black321 wrote: 
 Wise advice for the paranoid.

The primary enabler is this mess is Freddie and Fannie which are creatures of the Democratic Party (socialized housing).  I am an independent.

 hippiechick wrote: 

The new derivative vehicles.  They didn't exist until the late 70's and became widely used in the late 90's.  It is an incestuous web of relations with nothing but smoke and mirrors.  This is a much more foggy situation than anything before.   That said most of it centers around Wall Street broker houses and their partners.  I have no stake in that myself.  I say no bail outs and let those investors figure it out for themselves.

 p4jkafla wrote: 

 earthbased wrote: 
Yep. Wall street has to take the rap for this one. This is pure greed on their part. A lot of folks got in over their head b/c they assumed debt that lenders said was ok. I put some of the blame on the borrowers but the banks visited this plague on our entire house.

Next prez will have to deal with this mess and it might mean putting up that wall that used to insulate the banking system.

 black321 wrote: 
We have never been in this situation before.  All you can say is expect nothing based on how other manias happened.  Wall Street is still hiding bad stuff in the balance sheet via the shell game crap.  So if you are at least 30 years from retirement, stay aggressive in your retirement account (index stock funds).  But if your are nearing retirement, you should be very conservative (i.e. most in cash now and index fund of corporate bonds of industrial and consumer products sector) .  I was pretty positive on investing in the near term until the government and their cohorts on Wall Street laid this sh&t at our door.

 OmegaConcern wrote: 

Did you check your portfolio this morning?

Since first of July I have lost more in value than my contributions over that period.

Year to date -28%

There are some bargains and the market is recovering a bit this morning (Dow +172) but will it hold? Who is next for a Washington bailout?

 phineas wrote: 
There is so much B.S.   The defense now is the the CDO bonds and Credit Default Swaps are so complex they are hard to value.  OK, let's accept that as true.  Then why did the credit rating agencies (Standard and Poor, Moody's, Fitch) give theses derivative CDO bonds a AAA rating akin to a USA Treasury Bond?  You've been handled.  Sleep well.

OmegaConcern wrote:
Excellent idea.

Purchasing fund shares when share prices decline is called dollar cost averaging. You'll buy more shares (for the same capital investment that you make on a monthly basis) and overtime, you'll drive your average cost per share down.

Why is it we love to buy everything on sale but stocks?

Bernanke: 'We have lost control'

Economist recounts talk with Fed chairman

By Joshua Boak | Chicago Tribune reporter

September 17, 2008
NAPLES, Fla. - Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

The problem with that approach is that the value of the dollar plunged against foreign currencies, causing crude oil prices to skyrocket because oil is pegged to the dollar. It affected food prices, gasoline and family budgets.

"Ben, you are playing a very unique role in world economic history," Hale recalled telling Bernanke, an expert in the Great Depression. "You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices."

Bernanke could hypothetically limit inflation in commodities by raising interest rates, a policy that would restrict the flow of money but potentially lead to an avalanche of bank failures. At a financial conference in Florida on Tuesday, Hale, a Chicago-based economist for investment managers, hedge funds and multinational companies, paraphrased the Fed chairman's response.

"We have lost control," said Hale, quoting Bernanke. "We cannot stabilize the dollar. We cannot control commodity prices."

If efforts to stop a recession sent commodities to record levels through July, then the realization that a recession could be imminent has sunk oil prices by almost 40 percent during the past two months. For all the debate about foreign demand and financial speculators, one overlooked aspect of commodity prices is the health of the American economy.

With investment banks collapsing under the weight of subprime mortgages and the recent government bailout of Fannie Mae and Freddie Mac, commodity prices have retreated as the market predicts demand for oil will fall. October futures closed down $4.56 Tuesday, at $91.15 a barrel. And in response to inflationary concerns, the Federal Reserve responded Tuesday by holding the overnight federal funds rate steady at 2 percent as it has since April.

Hale believes the recessionary turns could keep oil below $100 a barrel, a consensus shared by many analysts who see oil staying in the $80 to $100 range.

