Freddie Mac and Fannie Mae

[ExiledInIllinois]

If these big financial firm behemoths can be brought low because of "rumor", then maybe we should regulate the schit out of them. These firms are handling Mom and Dads retirement money and you say because Trader Bob gets spooked and says "Watch out" that Mom and Dads money goes 'poof'? Give me a break. These firms shouldn't be defended, they should be torn down and rebuilt into something more solid that isn't so easily upset by the winds of gossip or Congressman writing letters.

 

I'm just an average schmuck on the street who readily admits I don't have 1/10 of the high finance knowlege that you do, but I don't think years of analysis is needed for my nose to be able to smell the stink that has been rolling in off of Wall Street lately. Hell, my nose was starting to smell the stink years ago when high dollar mortgages were being given to any fool with a pulse even though Greenspan and Co were telling us that the smell was rose petals. Those brillaint money guys are running our financial system and they really thought housing prices would go up forever?

 

Madness. The whole system had descended into madness. I'm not saying you're wrong and Mr Drane is right, or vice versa, but the truth is most likely somewhere in the middle and instead of this pissing contest how's about some common sense analysis of "where do we go from here"?

 

[Chef Jim]

GG-If I read you correctly, you feel (along the lines of what Bills_fan posted) that what the Fed did yesterday is our last gasp at containing this?

 

Here's something to consider though- for every homeowner that goes into foreclosure, it removes one candidate to assist with the recovery. Granted, had the system not been so !@#$ up in granting burger flippers mortgages in the first place, they probably wouldn't have been in the market. But, with ARM resets coming soon it looks like many with very good credit are going to go into foreclosure also. That is unless congress passes a bill to assist. But certainly inflation, which everyone is acutely aware exists right now, is going to get much worse from the printing presses working overtime. How do you see the Fed controlling this? And what if oil prices stay as high as they are?

 

How many people have gone into foreclosure? I know there is hard data out there but I bet if we asked eveyone here who has gone into foreclosure raise their hand, not too many would go up. But the media loves bad news and people like Dwight Drane lap it up and begin jumping from the 22nd floor. Go, jump, get out, buy silver, I don't care. I don't invest for today, I invest for the future....more than ten years out. When things stabilize (I'm thinking after the election, just look at the markets in 2004) you'll come crawling back which will lift the markets. And us steady dollar cost averagers will be rewarded. I just sit back and watch and laugh. Silver...........

[jjamie12]

One plan that I read which sounds draconian, but may go a long way is to take possession of the empty and partially built homes and demolish them. One year later, there's still too much supply.

I read that in The Economist, too... Fundamentally, I don't think it makes sense, though. I *think* it is a prisoner's dilemna situation. It might be better for *everyone* if *everyone* demolished the housing excess. However, if I wait for other banks to demolish their homes, I get to keep my asset and make a profit on it, while those that demolished their homes lost their asset value. Unless, of course, the proponents of this idea would have the gov't incent the banks to demolish homes...

[GG]

I read that in The Economist, too... Fundamentally, I don't think it makes sense, though. I *think* it is a prisoner's dilemna situation. It might be better for *everyone* if *everyone* demolished the housing excess. However, if I wait for other banks to demolish their homes, I get to keep my asset and make a profit on it, while those that demolished their homes lost their asset value. Unless, of course, the proponents of this idea would have the gov't incent the banks to demolish homes...

 

Yeah that was their take. The plan was that if the government was going to do a massive bail-out, then the logical next step would be for the government to demolish the home to put supply/demand into equilibrium. But you can imagine the pitfalls in that scheme.

 

But you are right, everyone is waiting for someone to blink first. I honestly think that with IndyMac's collapse banks will be even more proactive to dump, while equity investors will recognize that it's still better to get diluted by 50% than to lose the entire 100%. Will be an interesting end of summer.

