How low will the Market go before Bush acts?

[iplaw]

quote:First, it would help if Dubya acted like he gave a rats butt.  

What do you suggest he say?  

quote:
Then he could raise the spending caps at Fannie and Freddie

It is not the government's obligation to bail out the private sector every time it's in trouble.  We are reaping the whirlwind of our own gluttony.  Why should the government be obligated to purchase defunct mortgages from tanking lenders?  Are we to expect that Fannie and Freddie should take the shaft instead of the sub-prime mortgage holder who sold the bogus loan?  The bottom line is, no matter who holds the loan, they AREN'T going to get paid.  The mortgagee's simply can't pay their PITI payments anymore.  Might I suggest you read Atlas Shrugged for some perspective...

quote:maybe call an emergency meeting of his economic council.  

Oh boy!  Let's have a meeting.

quote:
I think of Jack Nicholson in Mars Attacks, explaining to his Cabinet after Congress has been obliterated by the aliens . . . [SOUND CLIP HERE] . . .

Too bad this is real life, or you'd have an answer on your hands.

[cannon_fodder]

quote:Originally posted by tim huntzinger

First, it would help if Dubya acted like he gave a rats butt.  Then he could raise the spending caps at Fannie and Freddie, maybe call an emergency meeting of his economic council.  He could dispatch Administrative talking heads to the media to explain the Administration's approach to the crisis (sticking to the reforms at Fannie and Freddie).

\]

1. Fannie is for student loans.  Start a different thread if that is an issue for you, but I just got done with school a couple years back and loans were not an issue.  If anything, they are TOO easy to get.  Plenty of my classmates took out loans for school so they could buy a new car with their other $$$.  Again, start a different thread if you want to discuss further.

2. You complained a while back about lending companies that gave retarded loans for ridiculous houses to unqualified people; we all know how that ends.  Why should the government (read your tax money) be used to save these companies from their own high risk decisions?

For that matter, the stock market is a RISK.  You are rewarded for your risk with returns, but you can lose your money as well.  Hence, risk.  It is not the governments job to manage citizens risk in the stock market.

3) The government over regulates as it is.  Anyone who thinks we need MORE regulation of the economy clearly doesn't deal with it very often.  Lending, equity, or bonds are all retarded over regulated and require a high amount of cost to navigate the bureaucracy.

The answer is to let these companies fail, take the pain, learn from the mistake, and move on.  If the government steps in we learn that we can make poor financial decisions and uncle Sam will save the day.  Thus, teaching us to do it again.

More government is seldom the answer.  Hands off.

[iplaw]

quote:1. Fannie is for student loans. Start a different thread if that is an issue for you, but I just got done with school a couple years back and loans were not an issue. If anything, they are TOO easy to get. Plenty of my classmates took out loans for school so they could buy a new car with their other $$$. Again, start a different thread if you want to discuss further.

Wasn't Fannie Mae setup to issue emergency loans in desparate times?  Either way, it shouldn't be done, but am I remembering this incorrectly?  I remember reading something from Jim Cramer the other day about this very issue and he mentioned Fannie Mae.

[tim huntzinger]

Fannie Mae stands for 'Federal National Mortgage Association.' [:O]

I am not an economist (but I slept at a Holiday Inn Express last night!) but for a President who has borrowed more than all predecessors combined to suddenly blush at the idea of keeping liquidity in the real estate game is bizarre.

[Wilbur]

First of all, none of us here have lost any money, unless you have cashed in your stocks this past week.  Everything lost is an 'unrealized loss', just as the profits you weren't really making were 'unrealized gains.'

And if you are in a panic right now and selling, you are a fool.  The idea is to buy low and sell high.  Not buy high, panic, then sell low.

Everyone should be buying!

And if you buy on a regular basis, which is what most of us do in our 401k, 457, ...., you should be thankful those stocks you have been buying within the last 10 days or so and cheaper then what you were buying before, meaning you are buying more shares at a cheaper price.

This correction is health, even if it is all George Bush's fault (just like everything else, like... global warming, the score at the PGA, gas prices, how much my computer cost, my kids grades at school, .....).

[cannon_fodder]

Fannie Mae is the largest 'private" lender for student loans in the world.  It was my understanding that they have more assets in non-dischargeable student loans than in mortgages.  I understand that they started as a federally owned mortgage broker/guarantee, but they have migrated.  

