We're All Gonna Die Broke

[MUDSHARK]

Sub-Prime woes have collapsed the markets by 3 percent today. Investors in High-yield bond funds and closed end mutal funds hold on tight. One wonders about these huge hedge funds that balanced risk by investing in mortgages to the least credit worthy borrowers.

After 28k in paper losses in the last month my mood has put a new Bryston for the Sierra's on hold. I view this as a long-term buying opportunity with all excess cash going to fund shares. Bulls win bears win pigs lose.

 

[Dolby CP-200]

ROFLMAO! Well I’ve been a little strapped for cash these past weeks!

 

[Tomorrow]

Trouble is definitely a-brewing thanks to greed.

Invest in gold!

 

[stratman]

Give it till next year, the housing collapse (foreclosures) will make this year feel like a walk in the park. We were the hottest market for the last 7 years, a lot of lower income folks got into loans that they shouldn't have and now it's time to pay the piper, one good thing though the Fed will not mess with interests this year. I know of one high-end building in Brickell with 35 foreclosures pending, these were the "greedy" property flippers that got their butt stuck on the door. Them I don't feel sorry for, other folks (working lower income) I do because unscrupulous mortgage brokers were handing out "impossible" loans like a cheap crack dealer gives out "samples" to hook new victims. I know ignorance is not an excuse for stupidity, but I do feel for some of the folks (older, low education, ignorance of the market, etc.)

 

[Dolby CP-200]

"Greed is good."

“You tell that bugger I’m going to full close on his a££”

 

[Dolby CP-200]

I was just in the laundrette and the guy in there was mentioning this might affect us over in the UK, this is something to do with debts in China, is was told?

 

[stratman]

I was just in the laundrette and the guy in there was mentioning this might affect us over in the UK, this is something to do with debts in China, is was told?

China? Nope. The housing market in Florida was way below average for years and years, starting in 1999 the market began to catch up with the state's growth, eventually overtaking it, where property values grew to such proportions that the average consumer was not able to afford housing. When this happens all sorts of legally gray schemes appear, loan solutions that barely make sense, which in turn attract those looking for a home. Most of those loans are not realistic and are based on a variable interest scale or payment on interest only (not combined with principal) or the new (what I call "never-own your-home" loan) super fixed rate with super extended payments of 40 and 50 years, you'll be an indentured servant to the lending institution for half a century, meaning a lot of persons when (and if) they pass a property to a relative or inheritor most likely that property will still be strapped with some kind of mortgage. It use to be that owning your home was the American dream, scratch off another from the list. It might affect the UK because we had myriads of European investors here, but they were buying property at a discount since the Euro is higher than the dollar, nonetheless if they developed land (which a lot of them did) they're stuck on a cold market where there's no where to go but to ride the storm out.

 

[Audioholics]

"full close" lol

The China thing has to do with the bond market... I believe they hold billions of dollars in US bonds and made some stupid gesture/threat about taking our market down if we play hardball on trade issues.

 

[Johnd]

"full close" lol

The China thing has to do with the bond market...

And, unfortunately (given the current volatility and uncertainty), so does a lot of America (Americans).

 

[Mort Corey]

"full close" lol

The China thing has to do with the bond market... I believe they hold billions of dollars in US bonds and made some stupid gesture/threat about taking our market down if we play hardball on trade issues.

IIRC, those billions are now over (or close to) a trillion...and that's largely US Treasuries. Someone once said that warfare is economics by other means. The Chinese "could" virtually collapse the value of the dollar but it sure wouldn't be in their best interest at this time. Besides, the stupid Fed is doing a bang up job of devaluing the dollar all on its own...JMO

Mort

 

[stratman]

IIRC, those billions are now over (or close to) a trillion...and that's largely US Treasuries. Someone once said that warfare is economics by other means. The Chinese "could" virtually collapse the value of the dollar but it sure wouldn't be in their best interest at this time. Besides, the stupid Fed is doing a bang up job of devaluing the dollar all on its own...JMO

Mort

Yeah it wouldn't be in China's interest to collapse any market, we're still the largest consumers by far (just look at this site!), any time the US economy "burps" the rest of the world shudders. Remember that we live in a world economy and we, like it or not, are just a cog, a very big cog, but a cog nonetheless dependent on other economic zones to sustain our drive.

 

[Johnd]

Yeah it wouldn't be in China's interest to collapse any market, we're still the largest consumers by far (just look at this site!), any time the US economy "burps" the rest of the world shudders. Remember that we live in a world economy and we, like it or not, are just a cog, a very big cog, but a cog nonetheless dependent on other economic zones to sustain our drive.

I don't believe it. A thoughtful, deliberate, well-written statement by the Neanderthal. Darwin may have been wrong after all. Perhaps you are not doomed to extinction!

