Granberry's Parlor

how much time you got? :)

What a journey.

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That is for the wimpy little fraidy cats that put their money in plebian mutual funds and run of the mill commercial banks. The hedge funds are for Masters of Universe types. So while they were busy playing bridge in Davos or skiing in Gstaad or just hanging with the Grimalidi kids , some bad news hit -- Chrisy Carpenter done sold her last "to die for" two bedroom one bath Palo Alto flip for a million bucks -- ain't no suckers left. So the rich dudes get all pissed and yell at their "financial advisors" about how they NEED a little more "current income" and WHAM, ain't nobody who feels like these hedge funds are doing much other than sawing through a whole mountain of cash mighty fast... That is a "crisis in confidence". People want "out" and they want it NOW. Except that the Bear Streans can't liquidate its positions and mail back checks, because NOBODY is dumb enough to think that things will "turn around" in any sort of reasonable (like faster than Japan's 10 year down/flat market).

What does that have to do with the Federal Reserve making a largish loan to JP Morgan to buy out Bear Stearns? So what if it collapses, taking the jetsetters' money with it? What benefit does this loan have to those 'wimpy little fraidy cats' who are actually the ones making it?

The system is heavily over leveraged, much like 1929. Letting one come down will probably cause a chain reaction and everyone else starts to fall over. It's not a bad thing to have public money bailing out Wall Street, but it should come under conditions. One of them is tight regulations.

Why should it cause a chain reaction? The daily operation of my local supermarket are independent of its share price. As are the operations of the farmers which supply the local farmstands. Difficulties obtaining credit aren't going to magically make them insolvent either - if they aren't solvent without new credit, they aren't solvent at all. Now, they may have to put off a few capital equipment purchases, in order to save for them in advance, but I don't see that as an intrinsically bad thing either.

If enough people start defaulting on their loans, banks will start issuing margin calls since they don't trust their clientele any longer. This has now started in the high risk areas but it's continually infecting the rest of the financial system ever since. If people lose their homes because they can't afford the mortgage any longer, imagine what wonders that will do to the economy.

I still think the whole kaboodle will sink anyhow, there's no way on earth that it's stoppable.



Edited 1 time(s). Last edit at 03/25/2008 12:19PM by tliet.

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YDD
... The daily operation of my local supermarket are independent of its share price. As are the operations of the farmers which supply the local farmstands. ...

Um, no.

I mean for chrissakes even in "It's a Wonderful Life" George Bailey has to 'splain to people that the money ain't in a big locked vault -- it is circulating round and round, building houses, paying for cars, allowing bartenders to become restaurateurs...

The whole friggin' reason that there are commodity futures is because farmers realized that needed some way to take some risk out of planting crops and hoping for the best -- it has always cost a helluva lot more to grow crops in tough conditions and without futures markets farmers could not have any price stability. With out price stability there were literal "booms" of over planting in good years and "busts" when farmers went broke. With futures contracts farmers created a way to mitigate their risk and ensure that when crops were poor they'd be fairly compensated and when crops were bountiful they would not harvest more than was profitable.

And your local supermarket is VERY LIKELY borrowing money continuously to finance the goods it puts on the shelves -- even "Little House on the Prairie" type general stores understood the value of CREDIT. They could not allow folks "30 days to pay" if their suppliers would not agree to the same terms. Suppliers understand that there is a cost associated with that lending, thus there are credit terms that have some interest charges spelled out. Now the interest charged to "shop keepers" is directly related to their "credit worthiness" and you can be damned sure that publicly traded firms credit worthiness is reflected in their share price.


rino:

Did you read the rest of that guy's site? He is a certifiable lunatic in my book -- the poor guy seems bright enough, but he misunderstands the fundamental way that "investment" happens. The poor chap believes he can hold a 'negative' view of the economy and STILL managed a mutual fund with a bias for growth that essentially all other mutual funds hold -- in my book if you truly believe that economic conditions are negative then you HAVE TO invest in things other the global economy, and that makes you not an "investor" but simply someone who makes a bet that they are smarter than almost everybody else. Pretty hard to accept that...

I suppose you could have posted for the "data" about percentage of 'home owners' with equity ess than 50% and lack of wage growth (which are facts) -- but I have ample evidence to suggest that that data is irrelevant if one looks instead at the data about total income going to debt service or percentage of houshold income going to combination of food & shelter NET of taxes. See, that is the kind of thing that explains a lot. Paychecks can (and did) stay flat in the "topline" but "spendable cashflow" increased quite a lot (until recently...).
I am basically optimistic that the GLOBAL ECONOMY will grow a lot for a long time, though like anybody else I have lots of doubts as to how many "setbacks" there will be, how long they'll last and how soon they'll hit.

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ddt
waiting for all the moderate christians to disavow people like this. after all, destroying science is a great threat to western civilization, innit?

