 month.

But you have to be careful, and think long-term no matter what investments you make. The EU$ was worth US$1.55 in July.

Nood, you’re right, but that doesn’t mean I’m going to start investing in any Russian companies…unless it’s oil…

Dont forget that the real cause of this mess is the federal governments involvement in the free market as congress tried to turn housing into an entitlement.

It was too much regulation that caused this banking system failure, not too little.

So what percentage of the foreclosed-on homes were only financed in the first place because of CRA between 1995 and 2005, Maz? I noticed Kev never answered that question. I don’t expect you will either.

You just want to make up the facts on the fly to match your ideology. I assure you that the government didn’t force anybody to go into OR accept predatory lending.

“BTW – Oil was trading UNDER $100/barrel today.”

Indeed it was. Yet Americans are still paying more at the pum mthan they did just a week ago. Even Gov. Crist of Florida has had enough of this BS, and has ordered his AG to investigate a number of retailers for price gouging.

Bush caused me to misspell that last comment!

I assure you that the government didn’t force anybody to go into OR accept predatory lending.

No, they weren’t forced into anything. They were guided and encouraged to take these loans by outfits like Acorn and the “community organizers” who worked for them like Obama. Obama’s phoney outrage is outrageous because it was people like him who encouraged people to take out ninja-like loans with no hope of making the payments. Now he’s saying the problem was not enough government involvement? The problem was too much government involvement.

McCain on regulation: He was against it before he was for it.

McCain yesterday:

John McCain issued a statement today on the financial crisis in which he blamed government regulation for what happened: McCain declares, “We cannot tolerate a system that handicaps our markets and our banks and places at risk the savings of hard-working Americans and investors.”

McCain today, after Wall Street’s Black Monday:

Republican presidential nominee John McCain said in an interview with CNBC Tuesday that the U.S. needs to strengthen its oversight of markets while remaining aware of the “risk of overregulation.” The Republican senator said regulators also need to “do a better job in reining in short sellers.”

Dont forget that the real cause of this mess is the federal governments involvement in the free market as congress tried to turn housing into an entitlement.

It was too much regulation that caused this banking system failure, not too little.

This is pure bull shit. The Federal Government CREATED the modern mortgage industry when FDR’s New Deal created the first F. It worked exactly like it had been designed until the 70s when they spun them off into GSEs. When they did that they created the worst of both situations: Private profit with socialized risk.

I doubt that maz can find a single example of Obama supporting NINJA mortgages. And in fact, the Fs RESISTED the most risky loans until very late in the game. the MARKETS pretty much forced them to accept them because they were losing too much business that was going to other firms that did accept them. Perhaps if they had still been part of the government, they wouldn’t have had to pursuit those profits, and would have been better positioned to continue ignoring the worst type of loans.

Only loony libertarians could look at this mess unfolding in an era of deregulation and conclude that the problem was too much regulation. It’s not likely a coincidence that these bubbles have been forming in sectors that have undergone deregulation.

At some point the neocons have to ask themselves what Anton Chigurh would ask: If the rule you lived by brought you to this, of what use was the rule?

Ha ha ha haaa haaa hee hee ha — the millions of foreclosures of subprime, unconventional loans that were packaged as securities and sold as investments by main-stay (er, not any more) financial institutions the fault of . . . community organizers! Yeah, that’s it! Maz, you are an idiot.

At some point people who insist on using the term “neocons” have an obligation to at least learn who the neocons are. They are former jewish leftists who joined the right wing in the 60s an 70s when they realized that the left is anti-semitic. Their focus is foreign policy, particularly as it relates to Israel. They’re not too terribly concerned with domestic ecomonics.

economics.

What are these “former Jews” now, maz?

Mormons?

I actually don’t “insist” on using the term neocon. I see you’re right about the term.

The point is the same. At what point will the mess that’s been made of deregulation and tax cuts for the rich be siezed on as an opportunity for MORE deregulation and tax cuts for the rich? Is there a shred of patriotism where people would worry about the future of the country? Do you guys ever reflect, or is reflection just some kind of timid, liberal, elitist thing to do?

The “tax cuts for the rich” meme shuld be avoided by people who don’t want the listener to roll their eyes in response. The Bush tax cuts went to everyone, not just the rich. Why, I bet even public employees received a tax cut thanks to Mr. Bush.

The “The “tax cuts for the rich” meme shuld be avoided by people who don’t want the listener to roll their eyes in response. The Bush tax cuts went to everyone, not just the rich. Why, I bet even public employees received a tax cut thanks to Mr. Bush.” meme should be avoided by anuone who doesn’t want the listener to roll their eyes in response. Bush’s tax cuts have so overwhelmingly favored the rich that even economic conservatives like Ben Stein have marveled at it on television and admitted that anyone in the middle class who continues to vote for Republicans is ignorant of their policies and not voting for their own interests.

I was in a weird area where the tax cuts actually increased my tax burden. Thanks!

I’m with you there Dougie_D. Perhaps this “tax cut” that actually increased our tax burden was targeting people named Douglas…

Fuckers!

At some point people who insist on using the term “neocons” have an obligation to at least learn who the neocons are. They are former jewish leftists who joined the right wing in the 60s an 70s when they realized that the left is anti-semitic. Their focus is foreign policy, particularly as it relates to Israel. They’re not too terribly concerned with domestic ecomonics.

At some point, people who criticize others for improper usage of the term neo-con should actually understand the history of the neo-cons.

The neo-cons’ split with liberals had little, if anything to do with antisemitism. Their original focus wasn’t even foreign policy. They left the Democratic Party because they came to disagree with liberal social policy. The “founding” journals of the neo-con movement were Kristol’s “Public Interest” and Podhoretz’s “Commentary.” Neither of them dealt with foreign policy. The focus on foreign policy did not arise until the ’80s.

david, wikipedia is not your friend.

Maz, you’ve been corrected in your false assertion. Don’t be such a child. Here’s Rich Lowry duplicating mnblrmkr’s comment. Any amount of research produced exactly the same story, from the mouths of neocons themselves.

Jesus. Grow up.

Yeah, try Conservapedia, it’s much better!

david, wikipedia is not your friend.

maz, I do a lot more research than wikipedia.

Who knew, John McCain invented the blackberry.

Asked what work John McCain did as Chairman of the Senate Commerce Committee that helped him understand the financial markets, the candidate’s top economic adviser wielded visual evidence: his BlackBerry.

“He did this,” Douglas Holtz-Eakin told reporters this morning, holding up his BlackBerry. “Telecommunications of the United States is a premier innovation in the past 15 years, comes right through the Commerce committee so you’re looking at the miracle John McCain helped create and that’s what he did.”

Since this is essentially the same claim that Al Gore made regarding the internet, I think it’s safe to say McCain has finally jumped the shark, if the pathological lies of the last two weeks hadn’t done it already.

BREAKING NEWS! Senator John McCain of Arizona has suffered an apparent epithany. There are no details on the current position of the 72-year-old Republican presidental nominee, but MNspeak will continue to break into regular commentary with updates on what he believes now as they come in.

Gov. Sarah Palin issued a brief statement to the nation asking for their prayers and understanding in this time of crisis.

We now return to our regular commentary.

Wow a massive flip flop all within one day, that must be some sort of record, someone call Guinness I need a beer.