Does Anyone feel like Bailing

[tw]

The original $85billion to AIG was provided on a theory that it was an investment to be returned maybe with a profit. This Washington Post article of 24 Oct 2008 describes progress of a company that may have contained only $67billion of equity. US government has already channeled 7% of this nation GNP into the bailout. This first progreess report is distressing:

AIG Has Used Much of Its $123 Billion Bailout Loan
The troubled insurance giant American International Group already has consumed three-quarters of a federal $123 billion rescue loan, a little more than a month after the government stepped in to save the company from bankruptcy.

AIG has borrowed $90.3 billion from the Federal Reserve's credit line as of yesterday, the bulk of it to pay off bad bets the company made in guaranteeing other firms' risky mortgage investments. That's up from roughly $83 billion AIG had borrowed a week ago, and the $68 billion level it reached a week before that. The news comes as the company's new chief executive warned Wednesday that the government's financial lifeline may not be enough to keep AIG afloat.

[Clodfobble]

Okay, so someone explain this to me. We just got a quarterly 401K statement in the mail. It's down, no shocker there. But on the last page, for comparison, they list a performance summary of all the funds available in the plan, not just the ones that you are actually invested in.

Of the 30 or so listed, exactly two of them show a positive number under "Actual Periodic Return" (period of 7/1/08 through 9/30/08):

Cohen & Steers Realty Income
Virtus Real Estate Securities


WTF?

[lookout123]

Cohen and Steers

Top 10 Holdings as of 9/30/08

Name Sector % of Net Assets
Simon Property Group Inc. Regional Mall 8.5
Public Storage Self Storage 6.2
Vornado Realty Trust Diversified 5.7
Macerich Co. Regional Mall 5.0
Boston Properties Office 4.8
Equity Residential Apartment 4.4
Regency Centers Corp. Shopping Center 3.8
ProLogis Industrial 3.5
Host Hotels & Resorts Hotel 3.4
AvalonBay Communities Apartment 3.3

Malls, storage units, and hotels are still making their rent payments. Those rent payments happen to equal more than the expense of owning those buildings.

VirtusDoesn't actually invest in the Real Estate, rather they own REIT's (real estate investment trusts) meaning they are buying and selling closed end funds that specialize in the various areas of real estate.

non-publicly traded REIT's are some of the most consistently profitable investments around. They are certainly not appropriate for everyone though.

[Clodfobble]

Okay, so in theory Cohen and Steers wouldn't see a hit until businesses actually start closing, and/or people significantly cut back on their general travel expenses (hotels.)

But then again, when we all start living in storage units, that part of their holdings will soar.

[lookout123]

They would suffer if the mall didn't have stores paying them monthly rent.

They would continue to make money on hotels, regardless of occupancy, unless the hotels actually go out of business.

[tw]

Ford Prodigy
GM Unveils Concept Car That Gets 108 Miles A Gallon
Dodge ESX3

The U.S. government is estimated to have spent about $240 million on PNGV projects last year.

Well of course. Clinton in the mid 1990s suggested (with investment) that the automakers innovate - an event that is nearly impossible when MBAs dominate a company and industry. Why must these automakers be driven to bankruptcy? As soon as George Jr took over and began stifling innovation (even White House lawyers rewrite science papers), then domestic automakers did not have to innovate. No longer was the product important. The purpose of their companies was profits - the lie taught in business schools. George Jr promoted corporate welfare. No wonder George Jr and his extremists advocated another $25billion of corporate welfare to domestic car companies.

Even Gerald Ford refused to give these automakers corporate welfare in the 1970s. So automakers removed the only reasons for their failures. For example, people more destructive to America than Nikita Khrushchev (Townsend and Richardo) were replaced by a car guy - Lee Iacocca. In only four years, Chrysler went from record losses to record profits. 85% of all problems are directly traceable to top management.

When your leaders are overt socialist - also known as extremists who work for a party agenda rather than America - then your tax money is given to airlines ($8billion), auto companies ($25billion), durg companies (Medicaid perscription drug laws), and insurance companies ($138billion). These policies are also supported even by the Cellar's extremists - who can only respond by attacking others.

