Financial Meltdown (1 Viewer)

[Spitfrnd]

...1. You hold Buffet in high reguard, I see a man paying no dividen on a stock
valued at $124,800 per share (today) getting rich with other peoples money.
...
Yes they are up in the long run......but down $25,000 from high this year.

2. Federal Reserve has less then 1% of money required to insure our deposits. 45 Billion to cover 1 Trillion.......so they are hardely safe.

3. What would I have the Fed do? Follow the Constitution, do not use taxpayer money to bail out private industry. Bad decisions, made by bad managers need to fail......so smart businessmen can come in and pick up the pieces and build new solid business.

A person that bought a multi-million dollar home with an income of $17,000 a year should LOSE IT.
....

Well this is not the financial forum. I would invite you over to the Motley Fool website for that. However, I did want to address a couple of your comments.

1. Most stocks do not pay dividends but rather create value for their shareholders by using their profits to buy companies that add to that share value. Buffet has been a genius at this and he hasn't lost his edge. He not only makes money from other people's money, he makes money for other people. I am happy to let him do it for me. As to stock voting, does that really matter to anyone, I never bother frankly. As to the Berkshire stock price, just about everything is down from its highs of this year. The point is Berkshire is down relatively less than the vast majority of other investments and if you are patient, they will make you money. As an aside, Berkshire's stock is actually up for the last few days while the market is tumbling; rationale, when financial matters look scarey, investers turn to proven winners. I wish it would fall a little farther for buying purposes, but it looks pretty good at this level.

2. Actually they generally are safe; banks in general are not in bad shape over all this and there is absolutely no credible evidence that the FDIC will have to cover any thing much at this point, much less 1% of 1 trillion. However, if you think conditions are so bad you need to put your money in a matress, that is fine, just not necessary.

3. Having said I am no fan of bailouts, in some cases they do make sense in preserving market functionality. AIG is perhaps a case in point and most likely one where the government will make a profit, as it did in a bail out loan to Mexico a few years back. Most of AIG's businesses are fine and offer more that sufficient security for repayment; their airline leasing business alone is estimated to be worth more that 50 billion. So while I agree with you on general principles, here I think our government actually got it right.

 

[bromhead]

I sit at night and listen to the financial commentators.....people far more
educated them I am (I have a quick mind but get bored easily) and I am
stunned at how they gloss over important issues.

Our interest rate is sitting at 2%........thats shocking! Everyone expected the Fed to lower interest rates again........to what? Its at 2 %!!

Ben Bernanke said we are holding it in reserve for an emergency.......Ha!
What are they going to do lower it to 1%??? Whats the next step 0%?

Well sign me right up, I'll take 100 Million at 0% interest........I'll pay them
$50 a week back and put the money in a Swiss Account.

Here is the bottom line on this entire mess Dollar is worth .6978 Euros. Every time we bail someone out we start the presses and print more money.

You see according to the Constitution the USA cannot go Bankrupt we get way in over our head we just say OK we don't owe anyone anything......we are just starting over.

Europe knows we are printing money so they devalue the dollar. So everything produced outside the US is going to cost more.........and we are sending our jobs overseas.........so where exactly are we heading?

My problem in school I like to think,,boredom phaseout,,its said today a lot of the financial ceo s going out the door have most of their bailout funds in their own worthless almost stock or securities,,of course any of them with sense left would have tried to convert things into cash or old Britains along the way tho none will say they saw it coming..my own telcom industry was pushing an optional 401 payout rather then a traditional pension,I took the traditional way ,,the stock plan was undiversified in fast track telcom stuff that lost 45% within 5 years, bad enough in my 401 at the time but helped to negotiate an ex wife out the door at a reduced rate,

 

[Njja]

CEOs typically rob these companies blind for a period of time and them find some external reason or bad judgement for their problems.

CEO's report to the Board of Directors......in the old days these were made up of Large Shareholders, Banks that loaned money to the company, and Funds that invested in the Company. These people were interested in protecting their own interests.....so they protected the individual shareholder if not by accident.

Nowdays often the Board of Directors are appointed by the CEO's its the buddy system.....you sit on my board and I will sit on yours. So many of these Board members had no stock in the companys whos boards they sat on that receintly they began giving stock as part of the compensation to the folks on the board.

