The Economy, stupid

[StrangeSox]

http://www.nytimes.com/2009/02/28/business...=AIG&st=cse

 

An interesting read on AIG and the monumental mess we're all in.

 

 

 

On a personal note, we have an "all staff meeting" at 2 today about "to provide employees with important information about recent activities at [company]." Yearly raises were supposed to be effective starting today. That's never a good sign.

[BigSqwert]

I feel like I might as well burn my money every time I look at my 401K balance.

[StrangeSox]

I feel like I might as well burn my money every time I look at my 401K balance.

 

That's why the last time I checked it was November.

[NorthSideSox72]

I feel like I might as well burn my money every time I look at my 401K balance.

As long as you are a long term investor, just remember, this is a buying opportunity. You are buying everything cheaper now than it will be later.

 

Actually, if you are just starting in the work world around now (not you, in general), I'd suggest putting as much as possible into your 401k right now.

 

[StrangeSox]

As long as you are a long term investor, just remember, this is a buying opportunity. You are buying everything cheaper now than it will be later.

 

Actually, if you are just starting in the work world around now (not you, in general), I'd suggest putting as much as possible into your 401k right now.

 

Just lost 401(k) matching for this year

 

At least it wasn't my job.

[NorthSideSox72]

Just lost 401(k) matching for this year

 

At least it wasn't my job.

That sucks, sorry dude. But as you said, could be worse.

 

[BigSqwert]

Just lost 401(k) matching for this year

 

At least it wasn't my job.

No raises for us this year but they're keeping 401k match....for now.

[Cknolls]

I am starting to short the dollar via the UDN. I think it will print in the 60's(DXY). It may take a while but I believe risk/reward sets up nicely here. Look to buy the UDN under $24 if you wish.

[southsider2k5]

This isn't a good sign...

 

http://www.washingtonpost.com/wp-dyn/conte...9030303640.html

 

So how long a financial downturn is the administration anticipating? President Obama has not put a date on it, saying that this year is going to be tough, but next year might be better. But it would appear that the Treasury Department thinks the Troubled Assets Relief Program, that $700 billion bank bailout, may be around for a while. The department, through the General Services Administration, has signed a lease for four floors of a building at 18th and L streets NW. It's a 10-year lease.

[Y2HH]

Contrary to everything you may be hearing right about now, this is the BEST time to be investing in 401k's or stocks -- they're at 30+ year lows...which means that for the same amount of money you were putting in a year or two ago, you are getting MORE shares in exchange. Let this go on for a few years, stockpile the share counts in your 401k, and when it recovers you'll be loving it.

 

And on the flip side of that coin, if it never recovers, it doesn't matter anyway.

 

I recommend investing in an index fund at this point -- something like the S&P500 or Wilshire 5000, that way when the market recovers, you will recover directly inline with it, you will not over or under perform the market, which is perfect in a situation like this. If you have the guts to ride this out for the next 5-10 years, you'll be happy. This is an opportunity of a lifetime if you're smart enough to see it.

[Balta1701]

Contrary to everything you may be hearing right about now, this is the BEST time to be investing in 401k's or stocks -- they're at 30+ year lows...which means that for the same amount of money you were putting in a year or two ago, you are getting MORE shares in exchange. Let this go on for a few years, stockpile the share counts in your 401k, and when it recovers you'll be loving it.

 

And on the flip side of that coin, if it never recovers, it doesn't matter anyway.

 

I recommend investing in an index fund at this point -- something like the S&P500 or Wilshire 5000, that way when the market recovers, you will recover directly inline with it, you will not over or under perform the market, which is perfect in a situation like this. If you have the guts to ride this out for the next 5-10 years, you'll be happy. This is an opportunity of a lifetime if you're smart enough to see it.

That depends on if you think we're anywhere close to a bottom. There's an argument to be made that based on historic bear market P/E ratios, the stock market still has another 20% of so to go down before it hits the bottom, and that assumes no significant further erosion of earnings.

 

Last November, my dad was telling me that it was a great opportunity to buy additional stocks, and I responded I didn't think we were anywhere close to the bottom. We're closer now. But I still think there's a ways to go. I do think we're ready for one of those late-October style big bounce upwards single days, but the bounces won't hold yet.

[bmags]

Should I assume that every time Gordon Brown speaks to Congress the market will increase by 150 pts

[Y2HH]

That depends on if you think we're anywhere close to a bottom. There's an argument to be made that based on historic bear market P/E ratios, the stock market still has another 20% of so to go down before it hits the bottom, and that assumes no significant further erosion of earnings.

 

Last November, my dad was telling me that it was a great opportunity to buy additional stocks, and I responded I didn't think we were anywhere close to the bottom. We're closer now. But I still think there's a ways to go. I do think we're ready for one of those late-October style big bounce upwards single days, but the bounces won't hold yet.

 

Fair enough, but you don't necessarily have to wait for "the bottom" to win in this. The fact is we are damn low right now, as some companies are trading at ridiculous PE's, there is money to be made here long term. I'd rather things be wonderful still, but the fact remains, I'm dealing with what we have, and in the mean time I'm not complaining that I'm buying up shares of the S&P500 index at lower costs in my 401k...I'll take it while it's cheap, I may not be right, but I'm betting that in the next 30 years sometime, it'll rebound.

[StrangeSox]

If you keep waiting for "the bottom," you'll probably miss it.

[southsider2k5]

If you keep waiting for "the bottom," you'll probably miss it.

 

My favorite trader saying of all time...