 

[Dolby CP-200]

China? Nope. The housing market in Florida was way below average for years and years, starting in 1999 the market began to catch up with the state's growth, eventually overtaking it, where property values grew to such proportions that the average consumer was not able to afford housing. When this happens all sorts of legally gray schemes appear, loan solutions that barely make sense, which in turn attract those looking for a home. Most of those loans are not realistic and are based on a variable interest scale or payment on interest only (not combined with principal) or the new (what I call "never-own your-home" loan) super fixed rate with super extended payments of 40 and 50 years, you'll be an indentured servant to the lending institution for half a century, meaning a lot of persons when (and if) they pass a property to a relative or inheritor most likely that property will still be strapped with some kind of mortgage. It use to be that owning your home was the American dream, scratch off another from the list. It might affect the UK because we had myriads of European investors here, but they were buying property at a discount since the Euro is higher than the dollar, nonetheless if they developed land (which a lot of them did) they're stuck on a cold market where there's no where to go but to ride the storm out.

Yeah I’ve seen places in and around that sale property in Florida. I think we have one around Bournemouth, I noticed one at Southampton about 3 weeks ago, property to buy or lease.

 

[stratman]

I don't believe it. A thoughtful, deliberate, well-written statement by the Neanderthal. Darwin may have been wrong after all. Perhaps you are not doomed to extinction!

Just when you least expect it! And yes I'm THE neanderthal.

 

[mazersteven]

Bulls win bears win pigs lose.

Go New York Giants.

 

[mazersteven]

Invest in gold!

Been there, done that 6 years ago.

But I've spent all those earnings.

 

[Tomorrow]

Been there, done that 6 years ago.

But I've spent all those earnings.

Hopefully you spent it wisely...like on audio equipment!

Gold historically has done solidly during all times of national and international unrest and war, as well as turbulent financial market times. Inflation is around the corner. It's a great hedge there, too. I just wish I had some dough to invest.

 

[Davemcc]

Besides, the stupid Fed is doing a bang up job of devaluing the dollar all on its own...JMO

Mort

You say this like it's a bad thing. On the grand scale, devaluing the dollar, in effect, devalues China's national wealth by an equivalent percent. If China collapses the currency, they also collapse their own national reserves.

The domestic effect of devaluing the dollar is that imported products become more expensive, primarily oil, food, natural resources, etc. However, this also means that imported consumer goods are more expensive as well, giving a competitive edge to domestic producers to compete profitably with offshore importers, i.e. manufacturing jobs stay in America. Also, American produced goods can be exported more cheaply, again giving domestic producers an edge in international markets, keeping more jobs in America.

Canada has for years relied on the low value of the Canadian dollar to maintain a competitive advantage in manufacturing cost. The recent decline of the American dollar makes it much more attractive to move production back to the U.S. from Canada. Same goes for China. An over-valued currency is partly responsible for the vast number of manufacturing jobs that have been shipped overseas. A properly valued currency should see some of those jobs return or at least stem the losses.

 

[Tomorrow]

You say this like it's a bad thing. On the grand scale, devaluing the dollar, in effect, devalues China's national wealth by an equivalent percent. If China collapses the currency, they also collapse their own national reserves.

The domestic effect of devaluing the dollar is that imported products become more expensive, primarily oil, food, natural resources, etc. However, this also means that imported consumer goods are more expensive as well, giving a competitive edge to domestic producers to compete profitably with offshore importers, i.e. manufacturing jobs stay in America. Also, American produced goods can be exported more cheaply, again giving domestic producers an edge in international markets, keeping more jobs in America.

Canada has for years relied on the low value of the Canadian dollar to maintain a competitive advantage in manufacturing cost. The recent decline of the American dollar makes it much more attractive to move production back to the U.S. from Canada. Same goes for China. An over-valued currency is partly responsible for the vast number of manufacturing jobs that have been shipped overseas. A properly valued currency should see some of those jobs return or at least stem the losses.

Great post. The FED is steering us down the rosy, middling path right now. The dollar value really needs to be floated. It has been propped up for so long, it's ready for a huge tumble. I wonder what Greenspan would do.

It seems the dollar will have to be devalued...the sooner the better, or we're in the deep end of the financial goo pool. (Sorry Dave, I know you probably dislike these playful, verbal recreations of mine. Hopefully what they lack in informative clarity, the make up in imaging. )

EDIT: Has anyone seen or heard any current Greenspan comments relative to this discussion?

 

[Davemcc]

EDIT: Has anyone seen or heard any current Greenspan comments relative to this discussion?

Interesting idea. I just did a quick search of "greenspan devaluation". It would seem that the current devaluation is quite deliberate. Greenspan calls it "salvation by devaluation". Here's a older link, but makes the point.
http://www.gold-eagle.com/gold_digest_04/fry011904.html

It's a good thing that the devaluation is happening slowly. One of the side effects is inflation as the cost of imported goods rises, as I noted primarily oil, food and natural resources. The cost of your imported Canadian speakers (Energy, PSB) and amps (Bryston) will likely rise in the near future. The slow fall of the dollar will ease inflationary pressure to some extent, but there will be a period of transition for consumers.

The mitigating factor is that the job market should open up in manufacturing and services as a result of American products becoming cheaper to export and more competitive with offshore imports at home.