Before you invest in a company check out the board members and their stock position in the company. If you do not know how send me a note and I will show you how......you may be shocked and reconsider your investment to another company.

One of the companies I invested in was just sold at a great profit for the shareholders. This was a 150 year old American Firm that the founding family did not want to sell yet they had only a 5% stake in a 50 Billion dollar business! Of the 13 members of the Board of Directors only 4 members had
more shares them my family own. Nine Directors were deciding the fate of a 50 Billion dollar company some with less then a $15,000 stake in the company.

This should not be allowed to happen, Public Companies should not be allowed to "Stack" the Board with hand picked flunkies.

 

[Njja]

Well this is not the financial forum. I would invite you over to the Motley Fool website for that. However, I did want to address a couple of your comments.

1. Most stocks do not pay dividends but rather create value for their shareholders by using their profits to buy companies that add to that share value.

2. Actually they generally are safe; banks in general are not in bad shape over all this and there is absolutely no credible evidence that the FDIC will have to cover any thing much at this point, much less 1% of 1 trillion.

3. Having said I am no fan of bailouts, in some cases they do make sense in preserving market functionality.

Yes this is not a financial forum but this was posted under Misc and I was interested in the opinions of my fellow collectors. I don't bother with Financial Forums as they make my head spin......and I always wind up asking the same question.......Are you a Millionare? If the answer is no........then whats the point?

1. Stocks are purchased for Growth, and Dividens as reflected in the 15% tax on dividens. I have owned HD and KO for years amassed my holdings through splits.....now I hold them for dividens it would hardly pay to sell pay taxes even at 15% LTG and put the money in the Bank at 3 or even 4%.

2. I'm not saying Banks aren't safe.....but a prudent person would have sufficent money behind the FDIC.

3. I believe in the Constitution if it says taxpayer money cannot be used for Public Companies.......then it can't. Thats what Constitutional Amendments are for.

 

[tdubel]

Re: Financial Meltdown - Rich and Taxes etc

Here is my take.

It's a breakdown of society and values. The US Government is willing to bale out the rich and put the burden on the middle class. "

As the resident (one of) tax CPA's on here, I think it is important for everyone to note a few of the following:

1. Rich people pay 80 to 90% of the Federal Tax burden (State burdens too), so before we start bashing the "rich", that should be understood.

2. I agree that no one should have to bail out these degenerates, rich or not and even though I am in the 10 to 20%, I don't feel 1 dollar should go to this.

3. If I were one of the "rich", I would really be screaming.

Coupla other unsolicited comments - There is an investment vehicle that can be used by "rich" folks where they will pay Zero tax - it is Tax free municipal bonds and if they are state exempt also, the rich pay no tax for about a 4% return. Now, of course, these are government securities that supposedly fund the building of roads, etc., but I think everyone should know this, that not all people who don't pay tax are crooks.

Warren Buffet- Njja, he actually preaches against a lot of what is going on in today's markets and has been for some time. He despises mortage securities, arms, people buying houses who can't afford it and fraudulent CEO's, so he is not really the one to bash. He believes in affordable, steady growth, not what has happened in the last 7 years.

Anyhow, I think we all have the same gripes and questions, but everything should be in perspective. The government has a lot wrong and it I know most will not like to hear this, but you can blame your CONGRESSMEN/Women for most of it. They are responsible for the Federal Budget and if anyone is really interested in how the budget really works, I have a multi page non partisan explanation on it that will make your head spin. One tidbit that you should know is approx 65% of the Federal Budget is mandated by law, ie, the only way to change it is the law. IT is a ginormous disaster that nobody really understands and it needs to shrink. Unfortunately, the only real "growth" in America is our Federal Government and that is not a good thing for investment and capitalism.

Off the box, but I hope some of this is insightful. I would recommend everyone stay clear of CNN and Fox, etc for your explanations, they are all biased and are opinions, nothing more, nothing less.

 

[Njja]

Sorry you had a financial problem with your 401K!

You can bet most of these CEO's are diversified. Problem with the folks at
Leman Bros is their CEO insisted some of their compensation was in the form of Leman Stock.......that is lost.

