[Mentalist]

lol, lovely.
Just as I graduate, too...

[Cold Iron]

Mentalist, on Apr 23 2009, 03:26 PM, said:

lol, lovely.
Just as I graduate, too...

It's gunna be the same for everyone so it's not like we'll notice anything

[Mentalist]

Disagree

people that have something will weather better than people who have nothing but debts.

[Cold Iron]

Mentalist, on Apr 23 2009, 03:41 PM, said:

Disagree

people that have something will weather better than people who have nothing but debts.

Which is exactly how shit goes down with or without a recession.

[Nicodimas]

At this point I am getting to the point if it continue's thye don't know what to do. So instead of just letting it happen they will try new different stuff, which they don't really know the effects of. This harvard professor called for negative rates on top of destroying tender by randomly picking a digit and all tender that has that as it's last one is voided. Somehow that does not appeal to my logic.

To me it seems people's own stupid action's are going to make this worse if it continue's is what I am getting at.

http://www.nytimes.com/2009/04/19/business...9view.html?_r=3

[frookenhauer]

Cold Iron, on Apr 23 2009, 06:00 AM, said:

This is more than a regular recession, it's a fundamental shift in market function.

Dude you want to clarify that for me? In particular the fundamental shift in market function!

It sounds frikkin awesome and I may use it one of my motivational buy my product speeches!

Pretty please...

Yup...World still refuses to blow up in an orgy of printed banknotes...I remain unsurprised!

And Nic seems to be getting a hell of a lot better, but I admit that I only ever looked at the words he posted and ignored the yards of cut and pastems

[Cold Iron]

Frookenhauer, on Apr 24 2009, 04:39 AM, said:

Cold Iron, on Apr 23 2009, 06:00 AM, said:

This is more than a regular recession, it's a fundamental shift in market function.

Dude you want to clarify that for me? In particular the fundamental shift in market function!

It sounds frikkin awesome and I may use it one of my motivational buy my product speeches!

Pretty please...

Yup...World still refuses to blow up in an orgy of printed banknotes...I remain unsurprised!

And Nic seems to be getting a hell of a lot better, but I admit that I only ever looked at the words he posted and ignored the yards of cut and pastems

People are calling for tighter regulation. Legislation will be passed, what it will look like i don't know, but from what I can gather, products like sub-prime mortgages and CDS are likely to be regulated out of the market with hopefully increased transparancy in reporting as well. In other words banks will no longer be able to go on operating in this quasi-invisible fluid world where today's debt is not real because it can be sold off tomorrow. Property speculators will no longer be able to flog dodgy investments with the insurance of CDSs. The banking game is changed, the property game is changed. How can you say this isn't a fundamental shift in market function?

[Nicodimas]

Quote

Legislation will be passed

Here's one of my points on the needed investigations. People need to see these happen to know that payoffs aren't happening and people aren't being protected that are guilty. I honestly don't think the type of confidence we need will return to market until that happens, espeically if it gets far worse. I am not talking about unlimited power, just letting some people follow the corruption and see where it leads. I am trying to logic is out, but it must be where it could lead and politicians don't want it lead there own people on either side. The must be afraid of how the market would respond to such investigations and the fallout's politically. Would it seem fascist to go for such an action? The media might try that angle knowing them. Again we a big decision to be made and I am on the side that inaction would be poor. Legislation is great, but it could be to little and i am not asking for to extreme reg's. Something to make sure the proper people/cancer get purged also.

(Also term limits on politicians would be great /haha)

Here is a great paper that I couldn't copy + paste

http://www.moneyandmarkets.com/files/docum...white-paper.pdf

[HoosierDaddy]

I am much impressed by your newer posts, Nic. Presenting your ideas in your own words is always easier for a non-expert audience to understand.

[Cold Iron]

Nicodimas, on Apr 24 2009, 02:51 PM, said:

Here is a great paper that I couldn't copy + paste

http://www.moneyandmarkets.com/files/docum...white-paper.pdf

I'll do it:

"Executive Summary" said:

