Filed under: Uncategorized | Tags: economics, mccain, Obama, who will will this november, will the bailout help obama, will the bailout hurt mccain
There is NO way that McCain will win the elections this November after the Republicans BOTHCED the bail out. The stock market is going to collapse and more banks will fail this week. The average person is going to get freaked out, won’t appreciate being freaked out, and will vote non-Republican accross the board this November.
Obama, who is perceived as more competent in domestic and economic issues was basically handed his victory today.
Unfortuantely, he will inheret one pretty messed up country and wil lspend the vast majority of his presidency un-doing the damage…
CAVEAT—If McCain somehow gets up and saves this thing by rallying his party, there is a chance he’ll come out victorious. It seems unlikely though.
Filed under: Market Trends, Politics | Tags: the bail out failed, why congress rejected the bail out, why did the bail out fail
Congress rejected the bail out? Now the DOW is literally crashing? WTF WTF WTF!!!!! I understand that the bailout isn’t perfect. I understand that they are nervous about signing their names to a bill that may be disasterous in the long run. But, they still needed to act in order to fight off major damage to the financial markets.
Instead of acting, they rejected the plan and came out empty handed. Rejecting the plan ONLY makes sense if they had a better alternative. They did not. Now the economy is screwed and voters are probably going to blame them for the fall out.
I bet you ANYTHING that the people who voted Nay did so because constituents back home lobbied them saying “vote for the bailout and we will make sure you lose the election this November.” Well. They’re going to lose the election anyway unless they fix this mess FAST.
On a side note—I’m beginning to think that career politicians are the least qualified people to run the government. They don’t have real-world experience. They vote based on whether xyz is popular and not whether xyz is the best decision.
I am LIVID right now.
Filed under: Politics | Tags: florida 2000 election, mccain, Obama, Palin, sarah silverman, will florida matter in the 2009 election
This video is HYSTERICAL.
Filed under: Politics | Tags: Bail out plan passes, is the bail out good, what are the risks of the bail out plans, what happens if the bail out plan passes
Cnn.com just reported that Congress approved a bailout plan. I do not know the specifics of the plan yet, but I wanted to go on the record for the following:
- Given available information, I think that the bailout plan was the correct step necessary to help the economy recover.
- The congressmen and congresswomen that voted for the plan made the most rational decision they could given the information available.
- I predict that the bailout will be a success because 1) It will help stabilize the market and 2) The government will be able to turn a profit on its $700 billion investment if it holds the assets long enough.
I think it’s going to work. I truly, truly hope that Paulson keeps his post in the Treasury no matter which party takes the White House this November.
With that said, this bail out gives the Fed and Treasury an unprecedented amount of power. These two bodies must be governed with care. There must be oversight. Paulson and Bernanke make a good team. We got lucky. These two men are modern day Renaissance Men, much like George Washington and Thomas Jefferson. They are extroardinarly capable of leading the country through difficult terrain. However, there is no guarantee that the next people in their position will be as capable.
We must place a system of checks and balances in place over the Fed/Treasury in order to mitigate the risk of an all powerful position held by weaker individuals than Paulson or Bernanke.
Washington was aware of this risk…that is why he stepped down after two terms, setting an example that was followed by all other presidnets (minus FDR). That way, a bad leader would only stay in power for 8 years.
I am not sure what checks must be in place, but some oversight, some rules, some balances must exist so that the Fed/Treasury do no harm.
Filed under: Market Trends | Tags: benefits to the bail out., Federal bail out, possible uses of bail out profits, will the bail out cost taxpayers money
The $700 billion government bailout may turnout a pretty profit. How? There are very few institutions in the world that have a big enough war chest and strong enough stomach to hold distressed investments of this magnitude long enough for them to turn around.
The government has the money and the patience to wait for its garbage bin of mortgages to ferment into something more positive.
Even if the return is minimal, the sheer size of the transaction ($700 billion!) ensures a sizable net profit. Some economists are estimating a profit of $1 trillion dollars.
Just a thought—what if this profit is reserved for bolstering the social security plan? After all, deficiencies in the social security program could very well be a crisis the USA faces in the future. Imagine all those baby boomers freaking out when the government tells them they will not receive their social security benefits that they counted on for their retirement. An entire class of citizens would suffer if social security does not shore up its funding pool.