You don't have to worry nowdays everyones pension is protected by the
Government...........Yikes!

Problem.....they only have so much in the fund so everytime they take over a new pension everyone collecting gets less money..........heres your pension but since the check is less then a postage stamp you will have to come to washington to pick it up!

 

[Njja]

Re: Financial Meltdown - Rich and Taxes etc

Tom:

While I agree Buffett has certainly made a lot of money his story has a lot of holes in it.

1. He said he was not leaving a lot of money to his children......something about wanting them to earn it.

His ex wife said "You don't have to worry about my children I am worth 12 Billion + and I will take care of them. Spoken like a true mother.

Buffett started his investment world with a loan from his father in law.

He likes to tell the story about how he earned pennies as a child and saved up $120 which he invested with his sister. "When the initial investment declined he felt so guilty" when it finally recovered he sold it at a small profit and paid his sister back.....and vowed to never again risk someone elses money!

Well what on earth is Berkshire Hathaway?.......Other peoples money!

I like Donald Trump.........okay, I know he has made lots of mistakes, as have I. But Trump believes you should know the marketplace, and who you are aiming your product at. This is a sound business practice. I do not have any investments in his companies but I do know this.....if you want to buy an apartment in any of his buildings he requires 50% down.....and the ability to pay the mortage! That I like.

 

[nmrocks]

I have serious doubts that this is even mostly businesses fault starting back in the Clinton presidency(and continuing thru today) goverment forced the banking industries hand for "Feel Good" loans. Forcing banks to take a percentage of there loans in high risk catagories and red lined areas or face heavy government fines. Once again gov't forces itself on the free enterprise system and meltdown occurs. For sure once these rules were imposed they were very greedily taken advantage of for the quick buck, but it would have never started or gotten so out of hand if politicians had just stayed out of where they should not be.

 

[Njja]

I have serious doubts that this is even mostly businesses fault starting back in the Clinton presidency(and continuing thru today)

I felt Clinton's cavaliear attitude toward the Presidency as exemplified by the

Lewinsky Scandal sent a signal to CEO's that once you got the job why

anything goes. If its OK for the president, why not?


So this is not viewed as Political let me state for the record that President

Busch has got to be the dumbest man to ever reach the Presidency.


I always believed the Presidency was a "Special Position". To walk the halls

of the White House where so many important decisions have been made must

truely be a special opportunity.

Think about it hundreds of years from now people would be experiencing

decisions you made, and reading about your time in office. One would hope

any man would rise to the challenge and do his best for the people that put

him in office.

Instead look at what has happened as of late:

Clinton got impeached.........

Busch lead our economy to near ruin......hoping to escape and leave it to the

next President.


George Washington, Thomas Jefferson, Teddy Roosevelt and Abe Lincoln

somewhere are Weeping.

 

[Spitfrnd]

Re: Financial Meltdown - Rich and Taxes etc

Tom:

While I agree Buffett has certainly made a lot of money his story has a lot of holes in it.

1. He said he was not leaving a lot of money to his children......something about wanting them to earn it.

His ex wife said "You don't have to worry about my children I am worth 12 Billion + and I will take care of them. Spoken like a true mother.

Buffett started his investment world with a loan from his father in law.

He likes to tell the story about how he earned pennies as a child and saved up $120 which he invested with his sister. "When the initial investment declined he felt so guilty" when it finally recovered he sold it at a small profit and paid his sister back.....and vowed to never again risk someone elses money!

Well what on earth is Berkshire Hathaway?.......Other peoples money!

I like Donald Trump.........okay, I know he has made lots of mistakes, as have I. But Trump believes you should know the marketplace, and who you are aiming your product at. This is a sound business practice. I do not have any investments in his companies but I do know this.....if you want to buy an apartment in any of his buildings he requires 50% down.....and the ability to pay the mortage! That I like.

Frankly when I look for someone to make money with my money, I don't care about their 'story' as much as I do their performance history; I am looking to do business with them, not marry them. I would never be comfortable with Trump, who I think talks the talk better than he walks the walk, also with other peoples money. I will stick with Buffet no matter what his relations with any family member.