Dangerous Unintended Consequences:
How Banking Bailouts, Buyouts and Nationalization
Can Only Prolong America’s Second Great Depression
and Weaken Any Subsequent Recovery
Martin D. Weiss, Ph.D.
Executive Summary
The Fed Chairman, the Treasury Secretary, and Congress have now done more to bail out financial institutions
and pump up financial markets than any of their counterparts in history.
But it’s not nearly enough; and, at the same time, it’s already far too much.
Two years ago, when major banks announced multibillion losses in subprime mortgages, the world’s central
banks injected unprecedented amounts of cash into the financial markets. But that was not enough.
Six months later, when Lehman Brothers and American Insurance Group (AIG) fell, the U.S. Congress rushed to
pass the Troubled Asset Relief Program, the greatest bank bailout legislation of all time. But as it turned out,
that wasn’t sufficient either.
Subsequently, in addition to the original goal of TARP, the U.S. government has loaned, invested, or
committed $400 billion to nationalize the world’s two largest mortgage companies, $42 billion for the Big
Three auto manufacturers; $29 billion for Bear Stearns, $185 billion for AIG; $350 billion for Citigroup; $300
billion for the Federal Housing Administration Rescue Bill; $87 billion to pay back JPMorgan Chase for bad
Lehman Brothers trades; $200 billion in loans to banks under the Federal Reserve’s Term Auction Facility
(TAF); $50 billion to support short‐term corporate IOUs held by money market mutual funds; $500 billion to
rescue various credit markets; $620 billion in currency swaps for industrial nations, $120 billion in swaps for
emerging markets; trillions to cover the FDIC’s new, expanded bank deposit insurance plus trillions more for
other sweeping guarantees; and it still wasn’t enough.
If it had been enough, the Fed would not have felt compelled yesterday to announce its plan to buy $300
billion in long‐term Treasury bonds, an additional $750 billion in agency mortgage backed securities, plus $100
billion more in GSE debt.
Total tally of government funds committed to date: Closing in on $13 trillion, or $1.15 trillion more than the
tally just 24 hours ago, when the body of this white paper was printed. And yet, even that astronomical sum is
still not enough for a number of reasons:
First, most of the money is being poured into a virtually bottomless pit. Even while Uncle Sam spends or lends
hundreds of billions, the wealth destruction taking place at the household level in America is occurring in the
trillions — $12.9 trillion vaporized in real estate, stocks, and other assets since the onset of the crisis,
according to the Fed’s latest Flow of Funds.
Second, most of the money from the government is still a promise, and even much of the disbursed funds
have yet to reach their destination. Meanwhile, all of the wealth lost has already hit home — in the household.
4
Third, the government has been, and is, greatly underestimating the magnitude of this debt crisis. Specifically,
�� The FDIC’s “Problem List” of troubled banks includes only 252 institutions with assets of $159 billion.
However, based on our analysis, a total of 1,568 banks and thrifts are at risk of failure with assets of
$2.32 trillion due to weak capital, asset quality, earnings and other factors. (The details are in Part I of
our paper, and the institutions are named in Appendix A.)
�� When Treasury officials first planned to provide TARP funds to Citigroup, they assumed it was among the
strong institutions; that the funds would go primarily toward stabilizing the markets or the economy. But
even before the check could be cut, they learned that the money would have to be for a very different
purpose: an emergency injection of capital to prevent Citigroup’s collapse. Based on our analysis, however,
Citigroup is not alone. We could witness a similar outcome for JPMorgan Chase and other major banks.
(See Part II.)
�� AIG is big, but it, too, is not alone. Yes, in a February 26 memorandum, AIG made the case that its
$2 trillion in credit default swaps (CDS) would have been the big event that could have caused a global
collapse. And indeed, its counterparties alone have $36 trillion in assets. But AIG’s CDS portfolio is just
one of many: Citibank’s portfolio has $2.9 trillion, almost a trillion more than AIG’s at its peak. JPMorgan
Chase has $9.2 trillion, or almost five times more than AIG. And globally, the Bank of International
Settlements (BIS) reports a total of $57.3 trillion in credit default swaps, more than 28 times larger than
AIG’s CDS portfolio.
Clearly, the money available to the U.S. government is too small for a crisis of these dimensions. But at the
same time, the massive sums being committed by the U.S. government are also too much: In the U.S. banking
industry, shotgun mergers, buyouts and bailouts are accomplishing little more than shifting their toxic assets
like DDT up the food chain. And the government’s promises to buy up the toxic paper have done little more
than encourage banks to hold on, piling up even bigger losses.
The money spent or committed by the government so far is also too much for another, less‐known reason:
Hidden in an obscure corner of the derivatives market is a unique credit default swap that virtually no one is
talking about — contracts on the default of the United States Treasury bonds. Quietly and without fanfare, a
small but growing number of investors are not only thinking the unthinkable, they’re actually spending money
on it, bidding up the premiums on Treasury bond credit default swaps to 14 times their 2007 level. This is an
early warning of the next big shoe to drop in the debt crisis — serious potential damage to the credit,
credibility and borrowing power of the United States Treasury.
We have no doubt that, when pressed, the U.S. government will take whatever future steps are necessary to
sufficiently control its finances and avoid a fatal default on its debts. However, neither the administration nor
any other government can control the perceptions of its creditors in the marketplace. And currently, the
market’s perception of the U.S. government’s credit is falling, as anticipation of a possible future default by
the U.S. government, no matter how unlikely, is rising.
This trend packs a powerful message — that there’s no free lunch; that it’s unreasonable to believe the U.S.
government can bail out every failing giant with no consequences; and that, contrary to popular belief, even
Uncle Sam must face his day of reckoning with creditors.
5
We view that as a positive force. We are optimistic that, thanks to the power of investors, creditors, and the
people of the United States, we will ultimately guide, nudge and push ourselves to make prudent and
courageous choices:
1. We will back off from the tactical debates about how to bail out institutions or markets, and rethink our
overarching goals. Until now, the oft‐stated goal has been to prevent a national banking crisis and avoid an
economic depression. However, we will soon realize that the true costs of that enterprise — the 13‐digit dollar
figures and damage to our nation’s credit — are far too high.
2. We will replace the irrational, unachievable goal of jury‐rigging the economic cycle, with the reasoned,
achievable goal of rebuilding the economy’s foundation in preparation for an eventual recovery.
�� Right now, the public knows intuitively that a key factor that got us into trouble was too much debt. Yet,
the solution being offered is to encourage banks to lend more and people to borrow more.
�� Economists almost universally agree that one of the grave weaknesses of our economy is the lack of
savings needed for healthy capital formation, investment in better technology, infrastructure, and
education. Yet, the solution being offered is to spend more and, by extension, to save less.
These disconnects will not persist. Policymakers will soon realize they have to change course.
3. When we change our goals, it naturally follows that we will also change our priorities — from the battles we
can’t win to the war we can’t afford to lose: Right now, for example, despite obviously choppy seas, the
prevailing theory seems to be that the ship is unsinkable, or that the government can keep it afloat no matter
how bad the storm may be.
With that theory, they might ask: “Why have lifeboats for every passenger? Why do much more for hospitals
that are laying off ER staff, for countless charities that are going broke, or for one in 50 American children who
are homeless? Why prepare for the financial Katrinas that could strike nearly every city?”
The answer will be: Because we have no other choice; because that’s a war we can and will win. It will not be
very expensive. We have the infrastructure. And we’ll have plenty of volunteers.
4. Right now, our long‐term strategies and short‐term tactics are in conflict. We try to squelch each crisis and
kick it down the road. Then we do it again with each new crisis. Meanwhile, fiscal reforms are talked up in
debates but pushed out in time. Regulatory changes are mapped out in detail, but undermined in practice.
Soon, however, with more reasonable, achievable goals, theory and practice will fall into synch.
5. Instead of trying to plug our fingers in the dike, we’re going to guide and manage the natural flow of a
deflation cycle to reap its silver‐lining benefits — a reduction in burdensome debts, a stronger dollar, a lower
cost of living, a healthier work ethic, an enhanced ability to compete globally.
6. We’re going to buffer the population from the most harmful social side‐effects of a worst‐case scenario.
Then we’re going to step up, bite the bullet, pay the penalty for our past mistakes, and make hard sacrifices
today that build a firm foundation for an eventual economic recovery. We will not demand instant
gratification. We will assume responsibility for the future of our children.
6
7. We will cease the doubletalk and return to some basic axioms, namely that:
�� The price is the price. Once it is established that our overarching goal is to manage — not block — natural
economic cycles, it will naturally follow that regulators can guide, rather than hinder, a market‐driven
cleansing of bad debts. The market price will not frighten us. We can use it more universally to value assets.
�� A loss is a loss. Whether institutions hold asset or sell assets, whether they decide to sell now or sell later,
if the asset is worth less than what it was purchased for, it’s a loss.
�� Capital is capital. It is not goodwill, or other intangible assets that are unlikely to ever be sold. It is not tax
advantages that may never be reaped.
�� A failure is a failure. If market prices mean that institutions have big losses, and if the big losses mean all
capital is gone, then the institution has failed.
8. We will pro‐actively shut down the weakest institutions no matter how large they may be; provide
opportunities for borderline institutions to rehabilitate themselves under a slim diet of low‐risk lending; and
give the surviving, well‐capitalized institutions better opportunities to gain market share.
Kansas City Federal Reserve President Thomas Hoenig recommends that “public authorities would be directed
to declare any financial institution insolvent whenever its capital level falls too low to support its ongoing
operations and the claims against it, or whenever the market loses confidence in the firm and refuses to
provide funding and capital. This directive should be clearly stated and consistently adhered to for all financial
institutions that are part of the intermediation process or payments system.” We agree.
9. We will build confidence in the banking system, but in a very different way: Right now, banking authorities
are their own worst enemy. They paint the entire banking industry with a single broad brush — “safe.” But
when consumers see big banks on the brink of bankruptcy, their response is to paint the entire industry with
an alternate broad brush — that the entire banking industry is “unsafe.” To prevent that outcome, we will
challenge the authorities to release their confidential CAMELS ratings on each bank in the country. And to
restore some risk for depositors, we will ask them to reverse the expansion of FDIC coverage limits, bringing
back the $100,000 cap for individuals and businesses.
Although these steps may hurt individual banks in the short run, it will not harm the banking system in the
long run. Quite the contrary, when consumers have a reason to discriminate rationally between safe and
unsafe institutions, and when they have a motive to shift their funds freely to stronger hands, they will
strengthen the banking system.
I am making these recommendations because I am optimistic we can get through this crisis. Our social and
physical infrastructure, our knowledge base, and our Democratic form of government are strong enough to
make it possible. As a nation, we’ve been through worse before, and we survived then. With all our wealth
and knowledge, we can certainly do it again today.
But my optimism comes with no guarantees. Ultimately, we’re going to have to make a choice: The right
choice is to make shared sacrifices, let deflation do its work, and start regenerating the economic forces that
have made the United States such a great country. The wrong choice is to take the easy way out, try to save
7
most big corporations, print money without bounds, debase our dollar, and ultimately allow inflation to
destroy our society.
This white paper is my small way of encouraging you, with data and reason, to make the right choice starting
right now.

