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Subprime Worries

  • #81
  • Aug 14, 2007 8:44am Aug 14, 2007 8:44am
It is the Fed's job to bail out financial markets when the need arises, assuming the need is unforeseen... However, it is difficult to justify that same action when it is the biggest players in the game that are responsible for the mess in the first place, and when any economist with half a brain could have foreseen the mess. This places the Fed in a very tough spot, because it is very much like these big players have taken the markets hostage and demand credit for their safe return. If the Fed does nothing, the hostage will die (i.e. market crash, financial doom). If they give in to the demands on the other hand, it's telling the hostage takers that they can carry on with their wicked ways with no consequences because they will jump to the rescue any time the markets are taken hostage.
  • #82
  • Aug 14, 2007 9:05am Aug 14, 2007 9:05am
Tomorrow Aug 15th is 45 days before the end of the next (3rd) quarterly cycle, which many hedge funds require in order for investors to notify their intention to withdraw funds. Since most hedge funds are private the ramifications might not be know for a while. But the rumours will sure be flying.

But did anyone see that Goldman along with 2 private investors put $3bil into their Global Equity Opportunities fund. No bailout there. Most if not all the mortgage companies are not getting a bailout. Just bye bye. Hello chapter 7.
  • #83
  • Aug 14, 2007 9:17am Aug 14, 2007 9:17am
Quoting SunTrader
Most if not all the mortgage companies are not getting a bailout. Just bye bye. Hello chapter 7.
Just some of the fat getting trimmed. For now... And rightfully so. Have you seen some of the mortgages they were signing off on?? It was like selling car insurance to a blind man.
  • #84
  • Edited 9:41am Aug 14, 2007 9:24am | Edited 9:41am
Quoting SunTrader

...............
But did anyone see that Goldman along with 2 private investors put $3bil into their Global Equity Opportunities fund. No bailout there. Most if not all the mortgage companies are not getting a bailout. Just bye bye. Hello chapter 7.
SunTrader,

Who priced the rate at which Goldman and the 2 investors bought into the sub-primes in the Funds ??? Was`it Goldmans ???? No...surely not !!!


What about a quick way to make a cool $500 mill (or more.....Goldmans are not known for being generous to others over themselves) by pricing the rate at a super low rate.


Bail-out, my ass !!! Rape of the Funds more likely !!!


.
  • #85
  • Aug 14, 2007 9:44am Aug 14, 2007 9:44am
Quoting jacko
SunTrader,

Who priced the rate at which Goldman and the 2 investors bought into the sub-primes in the Funds ??? Was`it Goldmans ???? No...surely not !!!


What about a quick way to make a cool $500 mill (or more.....Goldmans are not known for being generous to others over themselves) by pricing the rate at a super low rate.


Bail-out, my ass !!! Rape of the Funds more likely !!!


.

Some-one please tell me whether Goldmans and the 2 investors paid the "fair market rate" for their sub-primes in the Fund....




.
  • #86
  • Aug 14, 2007 9:48am Aug 14, 2007 9:48am
Quoting jacko
SunTrader,

Who priced the rate at which Goldman and the 2 investors bought into the sub-primes in the Funds ??? Was`it Goldmans ???? No...surely not !!!


What about a quick way to make a cool $500 mill (or more.....Goldmans are not known for being generous to others over themselves) by pricing the rate at a super low rate.


Bail-out, my ass !!! Rape of the Funds more likely !!!


.
I said "No bailout there." What Goldman and the other investors did there
is say, OK you want out, we recognize the value and will take your place. Isn't that what any trader does, buy from someone else who no longer believes a market is going higher or even just holding it's value?
  • #87
  • Aug 14, 2007 10:02am Aug 14, 2007 10:02am
Quoting SunTrader
I said "No bailout there." What Goldman and the other investors did ther is say, OK you want out, we recognize the value and will take your place. Isn't that what any trader does, buy from someone else who no longer believes a market is going higher or even just holding it's value?

Hmmmm.... "we recognise the value" ....

Wasn't this whole issue of the credit market freezing up, was a result of Credit markets saying that they couldn't price the securities.

Now Goldmans come out and say that they can price the securities, and out of the magnamity of their hearts and the unstinting generosity of two generous and lovable investors, they are making a "fair" offer.

I have no problem with Goldmans buying into the Funds....the questions I am raising is who was responsible for setting the price. ???

And was it fair to the Goldman clients who sold to them?

And was it fair to the remaining Goldman clients in the Fund who have now been grossly diluted by the value of the Fund ??


As I said above, Bail-out, my ass !!!!

