Investment strategy change.

http://financialrealityrevisited.blogspot.com/2009/03/new-era-of-investing.html

Suzie Orman Says Bush should give all money to citizens

Suzie has lost her marbles evidently. I can't believe she would say something this moronic. Go ahead and be a liberal as you want to be and go ahead and support Obama all you want but please refrain from adding more delusional commentary to the public discourse. Congress has the monopoly on that already. Obama and his Administration running a close second.

congress is fleecing America

The banks have been blackmailing the congress since september 2008. I can't believe how little courage congress has shown in dealing with the bankers. The have just rolled over and caved before the election out of fear and lack of fortitude. Congress is the biggest bunch of reactionary fearful criminals ever assembled. Now they are are going to over pay the banks for their toxic assets because the banks will pout and whine and cry if we make them sell to the market. I agree 100 percent that the banks will continue to blackmail congress at the expense of the taxpayer. I can't believe what I am seeing as our representatives who know next to nothing about economics are now under a president who knows less than next to nothing about economics and we are being driven into deeper into a system that is psuedo capitalism that is removing any sense of free market from the economy. It is a sad state of affairs. http://financialrealityrevisited.blogspot.com

Stewart tackles Cramer

I think Jon Stewart is a day late and a dollar short. I think Cramer is a typical television show guru and typical stock picker. The market is more about law of percentages than it is about stock picking. The market operates in such a way that most people don't know the direction of stocks. They buy stocks with stop loss orders or put protection. The oil they sell on TV is to try and fool people into believing that these “guru’s” have some secret that is written in their book. It is the same reason people are willing to hand their entire fortunes over to a mutual fund manager and hope they get 8% return without having to figure out how the market really works. Picking a well known figure to tear down is more of a publicity stunt than some type of constructive “comedy.”

An interesting side note is that even a lot of the people who seemed to have called the meltdown still really missed the extent of the down turn. Many were all in on emerging markets while bashing the US and the dollar. The decoupling theory may have gotten put to bed at least for a while.

The bear market is extremely difficult to trade and the entire financial system of the United States is predicated on the stock market going up. There is so much riding on the market that we can not survive any sustained bear market. All the 401 k plans, all the mutual funds, all the pension plans, and college savings plans through the state virtually put our country at the mercy of the market. CNBC and Cramer missed the meltdown as did a majority of people. However, I see no point to J Stew's rant on Cramer and CNBC. Is it that Stewart has been so busy the past 2 year that he missed the entire implosion and now that he can't blame it on "his" president, it was time to go on the war path? Speaking of disingenuous bye the way, Stewart seems to have that market cornered.

banks are looking crafty

It amazes me that this bailout of the banking system continues and the administration allows for CEO such from Citi and BOA to give irresponsible statement to the public regarding how profitable they have been during the first quarter. This is complete manipulation and it is how we got into the mess in the first place. People wrongly assumed that banks were being honest about their number and they bought the story. It appears that we are all buying it again as they pass out kool aid for wiling drinkers. The banks have soaked the tax payer for trillions of dollars and would have been bankrupt a few weeks ago if they had not gotten massive injections of capital from the government. In a miraculous turnaround a few weeks later they have become profitable companies?

Jon Stewart, Jim Cramer smackdown

I have to admit it was nice to see someone call Cramer to the carpet after his two years of delusional stock picking. The funniest part of the Stewart rant is that it is after Cramer and CNBC, along with other pundits and networks, have contributed greatly to the destruction of trillions of dollars of capital. I find it hard to believe people are not calling Stewart on his late arrival to the party. CNBC has promoted Cramer like he was the messiah for years. They believe that making disclosures for viewers to not take his advice gives them the right to put such a character on national television. If Stewart and a few other reporters would have been on the offensive before the majority of people lost 50% or more of their 401 K accounts, it might have actually helped the situation. Now the vitriol anger just makes for great you tube clips.

Citi is "back in black" or "swimming in red"

Citi has miraculously overcome the toxic asset problem and are making money this year already. I guess when you are not marking down your assets or just pretending they don't own them, it is easier to appear solvent. I don't know if people are buying the news or whether they have finally given in to the reality that the government is going to just keep giving the banks money when they need it. I thought today's rally felt like investors were just giving up on getting any real clarity from the administration and decided to get back in the market. ---that might just be my imagination-----The likely reason for the bull run was short covering. Once it was clear there was not going to be a reversal, like yesterday, stocks really started to fly. The shorts went on a covering frenzy. It will be interesting to see what happens tomorrow. It would be nice to see some more green on the screens again. The futures are higher already but hard to say how people will react.