This post has been edited by Cold Iron: 24 April 2009 - 05:13 AM

[HoosierDaddy]

Wall of Text = Unread.

CI you cheeky, sob!

[Cold Iron]

HoosierDaddy, on Apr 24 2009, 03:14 PM, said:

Wall of Text = Unread.

CI you cheeky, sob!

I only posted the executive summary

[Nicodimas]

On Assumptions:

http://2.bp.blogspot.com/_FM71j6-VkNE/SfIC...assumptions.jpg

Someone explain the logic of GDP up and umempoyment up and how that works out in the current market?

This post has been edited by Nicodimas: 24 April 2009 - 07:44 PM

[frookenhauer]

Cold Iron, on Apr 24 2009, 01:34 AM, said:

Frookenhauer, on Apr 24 2009, 04:39 AM, said:

Cold Iron, on Apr 23 2009, 06:00 AM, said:

This is more than a regular recession, it's a fundamental shift in market function.

Dude you want to clarify that for me? In particular the fundamental shift in market function!

It sounds frikkin awesome and I may use it one of my motivational buy my product speeches!

Pretty please...

Yup...World still refuses to blow up in an orgy of printed banknotes...I remain unsurprised!

And Nic seems to be getting a hell of a lot better, but I admit that I only ever looked at the words he posted and ignored the yards of cut and pastems

People are calling for tighter regulation. Legislation will be passed, what it will look like i don't know, but from what I can gather, products like sub-prime mortgages and CDS are likely to be regulated out of the market with hopefully increased transparancy in reporting as well. In other words banks will no longer be able to go on operating in this quasi-invisible fluid world where today's debt is not real because it can be sold off tomorrow. Property speculators will no longer be able to flog dodgy investments with the insurance of CDSs. The banking game is changed, the property game is changed. How can you say this isn't a fundamental shift in market function?

Hey CI sorry I missed this for so long...I been short of time with exams and whatnot, anyway...

With regards to sub prime and CDS'...I'm uncertain as to whether they will be completely erased, but there will be tighter regulations on them and we probably wont get Nic's $100,000,000 CDS on a $1,000,000, debt, but sub prime is a money making behemoth that lined the pockets of brokers and corporations alike. there will be much tighter regulation and scrutiny on who is elligible, but greed will out and those two particular product are here to say, but may get a redesign and a name change to fool the punters.