This is not an old practice at all. I was raised a Christian and was also home schooled [For s short period of time in 7th or 8th grade]. Much of what the creationists in these videos are teaching now was being taught to likely the same percentage of home schooled kids in my day.

We bowled on Thursdays with other kids from other home school families.

I went back to public schools at my own request after two quarters of schooling. I listened to Stryper and the Pet Shop Boys. Not consecutively. I listened to U2, Richard Marx and Peter Cetera. The latter to hopefully get chicks with the slow ballads--it really just made me appear gay. ;-)

This isn't to say I turned out all right... But I'm sure that a large percentage of these kids will grow up and with it their feast for the truth. Then again, they may not. *shrug*

Now I'm into everything from AC/DC to James Blunt.

So I guess now I'm a twig-eatin', hard-rockin', liberally gay conservative who is happily married to the woman of my dreams. And I have two katz.



Edited 2 time(s). Last edit at 03/25/2008 03:22PM by Madaracs.

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stan sayeth
rino:

Did you read the rest of that guy's site? He is a certifiable lunatic in my book -- the poor guy seems bright enough, but he misunderstands the fundamental way that "investment" happens. The poor chap believes he can hold a 'negative' view of the economy and STILL managed a mutual fund with a bias for growth that essentially all other mutual funds hold -- in my book if you truly believe that economic conditions are negative then you HAVE TO invest in things other the global economy, and that makes you not an "investor" but simply someone who makes a bet that they are smarter than almost everybody else. Pretty hard to accept that...

Which site are you citing??
The last link I posted was to NYTimes eddy: http://www.nytimes.com/2008/03/21/opinion/21fri1.html

From another thread?

I'm cornfused.

Stan is probably referring to my earlier post.

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ddt
waiting for all the moderate christians to disavow people like this. after all, destroying science is a great threat to western civilization, innit?

ddt

OK, those guys are nuts! Christianity does not equal "literal" reading of the Bible. For instance, do you think the "literalists" have taken the time to discover what numbers in a story really meant to people of that time? 40 did not mean 39+1, but "a lot, but not too much" and 1000 did not mean 999+1, but "a really big amount, almost uncountable." So, what does "God of the Bible" and "Biblical" mean? Rejecting original context?

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The whole friggin' reason that there are commodity futures is because farmers realized that needed some way to take some risk out of planting crops and hoping for the best -- it has always cost a helluva lot more to grow crops in tough conditions and without futures markets farmers could not have any price stability. With out price stability there were literal "booms" of over planting in good years and "busts" when farmers went broke. With futures contracts farmers created a way to mitigate their risk and ensure that when crops were poor they'd be fairly compensated and when crops were bountiful they would not harvest more than was profitable.

Interesting then that futures contracts get the blame for so much instability these days, then...

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And your local supermarket is VERY LIKELY borrowing money continuously to finance the goods it puts on the shelves -- even "Little House on the Prairie" type general stores understood the value of CREDIT. They could not allow folks "30 days to pay" if their suppliers would not agree to the same terms. Suppliers understand that there is a cost associated with that lending, thus there are credit terms that have some interest charges spelled out. Now the interest charged to "shop keepers" is directly related to their "credit worthiness" and you can be damned sure that publicly traded firms credit worthiness is reflected in their share price.

If the supermarket cannot operate at all without its lines of credit, then I don't see how it can be described as 'solvent.' What you are describing is how credit can make things easier, smoothing out some humps. It will be saving the supermarket (or whoever) from having to carry larger cash reserves. But credit is not, by itself, making anything grow. Aren't we all told to have at least six months' expenses in a 'rainy day' account? Why should businesses be different?

And none of this answers my original question: how does giving JP Morgan Chase a cheap loan, plus offering to eat bad debt at a ratio of 29:1 make sense for taxpayers? Why shouldn't those who issued the debt be burned (along with Bear Sterns itself)? The investors who will be hurt were more than happy to take the upside returns. Let them learn about the downside risks.

I just think if corporate barons are going to pay each other increasingly exorbitant rates, then corporations should be held accountable through their actions, even if it means recouping as much of the executive pay as needed. Yes, even if it makes the exec have to (gasp!) go bankrupt.

Some personal accountability is needed.

Yep, sorry, rino -- I read tliet's post and mentally attributed it to you.
I actually like some of the ideas presented in that NYT piece -- slower, more consistent profits ought to be something with almost no downside, though I don't think you can get "to there" from where the world is now. It is unrealistic to think that such a shift could be legislated -- one need only look to the "salary caps" that the NFL and MLB have in place AND the major effort that is spent by sports agents and the like to dream up ways around the caps to imagine a whole new territory where their skills would be welcome. I don't even think it makes sense to say that there is a floor to loses that banks can suffer -- for an example many firms have been shuttered in the wake of scandal. A failed strategy is different. While it worked such a strategy DID make A LOT OF MONEY for A LOT of people. People can and did spend that money. Those profits are taxed as are a majority of the purchases that trace back to those good times. In the case of the of the present forced buy-out of BSC it is clear that regulators stepped in because they understood the magnitude of failure (regardless of scandal) would be extraordinary. It is neither possible nor desirable to "reach back in time" and get back the profits from previous good years. (Aside: with the talk of literalism in the bible I think I've just a scenario where the Pharoh's dream of starving cows consuming fat cows was interpreted by Joesph as "famine destroying the years of plenty" -- unless cows in Egypt were carnivorous...).