Schumer full article

Schumer just said that there already has been earmark reform in congress. With so many delusional people in Washington and the spend o ramma congress we might see dow 1000 for crying out loud.

We have a banking disaster that is evidently over according to ken lewis and other banking execs..(crying for a reversion back to mark to model of course--load of crap by the way)The hubris of these bankers who seem to think that now that they can survive after having use of tax payer billions means they didn't really need it and that they shouldn't pay it back with a normal interest rate they charge to consumers. What a joke.

Look at the issues going on in Vegas with the previously cash cow casinos. When credit tightened, casinos were squeezed, burned through available cash, economy weakened leading to revenue shortages, and defaults began to rise. I know everyone thinks cash is the only way but normal credit is essential for growth of any kind. If we want to live in a pre order society where we have to specify what we want months ahead of time so it can be made at the factory, using our down payment, then shipped to the dealer for us to pay the balance in cash (car dealers for example) that is fine with me. However, our entire economy system and principals with in this systems is based on expansion and money flow. If corporation’s growth is greatly reduced, investment, as we are seeing now will be exponentially reduced and we will be hard pressed to find investors. I don't care how we proceed. All cash is fine but it means all cash for the banks too. If we take the hits on our investments and if we are to hold the losses of our real estate then so must the banks.

I don't see how you can say that contract law is paramount in our society when the corporations that are writing those contracts are belly up if not for the tax payer. You can argue all you want about personal responsibility and dead beat this and dead beat that but the only dead beats are the banks and bankers. These loans are all collateralized and that means house for money. The option of house in lieu of paying the money is one that the bank willing uses. The fact that they allowed themselves (and caused the collapse of the world economy) to be put underwater by a small percentage of defaulted loans is an issue with their business model not an issue about people buying what they couldn’t afford. It is the banks job and that of regulators to see that defaults do not kill the bank. The cycle started because banks created a system that could not tolerate any defaults or even the slightest up tick in default rates. Now people who have done nothing wrong and only wished for their home to hold its value are losing years of equity payments. (cash used to pay down principal as prices fall below the 2003 or older property values). These people are suffering because of the banks and regulators. They both failed miserable and now we bail them out while with taxpayer money to prolong the crisis and to push values even lower in stocks and real estate.

We then get "change" in the white house and they keep on spending. The ridiculous PR stunt of helping home owners with out reducing principal will waste another 75 million, which most will be used to administrate the program, because it is likely that any of the people who could have used the help are now will over the 105% LTV. You can yell about free markets and I am with you all the way but when the lenders go on the public dollar then things have to be changed for those on the other side of the trade. IE consumers holding notes from insolvent banks. I will not agree with you that when these notes have gone down to pennies on the dollar, that they can be sold with the buying party able to sting the borrower for full value. The banks have to base their paper on collateral value and when they "guess" wrong you can't let them walk away with billions in tarp funds and the rights to full future value of the note. It might not be fair to everyone but fairness is out the window when banks come crying for handout. (yes don't forget the perfect timing by the banks either.....right before the election when they knew they could manipulate and stare down the cowardly congress......because they were all pandering for votes....{there were more flip flops in Washington than in middle of July on south beach}...congress blinked and they have been caving every time the banks cry economic disaster. I don't want a penny from the bank or reduction in my mortgage. But there are people who should be getting mortgage reductions and the banks should be paying for their poor business models and poor business decisions. If this happened we would be a lot closer to a free market than we are today.

Forbes on Mark to Market

Steve Forbes is just plain wrong when it comes to the issue of mark to market accounting. The reason the banks and insurers are in death spirals is because they took assets that have depreciated well beyond the original amount of a mortgage or policy. The reason mark to market account is hurting these companies has nothing to do with paper losses but more to do with what ensuring the companies have adequate reserves in case strong economic downturn. The reality is now being seen by everyone. The banks were horrible at forecasting real estate values have been overly involved in MBS and CDS markets. It doesn't matter if someone is paying or not on a loan that is 300,000 underwater because that particular loan is a powder keg waiting to blow. It is a toxic asset regardless of the payment history. If the collateral doesn't matter and we should do away with mark to market accounting my question is this: Why do banks take collateral at all then? If we are willing to not care whether the collateral is equal to that of the debt being serviced or if the collateral is worth 5o% less than the amount borrowed then banks could lend with out collateral. There is no reason to not mark to market unless you want to keep bad institutions alive. It is quite clear that banks have no business trying to make predictions on who will pay and who won't pay. Just look at current results and you have your perfect argument for mark to market accounting. The banks are over exposed and now they want to get a way with making mistakes. This is not about the homeowner or the few that have defaulted. It is about banks rolling the dice on real estate. How about if anyone who wants to sell their home gets to price it at a future value? A value that no ones knows is realistic or sensible but lets just do it because it will really hurt their financial position if they have to actually value the property at today's prices. This is what the banks want to do because some how they have convinced people that if they just hold out a little longer everything will be fine.

