The Economy, stupid

[Y2HH]

Oh, I was saying that my 401K is a mere pittance and 20% of nothing is something (play on words).

 

Yes, it was hard to watch my 401k go from what it was to what it is, however, there is a silver lining to all of this. If you are lucky enough to work for a company still doing a match or partial match it's even better. But just think that you're not buying into these funds for less per share than you were when the market was riding high, so now you're share count in these funds will rise faster. Don't worry about where the market is right now, worry about where it's at 20+ years from now when your 401k matters. It would be more of a worry if you were one of the unlucky ones that's right near retirement and had this happen, but this is good for us, it gives us a rare opportunity to buy low.

[kapkomet]

Yes, it was hard to watch my 401k go from what it was to what it is, however, there is a silver lining to all of this. If you are lucky enough to work for a company still doing a match or partial match it's even better. But just think that you're not buying into these funds for less per share than you were when the market was riding high, so now you're share count in these funds will rise faster. Don't worry about where the market is right now, worry about where it's at 20+ years from now when your 401k matters. It would be more of a worry if you were one of the unlucky ones that's right near retirement and had this happen, but this is good for us, it gives us a rare opportunity to buy low.

I'm actually out of work, that's why I have to cash it. My 6 months is almost gone. If I would ever get my COBRA credits that we were all promised, it sure would help.

 

[Y2HH]

I'm actually out of work, that's why I have to cash it. My 6 months is almost gone. If I would ever get my COBRA credits that we were all promised, it sure would help.

 

Well, rather than cashing it and getting hit with the penalty, you can open yourself a Rollover IRA with any broker, E*Trade, Schwab, whatever you happen to use, and roll it (tax free) into that account, and then you can openly trade with that account tax deferred for the life of it, until retirement.

 

I did this when I left my last two companies and rolled both of my 401k's from those companies into it...I still have it now. The bad news is you're basically cashing in shares, however, since the shares are equally low on the other end, just find an equivalent fund (index fund preferably) and sink the money right back into it.

[kapkomet]

Well, rather than cashing it and getting hit with the penalty, you can open yourself a Rollover IRA with any broker, E*Trade, Schwab, whatever you happen to use, and roll it (tax free) into that account, and then you can openly trade with that account tax deferred for the life of it, until retirement.

 

I did this when I left my last two companies and rolled both of my 401k's from those companies into it...I still have it now. The bad news is you're basically cashing in shares, however, since the shares are equally low on the other end, just find an equivalent fund (index fund preferably) and sink the money right back into it.

I am going to use it for COBRA. I can take it penalty free since I've been on unemployment for 12 weeks - I'm going to roll it into an IRA and then withdraw it. I still have to pay income tax (which at this rate I will get it all back anyway because I'm going to be on the lowest bracket possible if I never get to work).

 

If I get a job in the next couple of weeks, then I'm probably going to use it to pay for my wife's college, same deal... no penalty.

[southsider2k5]

Looks like the Obama administration could be pushing GM into bankruptcy after all.

 

http://news.yahoo.com/s/nm/20090413/bs_nm/us_autos_gm

 

WASHINGTON, April 12 (Reuters ) – The U.S. Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by June 1, even though the automaker has publicly stated it could reorganize outside of court, The New York Times reported on Sunday.

 

GM is operating under emergency U.S. government loans. It has been told by the Obama administration's task force overseeing its bailout that it must cut costs and reduce its debts in order to continue to receive aid.

 

The White House-appointed autos task force has given GM 60 days to come up with a restructuring plan and it is trying to determine whether the automaker can be a viable company.

 

Quoting sources who had been briefed on the GM plans, the Times said the goal was to prepare for a fast "surgical" bankruptcy.

 

The newspaper said preparations are aimed at assuring a GM bankruptcy filing is ready if the company is unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union.

 

A plan under consideration would create a new company that would buy the "good" assets of GM after the carmaker files for bankruptcy, the Times said.

 

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years, according to the paper.

 

Treasury officials are examining one potential outcome in which the viable GM enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person briefed on the matter told the Times.

 

The Times sources declined to be identified because they were not authorized to discuss the process. Both GM and Treasury Department officials declined to comment, the newspaper said.

 

Last week, GM's chief executive said the automaker wanted to restructure out of court, but also preparing for a bankruptcy filing.

[NorthSideSox72]

Looks like the Obama administration could be pushing GM into bankruptcy after all.

 

http://news.yahoo.com/s/nm/20090413/bs_nm/us_autos_gm

Good. But didn't they already say this, basically, like a week or two ago? Probably not as directly, but, that was the impression I got.

 

By the way, I am not saying its GOOD that more people will lose jobs in the interim - I feel badly about that. But I am convinced that it will be better for everyone and this economy, including the people laid off, to do this now and get it over with.