 

[1879fanatic]

Methinks
Presidents don't put unqualifieds in McMansions! Maybe Congress? The bubble was blown up by greedy private sector folk that were led on by new Housing rules drafted by Congressional liers lawyers from urban areas

 

[Spitfrnd]

Methinks
Presidents don't put unqualifieds in McMansions! Maybe Congress? The bubble was blown up by greedy private sector folk that were led on by new Housing rules drafted by Congressional liers lawyers from urban areas

Well Presidents set the tone and if they are popular, the agenda. When you set a goal of 65% plus home ownership you are inviting a set of rules that departs from basic good judgement about lending requirements. The McMansions are simply one resulting extension of that departure. Government encouraged and enabled the lending policy departures; Wallstreet provided the vehicle to impliment it. I hate to use ole Warren as an example again but when he says an inverstment is too complicated for him to understand, I would worry about it.

 

[Njja]

The American story is about hard work, proper use of credit, and intelligent

investments. I don't factor hero worship into my financial plans. Unfortunatley

wall street is really no longer a place for the average person to invest their

money.

At one time you could invest in companies you did business with.....where

you had insight into how they did business. The soda you drank, the stores

you did business with, or perhaps the car you drove. If you enjoyed research

you could follow accomplished CEO's when they moved from company to

company.

Fortunes were made with new ideas, and market innovations.

Today many CEO's line their own pockets first with hugh salaries and stock

options, inflated balance sheets, and creative accounting that often find

investors shut out.

K-mart went into chapter 11 wiped out the shareholders equity then emerged

and bought Sears? This is sheer nonsense.

Buffett is certainly a smart fellow, and if you admire him thats just fine.

I just prefer less smoke and mirrors and more straight talk. Don't talk to me

about the rich paying their fare share while you take a 175K Salary and amass

one of the worlds largest fortunes on paper.......just be quiet.

Now if you expect people to pay 50% of their earnings so you can

redistribute the wealth cash in some of the 62 Billion and give half of it to

Uncle Sam.......you don't see that happening.

Its a case of do as I say, not as I do.

Whats a young family to do today? Their biggest investment now will be their

home......and now that market is going to be trashed probably until 2010+

 

[Beaufighter]

Re: Financial Meltdown - Rich and Taxes etc

Tom:

While I agree Buffett has certainly made a lot of money his story has a lot of holes in it.

1. He said he was not leaving a lot of money to his children......something about wanting them to earn it.

His ex wife said "You don't have to worry about my children I am worth 12 Billion + and I will take care of them. Spoken like a true mother.

Buffett started his investment world with a loan from his father in law.

He likes to tell the story about how he earned pennies as a child and saved up $120 which he invested with his sister. "When the initial investment declined he felt so guilty" when it finally recovered he sold it at a small profit and paid his sister back.....and vowed to never again risk someone elses money!

Well what on earth is Berkshire Hathaway?.......Other peoples money!

I like Donald Trump.........okay, I know he has made lots of mistakes, as have I. But Trump believes you should know the marketplace, and who you are aiming your product at. This is a sound business practice. I do not have any investments in his companies but I do know this.....if you want to buy an apartment in any of his buildings he requires 50% down.....and the ability to pay the mortage! That I like.

Hey, go easy on Uncle Warren as he provides my paycheck and allows me to fly...and of course buy toy soldiers!

A Thankful Beaufighter

 

[Njja]

Lets not let this thread get off track......its not about Warren.

I started this thread to discuss the financial meltdown that is going to affect

each and everyone of us on the Forum.....and in the Country.

Here we have a mix of Attorneys (whom I hold in the highest reguard)

accountants, educators, businessmen, civil servants, contractors, scholars,

perhaps even a physician or two. I was interested in what everyone thought

of this financial situation......and if they understood what was happening.

I first became alarmed when the President gave 300 Billion to assist the

victims of Hurricane Kathrina.

His initial offer of 10 Billion.....with the lost cost federal loans was much more

financially responsible.

300 Billion was a wake up call that no one heeded......it showed he had no

concept of money or feeling of responsibility for us.

The Federal Reserve now has just 45 Billion cash on hand less then 1% of

our insured funds on deposit........yet they just loaned AIG 85 Billion?