With regards to transparency, we are already living in that world, in finance we are open about everything and nothing is left to chance or our compliance departments will jump up and down on our heads and then the FSA will be calling round and taking names and lopping heads. And If you've taken the time to read any credit agreement these days it covers everything, but...and that's a big BUT, hehe, all the most important information, ie the stuff that affects the client is set out so bloody clearly that only a fool would miss it, but get this, the guy whose selling yo the policy MUST point it out to you and is required by law to make sure you are happy with it and explain everything should you require. the next time you want to annoy a branch FA get him to go over the material and watch his face drop .
But if you're talking about transparency in what these people are investing in...man, I'd like to see how hedge funds operate, I really do. I spent the best part of a few hours sifting through what exactly they were and how they operate and the top funds and all that malarky and came to the conclusion that it'll take longer than a day to pin down exactly what their function is (Investments, I know) and how on earth they are organised and how they are able to operate on the fringes...Madoff and his Ponzi (is that the right spelling) scheme may well be the key that opens the door to the hidden world, but don't bet your money on it, cos apart from one lame duck or two, there's a lot of geese laying golden eggs in there and I will be unsurprised if they just leave well alone.

To conclude...not much will change once the dust settles and the markets stailise, you might get a few more regulations and there'll be less small fish floating around in the pond, but greedy bankers will be greedy and and property speculators will find some other way of fleecing the system and will get rich and pay taxes and the show will indeed go on until the next big fuckup and then we'll be here again listening to Nic's explanation of why the world will imminently implode in a n orgy of printed banknotes...again. I would like to write more, but people, have cooked me a mega dinner so i must do the off. Later.

[Nicodimas]

Life really likes to throw a bunch of crud at ya at times. To me if this flu keeps spreading pretty much puts a nail in the coffin for economies worldwide for the next year at a time of extreme sensitivity.

Sadly I think this is why they are terrified of closing border's on what the implications would be to the economy.

What terrible timing. ugg.This is just based off the economy obviously:

Quote

Australian independent think-tank Lowy Institute for International Policy estimated in 2006 that in the worst-case scenario, a flu pandemic could wipe $4.4 trillion off global economic output.

http://www.telegraph.co.uk/health/healthne...u-pandemic.html

This post has been edited by Nicodimas: 30 April 2009 - 06:05 AM

[Mentalist]

that's only IF it becomes an actual pandemic.
North America (where it's currently contained) went through several major health scares in the last decade --West Nile, Mad Cow, SARS, (etc)
that is the one part of the world where ther is a chance of localising the flu before it becomes a pandemic.

[frookenhauer]

And so the world trundles on and continues to fail to fall into an orgy of economic self destruction Why am I not surprised?!?

Nic you've been suspiciously quiet of late...wassup?

[Nicodimas]

Sorry Frook no good news to report yet. The market is still all messed up. SNAFU.

http://3.bp.blogspot.com/_FM71j6-VkNE/Sgw9...DCX+dealers.jpg

Imagine the fallout from these chrysler dealers.. Now add the 1100 more GM ones. These bankruptices could last years not months like promised. That should be a ton of jobs from mechanics to salesman. We can't short certain stocks right now : C, RF, STI, KEY, BAC, FITB, MS, PNC, WFC, F, and GM. Banks are still bankrupt. Still losing 500K+ jobs a month. Foreclosure are still increasing. The government has collected fifty percent less money then the year before.

http://3.bp.blogspot.com/_FM71j6-VkNE/Sgs6...oreclosures.jpg


Nine trillion dollars that aren't even being kept track of:
http://zerohedge.blogspot.com/2009/05/fede...ount-for-9.html

Sleep well.

[Mentalist]

certainly sounds crappy.

however, Nic, you have to realize: even if the recession ruins several tens of millions lives (via job loss/wiped out savings/etc), it's still unlikely to become a global collapse-type trend.

one simple reason--there's a helluva lot of people.
and it's getting progressively harder to lose everything .

yes, people lose jobs, yes people live in poverty.
but untill these people start to starve and others around them do as well, you're not gonna get a critical mass necessary to trigger an actual global collapse.
Because people are becoming decadent--you]ve said it yourself, the States hasn't faced war on its home turf in ages.
so to get people rioting on the streets--and I mean enough of them to halt or break down the economic machine--those people would have to be starving, with not a songle crumb left to them.

and the government's too smart to allow that.

[Shinrei]

I"m enjoying watching my stock portfolio recover while gold continues to hold it's value above $900.