MMM stands for Minnesota Manufacturing and Mining, they no longer mine...

Though I stand to be corrected on the Fannie Mae thing, just read an article in conjunction with its pending sale... which is hindered by both regulation and changes to student loan financing.  But like I said, I'm happy to be corrected if someone can find the Fannie Mae asset/loan distribution, I guess I really dont know.  Just my impression.
- -  -

and Wilbur, I'd be happy if everyone panicked a little more.  I have my eye on a few solid stocks and I'd like to see the P/E come off a bit.  Actually, most stocks are trading close to the historic 16.5 P/E anyway.  So if things keep falling nearly anything will be a good buy.

ps.  Dow rebounded (dangit).  I worked all day to free up cash to buy in tomorrow and the damn thing recovers.  /off to find some losers.

[iplaw]

quote:Originally posted by tim huntzinger

Fannie Mae stands for 'Federal National Mortgage Association.' [:O]

I am not an economist (but I slept at a Holiday Inn Express last night!) but for a President who has borrowed more than all predecessors combined to suddenly blush at the idea of keeping liquidity in the real estate game is bizarre.

It's not his job to bail out the private sector.  These are decisions that we as a society have to collectively deal with.  Many people will lose jobs and many companies will go out of business, but it's cause and effect dear Timmy.  

When people buy mortgages they can't afford from loan companies who shouldn't be offering them loans, where these loans are in turn labeled as "A" grade paper (when they really are B- grade paper) and used by unscrupulous hedge-fund pimps to purchase stocks that are subsequently not worth the paper they're written on...it is NOT the obligation of the federal government to buy out those loans to back the mis-graded fake paper behind these hedge funds.

We need to take our lumps and move on, but asking the Fed to mitigate the damage does nothing to teach either the BORROWER, MORTGAGOR, or HEDGE FUND PIMP not to create dangerously overvalued paper.

Unless you'd like to repeat this cycle again in 10 years....

[tim huntzinger]

Hopefully the Reserve will not raise rates 17 consecutive times, either. I surmise that seven million mortgage defaults will be as detrimental to the economy as a little inflation.

Why not just abolish Fannie and Freddie outright, then? It seemed to be working pretty good until recently.

[iplaw]

quote:Hopefully the Reserve will not raise rates 17 consecutive times, either. I surmise that seven million mortgage defaults will be as detrimental to the economy as a little inflation.

Still not gettin it?  The damage is coming from hedge funds that are backed by sh**ty mortgages.  The answer is not to bail out the mortgage companies.  We have a swell of hedge funds purchased with mis-graded paper.  IOW, a good majority of these stocks have overinflated values.  The cat is out of the bag so to speak, and nothing we do can "revalue" these stocks other than to let the market correct ITSELF.

Everyone knows these stocks are overvalued and the hedge fund pimps can't get anyone to buy them anymore.  Are you suggesting we buy out the liquidity problem that exists with these hedge funds as well, because that's the only real answer.

[tim huntzinger]

No, but there has to be more daylight at the end of the tunnel to keep things going in the short-term.  The correction is what it is, we cannot subsidize stupid practices, but if adding liquidity were not a partial solution then what have all the banks been doing when adding cash to the system?

Having Bush tap-dance and whistle Dixie with his advisers may not solve everything, but it would send a message that the wheels are not going to come off the economy.  You may know that and I may know that but the average consumer may not understand that.

[bokworker]

CF, normally you are spot on with your facts but Fannie Mae doe snot do student loans... Sallie Mae is the largest student lender. FNMA's charter only allows it to do residential mortgage loans and they along with Freddie Mac are the largest gurarantors of residential mortgages in the country.

Beyond that, the assessment of the part they could play in the sub-prime sissue is correct. They may very well be able to expand their loan portfolios buy buying more mortgages but they would NOT be the sub-prime types that are blowing up at present. Keep in  mind as well that congress, only 2 years ago, limited FNM and FRE in the growth of their loan portfolio because there was a fear that they might be getting big enough to cause systemic risk to the financial markets and as such could potentially force a tax-payer bail-out. How ironic that congress, and others like Tim, are calling on FNM and FRE to get bigger to AVOID a tax payer bail-out. If the market for traditional 20% down, high FICO score mortgages would begin to dry up then FNM and FRE could grease the skids so to speak, but, in todays market those are not the kind of mortgages that are causing the problems.

In total, I have trouble seeing how this issue can really be politicized..... let's see, are we going to bring in a bunch of people that are losing their house becaus they got money they shouldn't have? And their credit was screwed up before so this foreclosure is not going to make their plight any worse right? And the lenders and investors are LOSING a ton of money right? Not really a predatory lending issue as far as I can see..... more like a lot of people got to live in houses they shouldn't have for a period of time and now reality is sinking in... again.

Poor credit practices are poor credit practices... it is not un-American to tell people no when they ask for money if they cannot pay it back. And in the end, no one forced these people to take the money and if they didn't understand all of the intricacies of the loan then borrower beware.

One other issue and then I'll end this little diatribe, cry no tears for investors losing money in hedge funds. By definition, investors in these funds are required to be "accredited investors". In addition to significant financial hurdles that it takes to be deemed an "accreditied investor" there is an assumption that you are a "sophisticated" investor as well.... laymen's terms- there should never be an investor in these funds that cannot afford to lose some or all of the money they put at risk.

[Lister]

quote:Originally posted by rwarn17588

I agree there's not much that can be done.

You have the toxic combination of credit-challenged people buying way more house than they can afford, plus overly permissive lenders signing off on them when they instead should have steered clients to more financially manageable properties. This sort of shakeout was inevitable.

Plus you have this stupid "bigger is better" mantra. Does a couple with one kid really need a 2,000-square-foot house, when a well-maintained 1,000-square-footer will do just fine?

Financial regulations likely will be tightened after this, as they probably should. But it's closing the barn door after the cows have already left.

Well said Rwarn. I've seen it go on too long. People think they have to have MUCH more house than they really need. I guess it's just to one-up the Jones'. It really makes no sense. The heating, cooling, and maintenance of all that extra house is ridiculous. Well, they are reaping what they sowed, in my opinion.

[Breadburner]

Nice try Timmmmaaaaaaayyy....Now get back in your hole.....

[aoxamaxoa]

The Busheviks will go down in history as the great waste.

http://www.chicagotribune.com/business/chi-070815stocks-story,1,6911312.story?coll=chi_tab01_layout&ctrack=1&cset=true

"Feels like we're on the edge of a panic to me," said Jeffrey Saut, who oversees $33.7 billion as chief investment strategist at Raymond James & Associates in St. Petersburg, Florida. "In our business, psychology is everything and psychology has changed real quick on Wall Street."

"What that indicates is that people are worried not about this move or the past couple of weeks but the possibility of a real market sell-off or crash scenario," said Ben Londergan, co- CEO of Group One Trading LP in Chicago. "We've seen not that large a move to the downside in percentage terms but we've really had a big move up in the VIX."

Choppy times....lack of clear direction.

It might be time to be adding slowly to equities. This market will be lame duck for a couple of years. My advice, don't fear.

[bokworker]

Well Jeffery Saut of Raymond James, looking at futures this morning I guess phsycology has changed for the better....

Markets trade on emotion and we should not expect, or want, the Fed to react to emotion. The Fed this morning did cut the "discount rate" which is the rate that banks can borrow directly from the Fed. This is a totally different market than the fed funds market which is what banks lend money to each other... and these funds are completely unsecured. This move gives those banks that need money another avenue to fund themselves vs. paying higher than market rates to those banks that have money to lend on an overnight basis. All in all this move is more symbolic than anything.

One other comment on the move in the markets this morning. This has all of the signs of a short covering move than a sign of real investors getting long the market. The difference between the 2 is important. Keep in mind that if you buy a stock it can be either for a short term trade or a long term investment. Generally if you buy a stock on a trade then you have a quicker trigger finger than if you are buying a stock for a long term play. However, a short is ALWAYS a trade. you stay with it as long as it is working but the minute it stops working you cover. In theory, a buy of a stock has unlimited gains because a stock can alway go up.... or put another way you loss is limited to the price you pay for a stock. If you short a stock your potential losses are unlimited while your gain is limited to the difference between the price you siold and zero.

Confused yet? And guess what, Bush has absolutely nothing to do with the above....