Was the American economy investing in innovations - or the money games of finance? Fifteen years after promising to market hybrids and paid by government to do so - the domestic automakers did what? Nothing. Put 1968 technology low performance engines into MBA designed SUVs. Just another example of why patriotic people who believe in the free market buy innovative (and therefore foreign) products. This last decade was about innovation in finance rather than innovation in products. Expected when your president is also an MBA (and a mental midget).

Appreciate why an almost inevitable recession will occur as economics takes revenge on us for voting in wacko extremists. You don't just vote in the polls. You also vote by what you buy. We saved 1970s Ford Motor by stop buying their crappy products - and therefore removed another anti-American - Henry Ford. Welcome to Deja vue. Will you save America by buying the best - or love it when George Jr's solution is more corporate welfare.

[Aliantha]

Originally Posted by dar512

It's one of those things that should go in the rule book they should give you when you get married.

Never take vacation with others or dine out with others when you're trying to save money. You just don't have control of the outcome.

In our family that isn't usually a problem. We all just itemize what we've had and pay that portion. Those who have less, pay less. Those who have more pay more.

It works well for us, and no one has to feel like they can't join in a family outing.

[TheMercenary]

These were very good:

http://www.cbsnews.com/stories/2008/...e4546199.shtml

http://www.cbsnews.com/stories/2008/...e4502454.shtml

http://www.cbsnews.com/sections/60mi...main3415.shtml

[classicman]

From Mercs third link above

"There was an awful lot of, 'Trust us. Leave it alone. We can do it better than government,' without any realistic understanding of the dangers involved," says Harvey Goldschmid, a Columbia University law professor and a former commissioner and general counsel of the Securities and Exchange Commission.

He says the bill was passed at the height of Wall Street and Washington's love affair with deregulation, an infatuation that was endorsed by President Clinton at the White House and encouraged by Alan Greenspan.

"The credit default swaps was the key of what went wrong and what's created these enormous losses," Goldschmid says.

"Is it your impression that people at the big Wall Street investment houses knew what was going on and knew the kind of risks that they were exposed to?" Kroft asks.

"No. My impression is to the contrary, that even at senior levels they only vaguely understood the risks. They only vaguely followed what was going on," Goldschmid says. "And when it tumbled, there was some genuine surprise not only at the board level where there wasn't enough oversight but at senior management level."

[xoxoxoBruce]

I've been reading the Derivatives implosion will make the trillion dollar Savings & Loan bailout, and the more recent trillion dollar Wall Street bailout debacle, look like kid's stuff.
Off with their heads!

[TheMercenary]

I printed out the print versions of the interviews to study later. The show was very good.

[classicman]

From Link 2

The numbers are staggering, but they don't begin to explain the greed and incompetence that created this mess.

It began with a terrible bet that was magnified by reckless borrowing, complex securities, and a vast, unregulated shadow market worth nearly $60 trillion that hid the risks until it was too late to do anything about them.

"If you look at how this started with the subprime crisis, it doesn't seem to be a good bet to put your money behind the idea that people with the lowest income and the poorest credit ratings are gonna be able to pay off their mortgages," Kroft points out.

"The idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right. However, it seemed to fly with people who were making $10 million a year," Grant says.

Noble idea as previously posted, but really bad as we are all learning...and paying for.

"Now, who was selling these credit default swaps?" Kroft asks.
"Bear Sterns, Lehman Brothers & AIG were selling them. You know, the names we hear that are in trouble, Citigroup was selling them," Greenberger says.

"These investment banks were not only selling the securities that turned out to be terrible investments, they were selling insurance on them?" Kroft asks.

"Well, it made it easier to sell the terrible investments if you could convince the buyer that not only were they gonna get the investment, but insurance," Greenberger explains.

But when homeowners began defaulting on their mortgages, and Wall Street's high-risk mortgage backed securities also began to fail, the big investment houses and insurance companies who sold the credit default swaps hadn't set aside the money they needed to pay off their obligations.