The hope is that both the people that dream up investment vehicles and the people with enough money to through at non-run-of-the-mill investments will think twice before they embark/remain on a path that has too many unknowns. The downside is not just "losing ones shirt" but also in losing the "luster" that surely comes from being a James Cayne at the top of his game. I suspect that if the NYT editorial board really thought about what drives people to great heights they'd realize it ain't just the money. At a certain point a James Cayne has to realize he ever going to knock off Warren Buffet , and even people like Oprah have more money in the bank than he ever could. But while Mr. Cayne and his firm were doing things right he could take satisfaction in the knowledge that nobody was as good at mortgage backed derivatives -- this in not that different than the satisfaction that NYT itself must have when it is on the leading edge of story and the shame it must feel when they are duped by a falsifier on their staff.

It always amazes me how few fundamentalist Christians read classical Hebrew of the Old Testament and the koine Greek of the New Testament. I mean, if you had the divine word of God to Man, would you settle for reading it in the words of a four hundred year old committee? Based on a very politically-chosen subset of the original documents? I think the approach of Islam, where the only legitimate version of the Koran is the classical Arabic one that Mohammed transcribed, seems a more appropriate way to handle divine communications.



Edited 1 time(s). Last edit at 03/26/2008 07:56AM by John Willoughby.

and most Jews would agree with you, too, I think.

It's a time management issue for most.

Ten Commandments.... check.


American Idol...check.


Attend church.....mostly check


Spend time working to pay bills ... check.

What a journey.

Everyone likes a 25% off coupon.

http://latimesblogs.latimes.com/laland/2008/03/california-free.html

What a journey.

I'd say; the long decline has started...

One of the coalition partners of our current government is proposing a law to ban TV commercials for consumptional credit. That's a good start.

That is actually a fairly good article -- I think the little bit of extra 'splaining that the reporter did about the effect of few low priced homes selling as the credit standards were tightening AND now the "surge" in foreclosed homes at distressed prices moving the median swiftly downward gibes with my personal experience.

Bottom line: if you bought an existing home at least 3-5 years ago and at least have not let it get run down you probably are going to see no significant erosion of value. The same may not be true for condos, townhomes and new construction, but that is nothing new... The same pattern of 'volatility' has pretty much always existed for those kinds of real estate EXCEPT for periods of very constrained supply. There are tales of post WWII baby boom subdivisions where dads would camp out waiting for the "first available house" and the same sort of craziness was recently taking place around Vegas -- I saw many stories of lunatics reselling "pre construction" committments for condos and such. How many idiots would get into "bidding wars" to get houses in a decent commuting distance of various Silicon Valley locations?

There are a lot of ancillary stories that have not been widely told -- when Hurricane Katrina blew through the SE it really f'ed a big chunk of the building products supply chain (from the fast growth forests of the region to the chemical plants to instantly creating huge local demand for construction products), similarly rising energy cost have made it harder to keep a lid on building products prices, to even the rise in employment in the 'energy belt' itself driving wages and demand for housing in what was formerly (since the S&L blow up) a fairly stagnant region. Some would even argue that demographic shifts/trends have been quite the driver, with a large percentage of "boomers" actively rewarding themselves for surviving their offsprings' transition to college/career and their subsequent willingness to undertake more costly housing including vacation homes and the like.

The "rule of thumb" for decades was that there was a relationship of selling price in thousands / X= number of month until expected sale in a given region. As all the demand side factors raised that 'X' from 10 to 20 to 50 or 100 or higher, many sellers, who in typical times might have sold one or two houses over a lifetime made mobility the norm. As average "time on market" now gets back to historical norms (or greater) a lot more people ought to think a lot more rationally about the debt that is incurred by moving up. That is a good thing and if that also encourages more people to attempt to save up more of a down payment (or even a cash cushion) there could be a whole range of benefits to the overall economy. (Thank god for guys like baha out there doing his part to keep productivity numbers at super human levels...)

I still like discounts. I might buy me some houses? Do the silicon valley real estate agents have coupon code fields on their high-tech websites? :)

What a journey.

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As average "time on market" now gets back to historical norms (or greater) a lot more people ought to think a lot more rationally about the debt that is incurred by moving up. That is a good thing and if that also encourages more people to attempt to save up more of a down payment (or even a cash cushion) there could be a whole range of benefits to the overall economy

And how does putting taxpayers on the hook for $29B of BSC bad debt help this process? Why not just let the company fold, and the debt default?