 

[southsider2k5]

Good. But didn't they already say this, basically, like a week or two ago? Probably not as directly, but, that was the impression I got.

 

By the way, I am not saying its GOOD that more people will lose jobs in the interim - I feel badly about that. But I am convinced that it will be better for everyone and this economy, including the people laid off, to do this now and get it over with.

 

The layoffs aren't the important part, it is the cost restructuring that needs to be done.

[Balta1701]

Good. But didn't they already say this, basically, like a week or two ago? Probably not as directly, but, that was the impression I got.

 

By the way, I am not saying its GOOD that more people will lose jobs in the interim - I feel badly about that. But I am convinced that it will be better for everyone and this economy, including the people laid off, to do this now and get it over with.

The Obama administration is stuck in the middle of a game of brinkmanship right now, especially with Chrysler, GM to a lesser extent. Basically, on one side, they have the Unions, who want more concessions from the bondholders, and don't believe the government will actually let the companies go bankrupt. On the other side, they have the bondholders, who are demanding more concessions from the union, and don't believe the government will actually let the companies go bankrupt (noteworthy...a number of these folks are the TARP recipients...yay).

 

Basically at this point, unless both the unions and the bondholders start believing that the government will let the companies hit bankruptcy, where a court will actually have the power to enforce concessions, then it's completely guaranteed that the companies will hit bankruptcy. Now that the government has bailed out everyone under the sun, it doesn't have any credibility left when it says it won't keep bailing people out.

 

Edit: more thoughts...the reason both sides feel they have the government over a barrel is that the country still can't afford another couple million job losses right now, so they both feel like they have all the bargaining power. What the Obama Admin. needs to gain some power back is a method of ushering those guys through bankruptcy rapidly, without totally destroying the companies, so that they can extract concessions from the bondholders and the unions without those 2 sides having the ability to threaten the government with 15% unemployment numbers before the end of the year. So trying to design a method to shuttle them rapidly through bankruptcy is a potential way to gain the leverage they need.

 

Edit the 2nd: also, one thing i forgot earlier...the bondholders have one other potential gun to hold to the government's head...the Credit Default Swaps, which for $30 billion in GM debt probably total several times that amount, a good chunk probably held by AIG. Thus, the bondholders have the ability to do even more damage if the government doesn't acquiesce to their demands.

[NorthSideSox72]

The layoffs aren't the important part, it is the cost restructuring that needs to be done.

That's sort of my point. The restructuring of costs, the new management that would come in, the ability to be a little more forward-thinking instead of purely survival mode... those will all be good things for GM and the economy in the long run. I was just saying it sucks for people that will get laid off or see reduced pay or benefits - it is an unfortunate side effect.

 

[Balta1701]

Might not hold if other, more positive data comes out, but I think that the unexpected drop in retail sales might be exactly what an over-bought market was waiting on to push it back downwards over the next few days/weeks.

[kapkomet]

Might not hold if other, more positive data comes out, but I think that the unexpected drop in retail sales might be exactly what an over-bought market was waiting on to push it back downwards over the next few days/weeks.

I sold yesterday into a cash position. I think I'll be near the top on this push up. I'm hoping that I don't have to touch the money, but at least I'll have it just in case. If I don't need it, I'll just roll it again into some more funds.

[Balta1701]

Fascinating.

 

As part of the transition to becoming a "Bank holding company" so that they could receive the TARP funds, Goldman Sachs had to change the schedule it operates on. Previously, their quarters would start on December 1, now they had to start on Jan 1. So...the last quarter they reported last year was September - November, and they just reported those solid numbers for January through March.

 

An erudite reader might wonder...what happened to December.

 

Turns out...they took a ton of losses and accounted for them in December. And it also seems that they received a crapload of government money from the AIG bailout in December.

 

That's one way to make your books look better.

[kapkomet]

Fascinating.

 

As part of the transition to becoming a "Bank holding company" so that they could receive the TARP funds, Goldman Sachs had to change the schedule it operates on. Previously, their quarters would start on December 1, now they had to start on Jan 1. So...the last quarter they reported last year was September - November, and they just reported those solid numbers for January through March.

 

An erudite reader might wonder...what happened to December.

 

Turns out...they took a ton of losses and accounted for them in December. And it also seems that they received a crapload of government money from the AIG bailout in December.

 

That's one way to make your books look better.

I hear what you're trying to imply, but I don't think this is a shennanigans thing... I guess I could quit being lazy and go look at their 10Q.

 

 

[StrangeSox]

[kapkomet]

ok? What are you trying to say here? And I also think that you have to give Obama an assist on the upward tick as they didn't do anything without him knowing about it.

 

[lostfan]

ok? What are you trying to say here? And I also think that you have to give Obama an assist on the upward tick as they didn't do anything without him knowing about it.

More or less the same thing I was trying to say in the Dem thread I imagine.