Use any profit from the bail out to help the social security program, to help tax prayers….just a thought. A good thought.
Filed under: Market Trends | Tags: bailout, democrats fighting the bail out, does the bail out help main street, Populist, should the bail out happen, the Fed
It is hard to stay loyal to the Democrat party when representatives on the Hill start shouting populist chants in the face of America’s most significant economic crisis in several generations. Politicians are generalists—they know only enough to sound somewhat intelligible during tv interviews. They are not experts, especially in complicated fields such as finance.
The experts in the room are Bernanke and Paulson. Bernanke is a world expert on the great depression. He studied that era like no other student before him, diagnosed which government policies helped/hampered the country’s recovery from the Great Depression. The man knows what he is doing. Then there is Paulson, former CEO of Goldman Sachs. He knows banking. He knows the system, in fact he ran it for a few years. The man knows what he is talking about.
Senators and Congress(wo)men do not.
This bail out is dangerous as it is. The financial industry forced The Fed into a corner so that it now has to buy an entire trash bin of bad loans. Even if the Fed purchases these assets at $0.30 to the dollar, it will still lose close to every penny that it spends filling the bin. Pricing and structuring these loans will be madness, yet Congress is now talking about a Main Street tax rebate? Bailing out individual home owners? That makes the bail out plan THAT much more expensive and difficult to manage. Adding populist lines to the plan undoubtedly increase the odds that something will go wrong by complicating an already unfathomably complicated matter.
Here are some common arguments:
-How is it possible that taxpayer money will be used to rescue these idiotic bankers on Wall Street
WRONG. Wall Street’s problems are Main Street’s problems too. The risk of another bank failure lowers the value of the average American’s retirement savings. Mutual funs and all other types of investment vehicles are losing value. The Wall Street Journal even printed an article stating that people are opting to retire a few years later than expected because their savings have plummetted and they cannot afford to live without a steady income. Bailing out the banks will stabilize the markets and stabilize people’s life savings.
-We should help Main Street out by giving out another tax rebate or bailing individual homeowners out.
WRONG. A tax rebate of $600 will not help John Doe’s 401K recuperate value. A tax rebate will provide only short term relief. What we need is long term relief, long term stability, a chance for the markets to breath easy and become productive once again. The Fed needs every dollar in can get to properly clean up the mortgage mess. Diverting cash towards a rebate program sounds good, gets votes, but will not improve the average American’s life in a tangible way.
The same applies to the homeowner rescue bailouts that some Democrats are suggesting. If bailing out a handful of banks is complicated, imagine bailing out millions and millions of individuals. It will be hard to determine who really needs a bailout and who doesn’t. It is a mess. It will produce gross inefficiencies that will hurt the general economy. People will game the system to get their share of bailout money. An individual bailout is an undesirable method for stabilizing the US economy—it’s a misuse of taxpayer money.
I’m ranting. All I can say is that Paulson and Bernanke know what they are doing—getting in their way will only make things worse.
With that said, it scares me that the Fed has as much power as it has. It is now the most activist part of the US government. I trust the expertise currently at the Fed but I’m not entirely sure that I’ll trust its next leaders. The Fed needs some massive oversight.
Filed under: Politics
No, McCain was not saluditorian. He was the opposite. He was 894th out of a class of 899.
wow.
Filed under: Market Trends | Tags: implications of SEC short ban, SEC bans short selling, selling a stock short for dummies, Short selling for dummies, what is selling a stock short, what it means to ban short selling
The SEC just picked 799 companies and baned investors from short-selling them.