[Fastback]

How many people have gone into foreclosure? I know there is hard data out there but I bet if we asked eveyone here who has gone into foreclosure raise their hand, not too many would go up. But the media loves bad news and people like Dwight Drane lap it up and begin jumping from the 22nd floor. Go, jump, get out, buy silver, I don't care. I don't invest for today, I invest for the future....more than ten years out. When things stabilize (I'm thinking after the election, just look at the markets in 2004) you'll come crawling back which will lift the markets. And us steady dollar cost averagers will be rewarded. I just sit back and watch and laugh. Silver...........

 

Actually I have two people in my family (wifes side) who recently lost homes to foreclosure. Both were here in So. California. My wifes sister went through a divorce that was really ugly and they screwed around too long fighting over this and that and they couldn't sell it so they let it go. My wifes brother who lives in Corona recently lost his house. He makes a good living at Disney and his wife works for AT&T. They make a good living together, but are complete idiots financially. Nice people, but not the sharpest tools in the shed financially. Have you been through the IE at all lately? The place is a ghost town. It's REALLY bad there. But again, nobody forced those people to take 2nd's out on their house and spend it on a toyhauler and dune buggy for each family member.

 

As far as DCA, you're preaching to the chior. I maximize my 401k plan (10%), fully fund the wife and my IRA's and DCA into Mutuals. Not to mention that I'm pulling a pension for the USMc and maxxed out the allowable investment in the thrift Savings Plan when it became available to the military. I'm sitting just fine. BTW, my wife's 401k from her past employment could damn near support both of us (she's a 1099 employee now). I presently have three months cash for emergency in my regular savings and we had a recent windfall from a family member that we have tied up in CD's. The wife and I both work and let's just say that I didn't get much 'free' money from Uncle Sam. So, there's my portfolio for you. Oh and by the way, we have a trust set up for the kids etc.

 

So there is no "crawling back to the market" for me Chef. I sold a truck and made ~$10k and used it to fund my hedge. Laugh if you will, but I find it a sound and diverse investment considering the other things I'm doing. I don't understand why you find that so funny, but laugh away.

 

Have you considered that I may have placed a 'winning' bet?

 

BTW, you live in So. Cal...are you prepared for natural disasters or are you like the rest of the sheep who have no plan? I'm not trying to be a smartazz as you seem like a smart, reasonable person but merely asking.

[Fastback]

Yeah that was their take. The plan was that if the government was going to do a massive bail-out, then the logical next step would be for the government to demolish the home to put supply/demand into equilibrium. But you can imagine the pitfalls in that scheme.

 

But you are right, everyone is waiting for someone to blink first. I honestly think that with IndyMac's collapse banks will be even more proactive to dump, while equity investors will recognize that it's still better to get diluted by 50% than to lose the entire 100%. Will be an interesting end of summer.

 

I remember you buddy Drane opining about that awhile back...just sayin'

[ExiledInIllinois]

How many people have gone into foreclosure? I know there is hard data out there but I bet if we asked eveyone here who has gone into foreclosure raise their hand, not too many would go up.

 

You think people will be honest on the board... Don't you think there would be a sense of embarrassment... What I am saying, would people really be honest and actually raise their hand?

 

And why would the working stiffs be here during the middle of the day?

[Chilly]

You think people will be honest on the board... Don't you think there would be a sense of embarrassment... What I am saying, would people really be honest and actually raise their hand?

 

And why would the working stiffs be here during the middle of the day?

 

Because we can multitask and have jobs where we can use the interwebs?

[GG]

I remember you buddy Drane opining about that awhile back...just sayin'

 

To me there's a difference in saying that a hard rain's a gonna fall vs the sky is falling.

[SD Jarhead]

To me there's a difference in saying that a hard rain's a gonna fall vs the sky is falling.

 

I understand your point, but he did predict something like this was going to happen when The Fed was still saying the economy was growing.

[GG]

I understand your point, but he did predict something like this was going to happen when The Fed was still saying the economy was growing.

 

The two are distinctly separate. The economy is still growing now, but it doesn't mean that the financial players aren't in shambles. That's the joke, there are still sectors of the economy that are booming despite the gloom on Wall Street. That didn't happen during the Great Depression.