Asked what role the credit default swaps play in this financial disaster, Frank Partnoy tells Kroft, "They were the centerpiece, really. That's why the banks lost all the money. They lost all the money based on those side bets, based on the mortgages."

And those "bets" were made on what? GREED!

How big is the market for credit default swaps?

Says Partnoy, "Well, we really don't know. There's this voluntary survey that claims that the market is in the range of 50 to 60 or so trillion dollars. It's sort of alarming that, in a market that big, we don't even know how big it is to within, say, $10 trillion."

"Sixty trillion dollars. I know it seems incredible. It's four times the size of the U.S. debt. But that's the size of the market according to these voluntary reports," says Partnoy.

He says this market is almost entirely unregulated.

Isn't that special?

SDA's CEO, Robert Pickel, says there is nothing wrong with credit default swaps, and that the problem was with underlying mortgage securities.

"Well, there's clearly something wrong with the system if all of these leveraged bets, hidden leveraged bets, caused a collapse in the financial system," Kroft remarks.

"It is something that we all need to look at and learn lessons from. And we all need to work together to understand that and design a structure in the future that works more effectively," Pickel says.

"My point is, the people that made these mistakes are the people you represent in your organization. And many of them sit on the board. I mean, if they didn't get it right, who would?" Kroft asks.

That is so wrong on so many levels.

[lookout123]

something important to understand is that no lender was holding their paper much past the first payment. When that is the case, likelihood of repayment is no longer the primary concern. When a bank holds it's paper it will make profit from the interest over a period of years. When a bank sells it's paper it makes profit on the fees charged to close the loan. Sub-prime loans charged much higher upfront fees, therefore were much more profitable to the loan origination company. Repayment? That's someone else's problem.

I will tell you this, though, ACORN and others like them shoulder a lot of the responsibility for this. The tactics and pressure they applied to companies to approve loans for lower income and lower credit quality applicants was obscene. It got to the point that underwriters often joked that the applications should just be sent to ACORN since they seemed to want anyone with a pulse approved.

[classicman]

Oh lookout - stop it with the facts again.

[tw]

Socialism may end this year. So GM is running to George Jr for more money. In but a month, that $25billion is already gone. GM now wants the government to pay for a GM Chrysler merger.

As any good MBA would do. Fix a defective company by merging it with another losing company. No problem. A merger means a stock swap - no cost. But a merger is also an excuse for more corporate welfare.

Well, GM may not get that money. So GM today ran to George Jr to get money through its finance arm - GMAC. George Jr just announced that he approves of the request. Remember that $700billion bailout called TARP? George Jr now said GM may be able to tap that $700 billion as soon as the Treasury approves. GM will do anything to protect its problem - top management - especially Rick Waggoner.

Louis Hughes was running GM's $36billion international division - making a small profit. At least it was worth that much back then. The Buick in China was Louis Hughes' biggest success. Louis Hughes was a car guy - actually worked with cars. Rick Waggoner: a bean counter who as the head of GM's North American division. Under Waggoner, North American division was losing money. Who did GM select for the top job?

GM is so dominated by bean counters as to select Rick Waggoner. Therefore GM is losing money everywhere - even in its international group. Louis Hughes immediately left to run Lockheed Martin. Now the entire GM is only worth $5billion. International division alone was once worth $36?

When extremists advocate corporate socialism, GM will hurry for free money. Next year, the new president may demand fiscal responsibility - which the current administration never did to encourage this market meltdown. With $700billion in easy money sitting on the table, George Jr is again doing what extremist conservatives do best - spend with reckless abandon. As Cheney said, "Reagan proved that deficits don't matter". Using its financial arm - GMAC - GM intends to tap the $700billion TARP bailout money. GM will do anything to protect their only problem - top management. Easy to do when government is run by ‘spend excessively’ extremist conservatives who advocate corporate socialism. Easy to do when those extremists may lose power and want to spend even more recklessly. Easy to do when Rush Limbaugh tells extremists that this is good and blames it on Clinton.