First properly fund the Federal Reserve.

In case anyone is wondering why seemingly unaffected stocks are also

declining in value.....both AIG and AXA (French Insurance Giant) have large

holdings in most of our major corporations. They are selling their positions

to raise capital.

This causes companies like GE, Philip Moris, GM for example to decline in

share value which lowers their market capitalization which makes it more

difficult for them to raise the money they need to operate their business.

Thus you may watch your stocks lose value even though they are not

involved in the MBS business.

Louis......Brad.....who do we impeach for violating the Constitution?

 

[Spitfrnd]

I already gave you somewhat of my view. To restate, the stock market is fueled by confidence and chokes on fear of the unknown. The shakeup in AIG has left many wondering what shoe will drop next. The decline has something to do with the liquidations you noted, as I mentioned before, but the main driver now is concerns about the next large institutional failure. That has happened before, it will happen again and when it does it makes stocks of strong companies that are caught in the down currents relatively good bargins.

There is nothing about this that should cause any loss of confidence in banks generally or it the Federal Reserve. It has on hand what it needs and if needs more, it will do what it usually does, borrow more, as it just did for some of the AIG backing. Also, I think it is really incorrect to call the 85 million an expense, it is a loan with a great interest rate secured by 80% of the stock of a company with billions of assets in several viable businesses other than its mortgage insurance obligations. Liquidity is not the same thing as solvency. For what it is worth, I think the markets will recover much sooner than 2010 but even if they don't, it is not a loss until you sell.
I just finished a legal education seminar on this mess and one thing is sure, one by product of this mess will be much more paper and much less efficiency but so it goes Mr Rosewater.

 

[Steven Chong]

... To make a long story short I accepted a Cashiers Check at the closing...

Dear John,
While it is guaranteed by a bank, Cashier's Checks over $5000 are subject to deposit holds, with some banks having a hold of up to two weeks waiting for the check to clear the originating bank. Many banks will give you access to portions of your money every few days, but usually not the entire deposited amount on the day you deposit the cashier's check. I advise my clients to have proceeds wired directly to their bank. There are wire fees from both the originating bank and your own bank but you have full access to all the funds on day 1.

 

[Njja]

I already gave you somewhat of my view.

Yes you have......and I still do not know if this meltdown bothers you or not?

I have read your explanatons which doesn't seem to hold anyone responsible.

I don't believe it is the place of the Federal Government to use our Tax

Dollars to Bail out private business. Do you?

I believe the American people deserve to be told why this was allowed to

happen before we let the same bunch of idiots attempt to fix it. Do you?

There is really one simple question here......who decided a person could

borrow 125% of the value of a home without anyone verifying their income?

Do you think this was a reasonable decision?

 

[Njja]

Dear John,
While it is guaranteed by a bank, Cashier's Checks over $5000 are subject to deposit holds, with some banks having a hold of up to two weeks waiting for the check to clear the originating bank.

Dear Steven:

Thanks for the update! As you can probably tell I sold my last home in 1985

when Cashier's Checks were still in play. Thats why I love Attorney's always

looking out for you!

I just touched base with the Daughter she's a Real Estate Attorney in NYC

she informed me that its 2008 now.......and a wire transfer will be used.

Oh......I'm getting old.

 

[tdubel]

John,

I agree with a lot of your views, but I just decided as a 25 year old 10 years ago during the tech boom and subsequent drop that if I worried about it daily, I would have a heart attack.

Back when I was single, I was making more money day trading @Home, Lucent, Dell, Microsoft, Yahoo, WWF(Yes, at one time it was a fun stock to play), than I was at my "day job" as a CPA. I was never a rich man (at 25 I had more than at 35!!), but I am still not a rich man and will never be in Buffets league, so I figure it like this..... As long as I maintain my job and don't go completely broke, that is fine. AND by the end of this Earth for me, I will go out as I came in......BROKE!, because I will have spent my last dime on Toy Soldiers.

Long story short, we can get mad, angry, etc, but the market is going to do what it does, there will be bail outs every 10 years or so, crooks, scandals, etc. Just don't put all your eggs in one basket and keep enough in cash equivalents.

TD