[Chef Jim]

Actually I have two people in my family (wifes side) who recently lost homes to foreclosure. Both were here in So. California. My wifes sister went through a divorce that was really ugly and they screwed around too long fighting over this and that and they couldn't sell it so they let it go. My wifes brother who lives in Corona recently lost his house. He makes a good living at Disney and his wife works for AT&T. They make a good living together, but are complete idiots financially. Nice people, but not the sharpest tools in the shed financially. Have you been through the IE at all lately? The place is a ghost town. It's REALLY bad there. But again, nobody forced those people to take 2nd's out on their house and spend it on a toyhauler and dune buggy for each family member.

 

As far as DCA, you're preaching to the chior. I maximize my 401k plan (10%), fully fund the wife and my IRA's and DCA into Mutuals. Not to mention that I'm pulling a pension for the USMc and maxxed out the allowable investment in the thrift Savings Plan when it became available to the military. I'm sitting just fine. BTW, my wife's 401k from her past employment could damn near support both of us (she's a 1099 employee now). I presently have three months cash for emergency in my regular savings and we had a recent windfall from a family member that we have tied up in CD's. The wife and I both work and let's just say that I didn't get much 'free' money from Uncle Sam. So, there's my portfolio for you. Oh and by the way, we have a trust set up for the kids etc.

 

So there is no "crawling back to the market" for me Chef. I sold a truck and made ~$10k and used it to fund my hedge. Laugh if you will, but I find it a sound and diverse investment considering the other things I'm doing. I don't understand why you find that so funny, but laugh away.

 

Have you considered that I may have placed a 'winning' bet?

 

BTW, you live in So. Cal...are you prepared for natural disasters or are you like the rest of the sheep who have no plan? I'm not trying to be a smartazz as you seem like a smart, reasonable person but merely asking.

 

The reason why I laugh is that if you feel that silver is a good investment why were you not always there? I believe in a good diversified portfolio covering all the asset classes (that includes commodities) and periodic rebalancing. When everyone is thinking something is a good investment bet it's usually too late. You should have already had a small part of your portfolio in that asset class. Think tech in 2000, real estate in 2007. Why do you think the IE in a ghost town? It's because everyone and their grandmother felt they needed to be in the real estate rental market. As far as placing your winning bet, most people lose that bet chasing returns...but I wish you good luck. I never want to see people suffer financially, it is my business after all.

[bills_fan]

I understand your point, but he did predict something like this was going to happen when The Fed was still saying the economy was growing.

 

 

Don't ever rely on the "official" government numbers...stats are far too easy to manipulate.

 

Take a look at the monthly employment numbers and reasearch the entirely fictitious birth/death rate used to fluff those numbers.

 

As far as the Fed, they lost all credibility when they stopped reporting the M3 number.

[SD Jarhead]

Don't ever rely on the "official" government numbers...stats are far too easy to manipulate.

 

Take a look at the monthly employment numbers and reasearch the entirely fictitious birth/death rate used to fluff those numbers.

 

As far as the Fed, they lost all credibility when they stopped reporting the M3 number.

 

That statement alone is one that all should be concerned about. And it's also a reason one could point to an investment in metals as a wise choice (that's for you Chef).

[bills_fan]

That statement alone is one that all should be concerned about. And it's also a reason one could point to an investment in metals as a wise choice (that's for you Chef).

 

 

My pessimistic side (that is usually more realistic) tells me the Fed plans to hyperinflate us out of the housing crisis. Bernanke's helicopter drops of cash from his college professor days come home to roost.

 

EDIT: This is the best site I have found for trying to recreate M3 data. Of course, they are missing the Eurodollars piece, which was historically a small component of M3. Now...who knows?

 

Recreated M3

[Gavin in Va Beach]

I wouldn't call it a last gasp. That will come when they guarantee all the mortgages & house prices

 

But they are running out of reasonable non-inflationary measures to slow the slide down. There's only so much that the Fed can do, and people shouldn't be expecting the Fed to do much more, as doing more would be worse. Hopefully, people with good credit & ARMs are talking to their banks and trying to work out a deal before the rates step up. I'm hoping that banks with a boatload of ARMs and piss-poor borrowers have hired an army of negotiators to try to get the borrowers to agree to better terms. Unfortunately, there isn't a lot of data out there on the actual workouts yet. You get a lot of anecdotal evidence, but no one has come up with a plan as many people are still in denial and there's fear that many will try to game the system. How could you tell whether a borrower needs to get a new mortgage contract? If you give better terms to a guy with poor credit, why does the guy with spotless credit have to pay more? Until these thorny issues are solved, and people start buying homes again, the slide will continue.