.

.
  • #88
  • Aug 14, 2007 11:23am Aug 14, 2007 11:23am
Quoting jacko
SunTrader,

We are looking at the situation where Credit markets are attempting to dictate international Monetary Policies for each country, including the US and Europe. This just came across the wires:
Aug. 13 (Bloomberg) -- Credit markets are telling central banks what to do, and it isn't what Ben S. Bernanke or Jean- Claude Trichet had in mind.

Can you imagine the implications of greedy Wall Street firms dictating international monetary policy....so that they can make even larger rapacious profits for themselves ????

These Wall Street firms and their Credit market operations are the exact same ones that have brought us to this extremely dangerous and precarious situation.

These bail-outs will only encourage far,far, far more dangerous situations in the very near future. These are systemic problems that are getting far bigger, far quicker than people realise.

So, in answer to your question, the sooner these hedge funds etc are brought to heel, the less chance there will be of another 1929 situation.
If they are not brought under control, there WILL be another 1929 situation....but it will be far, far worse than 1929 and far, far worse than you can imagine.

.
consider this, it's not as if anybody is twisting any central bankers arm, this money is a loan they stand to make as much money as anyone.they are the problem!
  • #89
  • Aug 15, 2007 6:14am Aug 15, 2007 6:14am
Quoting 59fender
consider this, it's not as if anybody is twisting any central bankers arm, this money is a loan they stand to make as much money as anyone.they are the problem!
Someone IS twisting their arm: See my post above about the financial markets being taken hostage. Their choice is either to let the hostage be killed (let the market crash) or to pay the ransom (inject credit) and open the door to further hostage taking down the road (rational exuberance??). Tough choice.
  • #90
  • Aug 15, 2007 6:27am Aug 15, 2007 6:27am
Some are geting their panties in a bunch without knowing the actual details of the fed (and others) actions. I hope that this is not how they trade.

Besides, even if someone else is getting a free ride, it ain't you and me so who give a f... Time could be better spent than bitching.
  • #91
  • Aug 15, 2007 7:03am Aug 15, 2007 7:03am
Quoting SunTrader
Some are geting their panties in a bunch without knowing the actual details of the fed (and others) actions. I hope that this is not how they trade.

Besides, even if someone else is getting a free ride, it ain't you and me so who give a f... Time could be better spent than bitching.
I think (and hope) you're not referring to me... I'm not bitching, only making observations and forming opinions based on those observations. In any case, you can and should "give a f..." about what your central bank is doing, especially if they are spending your money to help those who have more than you to begin with. I do agree that bitching about it won't do much though but being aware of it, and making others aware of it is a tiny first step towards actually doing something about it. That's how revolutions begin, my friend :.
  • #92
  • Aug 19, 2007 9:45am Aug 19, 2007 9:45am
Quoting merlin
this subprime is going to have huge effects. i have been all over this one in the past week. i talked a lot about this at least a year ago...if i could find the thread you would think i was a genius.
Ok Merlin - you're a genius
...because you never know - until you do!
  • #93
  • Aug 19, 2007 9:49am Aug 19, 2007 9:49am
Quoting FxJarhead
Could the sub prime worries be similar to the savings and loan mess of the early 90's??
EXACTLY! In fact the "worst" is yet to come. We'll have to wait until the Europeans buy up all the US distressed properties just like the Japanese did in the 80's.
...because you never know - until you do!
  • #94
  • Aug 19, 2007 11:02am Aug 19, 2007 11:02am
Quoting fxsport
EXACTLY! In fact the "worst" is yet to come. We'll have to wait until the Europeans buy up all the US distressed properties just like the Japanese did in the 80's.
Yeah and then buy it back from the Europeans at further distressed prices. Then watch as it all go back higher still again. I like that kind of cycle.

You do know that the Japanese no longer own Rockefeller Center or the Pebble Beach golf course or any number of investments they lost their shirts on?
  • #95
  • Aug 19, 2007 5:02pm Aug 19, 2007 5:02pm
Quoting SunTrader
Can you say with any certainty that if the FED/BOJ/ECB did not pump in funds that we wouldn't have another 1929 type event.

Thats a very interesting question.

I recently read an article regarding the U.S. sub-prime loan crisis and its contagiousness towards the rest of the economy and the world economy in this instance.
This article postulated that there is a "real" or fundamental economy and the financial markets that represent a different segment to it in the overall economy. Clearly there is an interdependence between those two economical realms but certainly not an absolute one.