 

"Those who pick bottoms, get s*** on their fingers".

 

I learned that from a guy who traded in my crowd in AOL at the CBOE, who now happens to be on one of the CBNC after hours shows.

[Y2HH]

My favorite trader saying of all time...

 

"Those who pick bottoms, get s*** on their fingers".

 

I learned that from a guy who traded in my crowd in AOL at the CBOE, who now happens to be on one of the CBNC after hours shows.

 

That's a good one.

[southsider2k5]

I mentioned when Goldman Sachs said they were going to pay the TARP money back as soon as possible because of the new restrictions being places on it, that it would start a line of banks taking money out of the lending system and paying the money back early. Now it is happening. This is going to make sure that only the banks that are need the money to rescue their capital ratios take it, and the banks that are solvent, aren't going to lend because they are still paranoid about the values of their investments falling below their lending levels and having to be revalued because of Sarbanes Oxley.

 

http://www.chicagotribune.com/business/chi...0,5613366.story

 

Cash back: TCF Financial Corp., which has more than 200 branches in the Chicago area, is the latest bank seeking to return federal bailout money sooner rather than later, explaining late Monday that "the rules have definitely changed."

 

The Wayzata, Minn.-based bank, which has $16.7 billion in assets, filed a notice with the U.S. Treasury Department to redeem $361.2 million of preferred stock it sold to the government on Nov. 14 as part of the Troubled Asset Relief Program.

 

On Thursday, IberiaBank Corp. of Lafayette, La., said it would soon repay about $90 million in TARP money.

 

A day later, Chicago-based Northern Trust Corp., which took a drubbing for its entertainment spending, also said it would reimburse the government for its approximately $1.5 billion capital infusion "as quickly as prudently possible."

 

Possible new congressional or regulatory restrictions or mandates have caused TCF to reconsider its TARP participation.

 

"Public perception views banks that took TARP money as having done so out of weakness," TCF CEO William Cooper said. TCF has sufficient capital without TARP money, he said.

 

"Participation in TARP has created a competitive disadvantage for TCF, and it's in the best interest of shareholders to redeem these shares," Cooper said.

[NorthSideSox72]

I mentioned when Goldman Sachs said they were going to pay the TARP money back as soon as possible because of the new restrictions being places on it, that it would start a line of banks taking money out of the lending system and paying the money back early. Now it is happening. This is going to make sure that only the banks that are need the money to rescue their capital ratios take it, and the banks that are solvent, aren't going to lend because they are still paranoid about the values of their investments falling below their lending levels and having to be revalued because of Sarbanes Oxley.

 

http://www.chicagotribune.com/business/chi...0,5613366.story

Not a surprise, and that is fine anyway. I don't agree that these banks won't lend. If lending is part of their business model, they will contonue to do so. I think these paybacks are what you say, they simply don't want the restrictions. I know for a fact that the feds pushed this money on some banks that didn't even want it.

 

Besides, I think having lending be somewhat more restrictive is ultimately a good thing.

 

[Rex Kickass]

So if they pay back the money, that means that it really didn't cost us as much as they say?

[NorthSideSox72]

So if they pay back the money, that means that it really didn't cost us as much as they say?

It does reduce the cost by that amount, yes, although the governemnt loses the implied forward returns on the loans, and still has some cost on the lending due to opportunity cost during the time the money was out. Those are marginal though, and yes, this money would now be back with the government.

 

I personally think this is a good development.

 

[Rex Kickass]

Alright there, good times then!

[Balta1701]

It does reduce the cost by that amount, yes, although the governemnt loses the implied forward returns on the loans, and still has some cost on the lending due to opportunity cost during the time the money was out. Those are marginal though, and yes, this money would now be back with the government.

 

I personally think this is a good development.

The other key is...if the good banks were forced to take the money, and they start giving it back, that leaves more money available for the zombie banks that truly do need the help.

 

The other part of the loss the government will take is that every one of these that went out had a built in 33% or so loss, according to the TARP oversight panel, since Paulson under-priced the government relief funds.

[NorthSideSox72]

The other key is...if the good banks were forced to take the money, and they start giving it back, that leaves more money available for the zombie banks that truly do need the help.

 

The other part of the loss the government will take is that every one of these that went out had a built in 33% or so loss, according to the TARP oversight panel, since Paulson under-priced the government relief funds.

Both true too.

 

[southsider2k5]

The other key is...if the good banks were forced to take the money, and they start giving it back, that leaves more money available for the zombie banks that truly do need the help.

 

The other part of the loss the government will take is that every one of these that went out had a built in 33% or so loss, according to the TARP oversight panel, since Paulson under-priced the government relief funds.

 

But it also means less lending, which is the biggest problem in the system right now.

 

Take it this way. As I understand it you can only lend out 90% of what you take in as a bank. If the value of your portfolio that you have lent out, drops, that comes out of your capital, because of the accounting laws. That money can't be lent out either. For the healthy banks that got money, each dollar that came in, was able to be lent out right away, because the banks were already solvent and ahead of that 90% threshold. For banks that are right at, or maybe even under 90%, all that does is keep them floating. It does nothing to unfreeze the capital lending markets.

 

I guess in reality the answer lies in what you day heard what the purpose of the TARP actually is. If it is to keep banks afloat, this shows success. If it is to encourage lending, it is doing the opposite.

[Balta1701]

I've driven by this development a couple times, even before the drug war broke out, and even though the beach was nice, I couldn't for the life of me figure out why someone would want to actually live in a luxury development in this area.