What does it mean to “sell a stock short” Short selling rewards investors that accurately predict that a company is overvalued. For example, imagine a guru of all things internet related. This girl reads every blog, is a member of every cool online service, and predicts almost every online trend. She was the first in her state to join facebook, first to have a gmail account, hell, she was the first on ICQ back in the 90s. Guess what. She just joined a beta test for a new online mail service that blows gmail out of the water. It’s amazing in every way and makes gmail look like a typewriter next to the awesomeness power of this new email service. This girl predicts that gmail stock will fall once her new favorite non-google mail product hits the market. She does the math and thinks that Google’s current stock price of $450 is ridiculously high and will drop to $300 once the new mail service opens to the general product. What does she do? She tells her broker to short 100 stocks of google. Her broker goes out and finds another broker willing to lend the stock for a fee of $5 per stock (5×100=$500) and demands that the stock be returned to him in two months. Fine. The girl’s broker goes and sells the borrowed stock for $450×100=$45,000. Wait. The new product hits the market. People love it and defect gmail to set up new email accounts. Google now has less revenue stream since millions of people stopped using it gmail service. Less revenue = less value for the company. The stock falls $300. The girl’s broker re-buys the google stock for $300×100=$30,000 and gives the stock back to the guy that lent them to him. She keeps $45,000-$30,000-$500(fee)=$14,500.
Pro: Short selling rewards investors that do their research and correctly anticipate new trends.
Con: In this day of technology information is readily available. Everyone knows everything immediately and at the same time. There are virtually no competitive advantages if you have enough people “checking things out.” The advantage of short selling is limited.
Con II: It is easy to influence the market. A few months ago I wrote a blog about some dude that thought Fannie Mae was going to talk. He was kind of a big deal in finance and Bloomberg decided to interview him. They printed an article blasting Fannie Mae. Investors read this article and Fannie shares tumbled even more. Well it turns out that this man had shorted Fannie Stock so it was in his interest to a) talk bad about Fannie no matter what the truth was b) scare other investors into selling their Fannie stock, making its price go down, and enabling him to make a killing when he closed out the short trade. Because of today’s technology and ultra sensitive communications channels, it is easy to manipulate the market in the name of self-interest.
The SEC Ban on Short Selling: It is in the world’s interest for the stock markets to stabilize, for banks stocks to stabilize (allows banks to raise capital more efficiently) and for people to start freaking other people out just because they want to make some cash. Banning the short-selling of stocks that are particularly sensitive to the global crisis currently going on will help the world recover faster.
Con: The SEC just imposed a regulation, and this goes in the face of free market theory. Many people think that regulation is inefficient, produces inefficiencies, and therefore lowers the productivity/value of things markets (general theory).
Maybe, but cost of short-selling a stock and influencing others to dump that stock so you can make more money is more evil than temporarily regulating the stocks of a limited number of companies.
Fight Fire with Fire I say….
Filed under: Market Trends | Tags: $800 billion bail out, central depository for shitty loans, the Fed
Just on Bloomberg:
Options under consideration include establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market funds, said two people briefed by congressional staff who spoke on condition of anonymity because the plans may change.
Another possibility is using Fannie and Freddie, the federally chartered mortgage-finance companies seized by the government last week, to buy assets, one of the people said.
It’s understandable that the Fed is getting tired of these one off bail outs. They are sleep deprived. Stressed. Demoralized even because each bailout seems to stir up even more bankruptcies, calling for more bailouts, etc.
However, wouldn’t the creation of a massive garbage can full of crap assets be the very definitoin of a moral hazard? Tax payers would pay nearly $1 trillion for worthless assets and banks would walk out assured that the government will always be there to catch them?
Lets analyze this.
Pros: The market will stabilize once and for all. There will be less bankruptcies, the stock market will rise again, and I might have a chance of finding a summer internship in NY thi scoming summer.
Con: Moral hazard. Tax payers will get jipped. The US will have to borrow how much money to pay for this (although borrowing is cheap right now since US Treasuries are in high demand = low interest rates = cheap to borrow). Will the moral hazard created in this bail out create even more aggressive banking behavior in the future? Will the next fall (even if its 200 years from now) be even more cripling than this one?
I know the sun will rise again no matter what the Fed does. However, I think markets should be transperant and as self-sufficient as possible. Failure is sometimes necessary. I think that the Fed needs to stop excusing (bailing out) institutions that committed acts that amount to a 14-year old kid breaking curfew to buy crack and jump into an orgy. You can’t excuse that sort of behavior…can you? It seems like the Fed is taking its cues from Palin….(oooh low blow!)
I’m really tired. This blog doesn’t make sense but whatever. Enjoy.