One comment in this article reads:
"David Miles, chief UK economist of Morgan Stanley, for example, likens the complex financial products that are central to the current malaise to bets on a horse race. These bets can add up to an impressive figure - but they do not affect the outcome or the strength of the horse."

Indeed in my understanding the sub-prime crisis is only possible to spread because of financial derivatives that lean onto sub-prime loans.
It is like a bet that has been made on those loans.
The actual problem is augmented by the fact that some financial geniuses created ("repackaged") a bet on a bet on a bet etc. (i.e. financial derivatives) boosting company figures as they where sold on. That way its spread through numerous companies who all get affected by it like in a chain reaction.

So why now should those imprudent punters, who let them selves in with such risky short term boosters, be bailed out with others people money I dont quite understand ??

Especially not if it largely affects the financial markets only, because the extent to which it might affect the rest of the economy has been plausibly explained as limited in this particular article.
Of course if I was a hedge fund manager I would want to make everybody believe that doom is imminent if no one (central bank) bails them out an overall economic collapse will happen.

If you'd ask me I'd say that they should bleed to their (financial) death
for they created unjust wealth out of thin air for themleves for as long as they could make evrybody belive it worked. That should give an appropriate trimm to an unsustainable system.


But to come back to your question.

Can you say with any certainty that if the FED/BOJ/ECB did not pump in funds that we would have another 1929 type event?




P.S.
This is the article I mentioned, very interesting http://www.forexfactory.com/images/icons/icon14.gif

http://www.ft.com/cms/s/0/00d0c8e6-4...0779fd2ac.html
  • #96
  • Aug 19, 2007 5:45pm Aug 19, 2007 5:45pm
Quoting Maxpip
Can you say with any certainty that if the FED/BOJ/ECB did not pump in funds that we would have another 1929 type event?
http://www.ft.com/cms/s/0/00d0c8e6-4...0779fd2ac.html
It greatly increases the expectation of one - at least in the opinion of the people in the halls of power that study such things (it's one of Bernanke's favourite research topics, and the one he is best known for in academic circles). But obviously they consider the risk atm at low, otherwise they would have taken more drastic steps.
Personally, it's just a problem of too much money combined with too little brains at the top of the food chain (hence the large volume of inanely speculative investment by large private investors, a la the Guilded Age, and the 1920's). Most of them have little inclination or talent to do anything useful with it, so it's probably better to burn it off now rather than later, when the system might get too top-heavy and the ensuing damage possibly severe.
  • #97
  • Aug 19, 2007 7:18pm Aug 19, 2007 7:18pm
Yes but the word bailout keeps being thrown out there. I have read news reports of repo purchase of debt and then the discount rate drop. Is this the bailout that is being refered to? Have I missed something somewhere?
  • #98
  • Aug 19, 2007 8:02pm Aug 19, 2007 8:02pm
Quoting SunTrader
Yes but the word bailout keeps being thrown out there. I have read news reports of repo purchase of debt and then the discount rate drop. Is this the bailout that is being refered to? Have I missed something somewhere?
I think actually I agree with you - it's not a bailout, it's a breather while the rest of the market gets it's act together. I think Bernanke is givng excessive specs a chance for an orderly retreat based on his understanding of the market (which, I hasten to add, is much better than mine), which is probably reasonable given the possibility for collateral damage were he to play idealistic hardball. The real power of prevention (so to speak) lies with the elected branches of the government. Maybe they'll get the message, but judging from the past, the hope there is dim....
  • #99
  • Aug 19, 2007 8:44pm Aug 19, 2007 8:44pm
Quoting HalifaxCB
I think actually I agree with you - it's not a bailout, it's a breather while the rest of the market gets it's act together. I think Bernanke is givng excessive specs a chance for an orderly retreat based on his understanding of the market (which, I hasten to add, is much better than mine), which is probably reasonable given the possibility for collateral damage were he to play idealistic hardball. The real power of prevention (so to speak) lies with the elected branches of the government. Maybe they'll get the message, but judging from the past, the hope there is dim....
  • #100
  • Aug 20, 2007 9:53am Aug 20, 2007 9:53am
Quoting SunTrader
Yeah and then buy it back from the Europeans at further distressed prices. Then watch as it all go back higher still again. I like that kind of cycle.

You do know that the Japanese no longer own Rockefeller Center or the Pebble Beach golf course or any number of investments they lost their shirts on?
I know isn't it great? My point is when all those countries have excess $ they have to do something with them. They'll look at the distressed properties here and since their currencies are so much stronger than USD it only makes sense to either buy US securities or US properties with their excess $.

It's the heard mentality
...because you never know - until you do!
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