 

One plan that I read which sounds draconian, but may go a long way is to take possession of the empty and partially built homes and demolish them. One year later, there's still too much supply.

 

Any plan that tries to prop up the overinflated price of housing does nothing but prolong the inevitable. Housing must fall back into realistic pricing in line with wages before the real estate market can truly hope to recover. Debt across the board is at all time highs (HELOC, credit card, etc) and I don't think the answer is higher prices, or propped up high prices, causing people to take on even more.

[GG]

Any plan that tries to prop up the overinflated price of housing does nothing but prolong the inevitable. Housing must fall back into realistic pricing in line with wages before the real estate market can truly hope to recover. Debt across the board is at all time highs (HELOC, credit card, etc) and I don't think the answer is higher prices, or propped up high prices, causing people to take on even more.

 

If you subscribe to the pendulum swing theory of life, the risk is that before the pendulum returns to equilibrium, it will swing on the opposite side of the boom times. The Fed & Treasury are trying to prevent the downside swing and restore the equilibrium point sooner. After a year of mortgage mess, the housing/mortgage ratios are inching closer to historic norms. The issue is not just house prices, but confidence that if you want to buy a house, you will be able to get a loan.

[Wacka]

The problem is that people who wanted a home, but had no business getting a loan , got them. For pete's sake, they were giving loans to illegal aliens.

[Gavin in Va Beach]

Don't ever rely on the "official" government numbers...stats are far too easy to manipulate.

 

Take a look at the monthly employment numbers and reasearch the entirely fictitious birth/death rate used to fluff those numbers.

 

As far as the Fed, they lost all credibility when they stopped reporting the M3 number.

 

Thanks for that tidbit about the M3 number. I wanted to find out more about that and found information on it on the wiki page dealing with money supply. For others who might be interested (and our friend Ron Paul makes an entrance at the end. I may write this guy in on my ballot in November after all)...

 

http://en.wikipedia.org/wiki/Money_supply

 

The Federal Reserve previously published data on three monetary aggregates, but now it only publishes data on 2 of them. The first, M1, is made up of types of money commonly used for payment, basically currency (M0) and checking deposits. The second, M2, includes M1 plus balances that generally are similar to transaction accounts and that, for the most part, can be converted fairly readily to M1 with little or no loss of principal. The M2 measure is thought to be held primarily by households. The third aggregate, M3, which is no longer published, included M2 plus certain accounts that are held by entities other than individuals and are issued by banks and thrift institutions to augment M2-type balances in meeting credit demands; it also includes balances in money market mutual funds held by institutional investors. The aggregates have had different roles in monetary policy as their reliability as guides has changed. The following details their principal components[14]:

 

M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.

M1: M0 - those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).

M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).

M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.

 

The Federal Reserve ceased publishing M3 statistics in March 2006, claiming that M3 did not appear to convey additional information about economic activity compared to M2, had not been used in determining economic policy, and that the costs to collect M3 data outweighed the benefits. Some politicians have spoken out against the Federal Reserve's decision to cease publishing M3 statistics and have urged the U.S. Congress to take steps requiring the Federal Reserve to do so. Congressman Ron Paul claimed that "M3 is the best description of how quickly the Fed is creating new money and credit. Common sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation."[15]. Some of the data used to calculate M3 are still collected and published on a regular basis.[16] Current alternate sources of M3 data are available from the private sector.[17]

[Endzone Animal]

My pessimistic side (that is usually more realistic) tells me the Fed plans to hyperinflate us out of the housing crisis.

Agreed. The treasury essentially printing money (extending credit) to bail out the secondary market will make the dollar virtually worthless, and cause prices to skyrocket. We're really in for it...