But a problem for America is that much of the power it wields over oil prices is based on the strength of the dollar and economic demand. Russia, Venezuela, Ecuador and others have nationalized their reserves, stripping ownership rights away from private firms and complicating the global market for oil.

"While every other country is practicing natural resource nationalism, this country still pretends there is a free market in energy when, in fact, there is not," said John Hofmeister, the head of Citizens for Affordable Energy and the former president of Shell Oil Co.

If there is any relief for American consumers to come from global markets, it might emerge from China, a country that has successfully wrestled down inflation. China insulates its population from the market price of oil, a policy shared by Malaysia, Thailand and India.

As inflation in China dropped to 5 percent from 8 percent, the government has begun to pass actual commodity costs onto the public, said James McGregor, a consultant and author of the book "One Billion Customers: Lessons From the Front Lines of Doing Business in China."

"I think you're going to see them squeeze down subsidies," McGregor said. "They don't like them either because they distort the economy."

 OmegaConcern wrote: 
As they say at the blackjack table, "good luck."

In thinking about the current state of things and considering that my 401(k) is all mutuals (i.e. diversified and only moderately aggressive), I actually bumped my contribution a little today.  Buy low, sell high, right?  Here's to hoping I can actually afford to pack it in someday...

 black321 wrote: 
Yes, BoA's slate of acquisitions during the relative boom times of the last few years (until 2007) put it in the position to be able to take on even as large a risk as the Merrill purchase. It's going to come out of this as probably the strongest consumer-oriented bank in the US, with maybe Wells Fargo and Citi duking it out for a distant second (although there may be a foreign-incorporated bank that has more FDIC-insured assets, I'm too lazy to look at the full listing available through the FDIC)... while at the same time having the largest investment corporation, too. Not too shabby. As someone with both Bank of America deposit accounts and Banc of Americ Investments mutual funds, I'm unconcerned about their future. In the case of investments, I expect my current accounts will gain access to a wider range of funds.

 p4jkafla wrote: 

sorry, i was referring to checking/savings account alternatives, relative to the Citibank, Bank of America...  I agree, if your invested in stocks, stay invested for the long haul...but I'm still not sure now is the time to buy...too many more bad things still to come. 
p.s. I would consider buying those financial firms who look to emerge from all this...I'm just not sure who they are yet.  At the end of this tunnel will emerge fewer and stronger financial firms who will control more of the financial markets.  Bank of America is one firm taking a bet with its recent acquisitions, including Merril. 
p.s.s I am personally betting that Bank of America will be one of those financial firms to emerge.

thank goodness for the Socalist Republic of America, then again the abandoning of the glass stegal act in 99 allowed this meltdown to happen along with the totally irresponsible lending in the property market. it's going to get a lot worse before it gets better. certainly in the S.R.A. as it is almost totally bankrupt. Regulation is required (it always is) not less, deregulation does not create wealth  it creates anarchy. it s a great shame that the S.R.A. is now exporting financial turbulance (as opposed to the usual inflation) to the rest of the world. let's hope we ll get through this with our jobs, and that the grapes of wrath don't come back to haunt us again( soft commodities look stable)

to check the markets;    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1399335

 black321 wrote: 
And then consign yourself to losing real purchasing power. Inflation for August was 5.37%. Once you've locked up your CD money for two years, and received at best 4% for that period, you'll still have to pay taxes on that income. Assuming a 15% marginal rate (and not including state income taxes), you would be left with a real income of 3.4% to spend. In other words, inflation is outpacing the ability of your CD:s to provide for you.

So... once you've gotten sick of watching your purchasing power fail to keep up with inflation, you decide to get back into the stock market. You do this precisely because you've seen the stock prices go up, and you want to get in on it.

Just as you finally decide to get in, the stock market declines. You sell out because you've watched your investment lose value and you can't stand the up and down movement.

See any pattern here? Yo yo investing.

Not advice I would give anyone

FYI, if you are nervous about your money, you might want to consider your local credit union.  Most of these are open to the public now, and as far as I know, most have not invested or took part in the whole subprime mess.  It keeps your money in the local community and they also offer very competitive rates on CDs. 

NEW YORK — