S&L 2.0?

[inteller]

quote:Originally posted by PonderInc

quote:Originally posted by inteller

I see what is happening with all of the big investment banks getting bailed out and I have to wonder, did we learn nothing from the 1990s S&L debacle?

Um, well...we learned that the S&L crisis was in 1980, not the 1990's.  But, hey, time flies when you're having fun...

http://en.wikipedia.org/wiki/Savings_and_Loan_Crisis

it started in the late 80s and most definitely ended in the 1990s....and the fallout occured in the 90s.

[FOTD]

White House Scrubs Web Site On The Economy

http://www.crooksandliars.com/2008/03/21/white-house-scrubs-web-site-on-the-economy/

"What a difference a week makes, especially when it comes to the rollercoaster American economy. No where is the impact of looming recession and the near-meltdown on Wall Street clearer than on the White House web site. Just days ago, the site boasted about President Bush?fs glorious stewardship of the U.S. economy. Now, the White House?fs economy web page reflects the mad scramble to ward off the twin crises of the housing market and the financial system.

A cached version of the White House web site from March 16, 2008 showed the last vestiges of rosy optimism and unbridled Bush boosterism. (The Google cache has since been updated.) In the upper left hand corner, an elegant animation proclaimed ?"President Bush?fs actions are moving our economy forward,"?"18,000 jobs created in December 2007,?" ?"Over 8.3 million new jobs created since August 2003?? and ?gUnemployment rate remains low at 5%.?"

The usual fuzzy math was there as well, cynically designed as always to sell making President Bush?fs tax cuts for the wealthy permanent:

?"The 2001 and 2003 tax cuts are set to expire in less than three years. If Congress allows that to happen, 116 million taxpayers will see their taxes go up by $1,800 on average.?"

Some signs of the downturn were already present as well. Bush?fs disastrous appearance last week before the Economic Club of New York was front and center. And a run down of the steps being taken to confront the imploding housing market were highlighted as well.

But four days later, the main White House economy web page has gotten an emergency face-lift. The eye-catching animation crowing about Bush leading the economy forward is gone. After the U.S. shed 63,000 jobs in February and new jobless claims this week jumped by 22,000, the text about past job creation became history. And even the verbiage about making the tax cuts permanent has been deleted. And just days after the Federal Reserve intervened with its massive Bear Stearns bailout to halt the building Wall Street panic, the White House web site proclaims:

?"The President remains deeply concerned about the housing issue and strongly believes that any government policies must be responsible. Government actions often have far-reaching and unintended consequences. Any time the government intervenes in the market, it must do so with clear purpose and great care.?"

[Conan71]

quote:Originally posted by inteller

quote:Originally posted by PonderInc

quote:Originally posted by inteller

I see what is happening with all of the big investment banks getting bailed out and I have to wonder, did we learn nothing from the 1990s S&L debacle?

Um, well...we learned that the S&L crisis was in 1980, not the 1990's.  But, hey, time flies when you're having fun...

http://en.wikipedia.org/wiki/Savings_and_Loan_Crisis

it started in the late 80s and most definitely ended in the 1990s....and the fallout occured in the 90s.

Penn Square was a significant collapse in Oklahoma which started a whole house of cards tumbling in 1982.

I believe Repblic Bank in Tulsa collapsed around 1983 as I seem to remember there was about a seven or eight month-long global chase of Wes McKinney, the president.  Republic was essentially an un-insured institution operated much like an S & L.  They were into risky real estate and energy lending.

[cannon_fodder]

FOTD, I get the impression that you are from old money and work that money instead of yourself.  How are YOUR finances doing?  Mine are doing fine.  No where near collapse.

All of my neighbors, my friends and family around the country, and indeed most people in the nation are doing just fine.  I seriously do not know anyone that has lost their job or had their mortgage foreclosed on - and I know people in 15-20 States that I would hear about if they lost their homes or their jobs.  From laborers in Iowa, to investment bankers in NYC, to Physiologists in San Fran to Attorney's in Seattle and retirees in Virginia.

You have been shouting DOOM and GLOOM for well over a year now. Did you shout all during the 1990's and then raise your hands in glee when the economy shook?  You must have been disappointed when it didn't fall.  I hope you are disappointed again.

Things certainly are not great.  But government regulation had as much to do with causing the problem as anything else.  Encouraging home ownership with tax incentives, mandating sub-prime quotas on banks (you must make X% of bad loans), and essentially guaranteeing a market for mortgages.  But for some reason you think they will solve the problem?

Here's the deal:  you can not legislate stupidity (borrowing $350K for a house while making $60K a year) nor greed (banks making those loans).

No matter what new regulations are put in place, you can't stop it.  Every time regulations have gotten tighter, it has been followed by another scandal.  That is not an argument against regulation, it is an argument against knee jerk regulation.

Not too mention there is an inverse relationship between regulation and efficiencies.  More regulation not only slows domestic growth but it discourages foreign investment.  If we regulated our economy to be risk free it would be return free as well.

Some basic elements need to change, I agree.  But it is the federal policy of encouraging excess borrowing on the private level as well as doing so itself - not regulating the behavior of business that needs to change.  A good start would be to let companies that took these risks as well as people who made poor choices suffer the consequences of those choices - lest they be repeated in short order.

If the government bails out Joe McMansion's mortgage, I demand they cut me a check for living within my damn means. If they want to give C. E. Officer a state sponsored Golden parachute then why don't I deserve it?  I've never once lost $50 BILLION in other peoples money.  

While I'm at it.  The Federal Reserve is supposed to check inflation, NOT worry about the economy.  Stop playing politics with our monetary policy or it will lose its worth.

But damn if we don't agree on one thing, the government has sure screwed things up and things need to change (I just don't think government is the answer to government).

[we vs us]

quote:Originally posted by cannon_fodder

FOTD, I get the impression that you are from old money and work that money instead of yourself.  . . . .

You have been shouting DOOM and GLOOM for well over a year now.

CF I'm going to resist taking you on head to head over your anti-regulationeering because I agree with you that FOTD is a massive Fountain of Negativity.  

I mean, it's bad, but it ain't THAT bad.

[bokworker]

Actually CF the Fed has a dual mandate.... price stability AND sustainable growth. In normal times the 2 can coexist but in times of stress, like now, the Fed can be forced to choose one over the other. Notwithstanding the policy decision to send $150 billion dollars in rebate checks, the Fed has clearly made the decision that growth is more important right now than price stability, i.e. low inflation. While the longer term impact of this decision is debatable, and I do for one feel that we will have to pay an inflation price for the current monetary and fiscal decisions, the reality is that if the Fed did not ease aggressively that we were looking at a massively deflationary debt liquidation cycle. I worked for a failed bank, FNB OKC, that fell victim to the deflation we felt in this part of the country in the early and mid-eighties... and most everyone that lived in Oklahoma at that time was impacted by the deflation of oil prices... whether they were in the oil business or not. As a bank, FNB OKC was not nearly as aggressive as some of our competitors in the oil business but, in the end it bacame apparent that we were ALL in the oil business.

The interesting part of that event though was that while declining oil prices were deflationary to us it was stimulative to the rest of the economy. And the fact is Oklahoma, texas, Kansas, and Colorado were not as big a drag as the the stimulus was to the rest of the country so while we suffered the major population centers recovered. Unlike that period though, the real estate issue is much bigger and more pervasive than our little oil bust... the numbers are a LOT bigger.

A capitalistic economy has 2 main enemies... hyper-inflation and deflation. Given that, the most pressing risk TODAY is not hyper-inflation(note- in reality a capitalistic economy works best with controlled inflation. Hence the Fed's stated goal of 1 to 2% inflation) but deflation. The Fed has many tools that can deal with both of these issues but the risk for the Fed today is deflation caused by a debt liquidation cycle that would be much more damaging that somewhat higher inflation in the future.

The range of outcomes for monetary and fiscal policy decisions undertaken today is VERY wide. Leverage does that to you. It magnifies the good and the bad. As many posters on here would agree, our country, and many of us personally, would be much better off if we did not have the level of debt on our balance sheets that we do. But, we are where we are. I too worry about the long term implications to the dollar and watch in amazement as commodities rise (keep in mind that $100/barrel oil and $10 a bushel wheat is not all bad for us okies) but tend to think that the best way to get the dollar stabalized is to improve the growth prospects for our economy... then the dollar will follow.

In total, I try not to take the FOTD tack and extrapolate our current economic distress to an end that means we should all be buying canned goods and ammunition. No doubt we have issues to deal with economically but I bet in 30 years that businesses will be in business to make money... kind of like they are now and that it is a bad bet to think our economy is going to collapse....

[cannon_fodder]

Thanks for that BOK.  You are correct int he dual purpose.  But I guess it seems they are sacrificing any notion of inflation control to cut rates on policy concerns.   Though you raise an interesting point with deflationary pressure from lower home prices (tighter credit, etc.).  

Can't really argue with your statements.

[Conan71]

As an investor, I'd think it quite fool-hearty to talk down the economy unless one is heavily vested in businesses which would stand to gain by a crash in the economy.  There are many people poised to make money off the fall-out of the housing market, for example.

The psychological effects of recession and depression-talk on business is proven.  Start talking recession and companies will stop hiring, put off capital expenditures, and even cut back production which sets off ripples down the line.

[bokworker]

Good point Conan..... it is always important to remember that whensomebody is espousing a particular viewpoint or forecast it is probably in their best interest, read they will profit financially, for their view to come to fruition. Stepping back from the noise of the press, remember they are a business that profits from more eyeballs and bad news sells better than good news, and just looking at the numbers gives one more reasons to be optimistic.

There is a TON of cash on the sidelines that will need to be put to work. While cash is good if prices are falling, as an asset class cash does not achieve any long term financial goals. One of the Fed's jobs during times like this is to push the "riskless" rate down to the level that one eventually has to do something else with their money. Short interest on the NYSE, a measure of bearishness, is at historical highs. Buying a stock, or any other asset, can be a trade or an investment but, a short is ALWAYS a trade. And while certain sectors of the economy are certainly in the doldrums, many others are not. As CF mentioned earlier, the feedback I get from those that are IN business is that while things are tougher than they were it is nowhere near as bad as it has been in times past. However, those that are not IN business and are getting a pulse on the economy based soley on what they read or see on TV are scared to death.

The Fed's response to the Bear Stearns issue can be agreeable or not but the reality is they had no choice. And hey, if you are in the business of marketing or mantaining foreclosed properties on behalf of financial institutions then these are the best of times.....

[Conan71]

That's all I'm left to believe is that when an investor like FOTD is dumbing down the economy, he's got something to gain by it or he has absolutely no grasp on how it affects his investments.

[we vs us]

quote:Originally posted by Conan71

That's all I'm left to believe is that when an investor like FOTD is dumbing down the economy, he's got something to gain by it or he has absolutely no grasp on how it affects his investments.

I mean, yeah, but . . . isn't that sensitivity to speech proportional to the possible effect the speaker can possibly have on an economy with a GDP of $13 trillion? I mean, FOTD's posts are a drag, no doubt, but his individual effect on the national -- not to mention global -- economy is less than nothing.

[cannon_fodder]

I don't know Wevus, I sold all my assets and buried them in a can because he told me cash was the best investment.  That and I only by Berkshire Hathaway A shares, just like AOX.   Who hates big business... but only invests in one of the largest businesses in the world.

The horror.

[bokworker]

we vs us.... it isn't the effect FOTD has on the national economy. It's the effect the economy can have on FOTD's personal wealth. I would certainly hope that FOTD has taken steps to either protect or enrich his wealth based on his feelings about what is going on in the economy. And that is one of the great things about our "free" markets.... a person can profit from both the success or failure of those markets. FOTD obviously has strong feelings about what is going on and can certainly cite a number of published articles that confirm his assessment of our economy's direction. If he isn't acting on those feelings then he is leaving a bunch of money on the table..... or is he?

All of the articles and issues that have been cited in this thread are known and, as such, are discounted in the markets today. the key fact is that the market is anticipatory.... and there are many signs that the market is beginning to "look through" today's and even tomorrow's weakness and anticipate better times ahead. I am not saying the market is always right but you don't consistently make money betting against the Fed and the markets.

[we vs us]

quote:Originally posted by cannon_fodder

I don't know Wevus, I sold all my assets and buried them in a can because he told me cash was the best investment.  That and I only by Berkshire Hathaway A shares, just like AOX.   Who hates big business... but only invests in one of the largest businesses in the world.

The horror.

Consistency, my dear CF, is the hobgoblin of lesser minds.

[Conan71]

quote:Originally posted by we vs us

quote:Originally posted by Conan71

That's all I'm left to believe is that when an investor like FOTD is dumbing down the economy, he's got something to gain by it or he has absolutely no grasp on how it affects his investments.

I mean, yeah, but . . . isn't that sensitivity to speech proportional to the possible effect the speaker can possibly have on an economy with a GDP of $13 trillion? I mean, FOTD's posts are a drag, no doubt, but his individual effect on the national -- not to mention global -- economy is less than nothing.

One person like FOTD/AOX does not affect it.  

One person like Alan Greenspan (who should keep his mouth shut as he is no longer the chairman of the Fed) his words can move financial mountains.  So can the President or prominent political candidates.

It's the cumulative effect of several million FOTD's plus the media talking down the economy which can literally cause people to lose jobs and orders to slow down, not one loose screw unless that screw has the platform and respect like Greenspan.

Oil and gas prices are keeping my company busy and in the black.  I'm seeing though that orders for large equipment from manufacturing sectors is starting to lag and get postponed.  Speaking with my contacts, it's a fear of future sales slowdowns which are putting off capital investment, not a real slow down in their sales numbers at this point.

IOW- they are hanging on to money and not contributing to growth of the economy, due to rumors and speculation.