I have heard Steve Forbes comment on a lot of things over the years and he seems very knowledgeable. However, this idea is ridiculous and if congress suspends market to market our economy will be in even greater jeopardy.

Homeowners have decisions to make regarding property

I am all for free markets and personal responsibility and think there are people that have tried to game the system. However, the vast majority of homeowners are not losers. Mortgages are still being paid on time by well over 90% of the people in the country. The individual homeowner has been used as a whipping post in order to let the banks and brokers milk the system for 2 more years while try to keep people from realizing they have to make a very important financial decision with their real estate. When values were down 15% the case could be made that is it much more valuable to keep the home and your credit in tact rather than walk away. However, the story is not the same when people are 35-45% or more underwater. The home can become an albatross around someone’s neck and the financially prudent thing to do would be to walk away if something drastic isn’t done with the principal. I would imagine there are many bright, successful, hardworking winners out there that may have to make just such a decision if we continue to see falling prices. (Which is not out of the question if we keep letting the big banks yank the chain of government whenever they need capital)? Can any financial adviser actually look a homeowner straight in the eye and say although your home is 50% underwater, you will be paying mostly interest over the next 10 years with little principal reduction, your 20% down payment is wiped out, and the economy is crap, and the government seems set on bailing out big banks while housing prices tank, but all that being said, you should go right no paying your mortgage and hope your home goes up 150% in the next 10 years in order to get you back to even? I highly doubt anyone with integrity could tell their clients that this sounds like a good idea. Santelli says some great things on air but this wasn’t one of them.

Real Estate Was Not a Ponzi scheme

Cash is Cash really.....unless you hold all your wealth in gold bars in your basement then I guess you could say it was all phony.....what about the 401 k accounts and IRA accounts and mutual fund accounts?...that are now vapor....I guess you could say it was all phony and then say it will be all phony again in the future.....but then again we could go back to trading cold coins and pieces of sliver....the real estate market seemed to go up reasonably until a few years ago....there were many places that saw no appreciation for 10 or 12 years prior to 1997 or 1998 and even as late as 2001 property values were not really rising dramatically. It wasn’t until 2004 that we started to see the massive appreciation in real estate. There was no 25 year ponzi scheme as far as I could tell. The circumstances that led the fed to believe that they needed to stimulate the economy with low rates naturally added about 10 % to home prices just based on lower payments. It was a reasonable up tick to ensure that we would come out of a recession. The home ownership initiative that congress indorsed was another piece of the pie and began to put more stress on the system as the notoriously steady homeownership rates began to climb to all time highs. When congress decided that home ownership for over 70% of the population was to be good for the country, they took the economy to the edge. The tried and true theory that in general real estate would always appreciate or at very least never depreciate more that 5 or 10 % was soon to be put to the test.

2004 was the giant leap of prices in most cities. It was when a few areas saw well over 30% appreciation for one year. Las Vegas had a ridiculous number of 34% increase in housing values for the previous 12 moth period. I knew that between the fed, the real estate community, home builders and the local politicians they would soon have major issues. Even if they weren’t driving up real estate prices to unheard of levels, they were issuing far too many permits and becoming far to permissive on previous laws regarding the number of homes per acre. The streets were not large enough to accommodate the massive growth and as homes were being build virtually on top of each other. So even with out the recent credit meltdown Las Vegas was sacrificing quality of life for growth and tax dollar revenue. It was only a matter of time before prices would come back. The appraisals had gotten ridiculously high and unjustifiable, but the continued. I don’t care what anyone says but there was a conspiracy between home builders, appraisers, and mortgage brokers that systematically drove up the prices of new homes by thousands of dollars by selling homes in phases. These phases were just a scam and marketing ploy to ramp up demand and increase revenue. But think about the process for a minute. Phase one in April goes on sale for 200000 for example. By June phase 2 would follow. But the price might be 220000 or 240000. These home were exactly the same as the first batch that sold during phase one. How could it be possible to get a 240, 000 appraisal on the phase 2 a few months later? The answer: is that you can’t get a valid appraisal if all of the homes in phase one sold at the basically the same price.