[bmags]

let's get more no spending cartoons from the 1930s

[kapkomet]

let's get more no spending cartoons from the 1930s

Now let's not drag other threads into this.

[StrangeSox]

ok? What are you trying to say here? And I also think that you have to give Obama an assist on the upward tick as they didn't do anything without him knowing about it.

 

Just an interesting graph I saw. I'm not sure why Bush/ Reagan, Bush II and Obama are colored red.

Edited April 15, 2009 by StrangeSox

[Cknolls]

Fascinating.

 

As part of the transition to becoming a "Bank holding company" so that they could receive the TARP funds, Goldman Sachs had to change the schedule it operates on. Previously, their quarters would start on December 1, now they had to start on Jan 1. So...the last quarter they reported last year was September - November, and they just reported those solid numbers for January through March.

 

An erudite reader might wonder...what happened to December.

 

Turns out...they took a ton of losses and accounted for them in December. And it also seems that they received a crapload of government money from the AIG bailout in December.

 

That's one way to make your books look better.

 

Exactly. And people wonder why I say the mkt is manipulated? Let's run the stock up from $115 to $130 in two days, issue a secondary at $123 and then right back down to $115 yesterday. GS projects to $109 by Friday.

 

Hopefully, when GS files its 10-Q, they will include some data on the fourth quarterof 2008, although, even then, it will probably be too hard to discern.

[Balta1701]

A question for anyone who has an answer...yesterday's rally was promoted in part by a significant surge in new housing starts. My question is...why was there a surge in housing starts? There's still a fairly large glut of housing on the market, prices are still falling significantly, credit is still tight. It seems like a surge in housing starts now is way ahead of the game even given that it takes a while to construct housing. We're sitting on an 11 month or so supply of housing at the last numbers I found, where a 6 month supply is typically normal.

 

The only reason I can figure for why there would be a surge in housing starts is if there was anomalously good weather throughout much of the country. Can anyone explain to me how else that makes sense? It seems like another pulse of construction will just wind up increasing the over-supply unless there's a huge surge in buying.

Remember this discussion we had a couple weeks ago? The one where CK and I actually agreed on something?

 

Here's the data to prove that when we agree, we might actually be right on things.

- Housing construction plunged to the second lowest level on record in March, reversing a big jump from the previous month. Economists, however, were heartened by indications that the long slide in single-family construction could be coming to an end.

 

The Commerce Department said Thursday construction of new homes and apartments dropped 10.8 percent last month to a seasonally adjusted annual rate of 510,000 units. That was the second lowest construction pace in records that go back 50 years.

 

The decline was worse than economists had expected and February activity also was revised lower. Applications for building permits fell 9 percent in March to a record low of 513,000 units.

[Cknolls]

Remember this discussion we had a couple weeks ago? The one where CK and I actually agreed on something?

 

Here's the data to prove that when we agree, we might actually be right on things.

 

 

[Balta1701]

If this isn't a conflict of interest, I don't think there is such a thing as a conflict of interest any more.

[kapkomet]

If this isn't a conflict of interest, I don't think there is such a thing as a conflict of interest any more.

Just a little bit.

 

[Balta1701]

If Chrysler comes back asking for more money now, let em burn.

Top officials at Chrysler Financial turned away a $750 million government loan because executives didn't want to abide by new federal limits on pay, sources familiar with the matter say.

 

The government had been offering the loan earlier this month as part of its efforts to prop up the ailing auto industry, including Chrysler, which is racing to avoid bankruptcy. Chrysler Financial is a vital lender to Chrysler dealerships and customers.

 

In forgoing the loan, Chrysler Financial opted to use more expensive financing from private banks, adding to the burdens of the already fragile automaker and its financing company.

 

Chrysler Financial denied in a statement that its executives had refused to accept new limits on their pay.

 

The company's decision comes amid a firestorm on Capitol Hill and elsewhere over the lavish pay of executives at companies being aided by government money. The uproar has made companies skittish about taking federal aid and hindered the Obama administration's effort to revive lending by replenishing the coffers of the nation's financial firms.

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The Treasury Department previously had loaned Chrysler Financial $1.5 billion, when less stringent requirements on executive compensation were in place for recipients of federal bailout money. Since that first loan was announced on January 16, the Obama administration and Congress have toughened the rules.

 

During March, when it seemed that the first loan would run out, the Obama administration began working on a deal to lend the company another $750 million.

 

Most of the agreement was in place, sources said. But on April 7, Treasury asked Chrysler Financial to have its top 25 executives sign waivers regarding their compensation, according to sources familiar with the matter who declined to talk publicly because they were not authorized to speak.

 

Within a week, the company responded that some of the executives had refused to give their approval. By last week, Treasury had rescinded the loan offer, the sources said.

Anyone want to give us a lecture about how corporate pay levels are reasonable because the executives are always beholden to shareholders and work in their best interest?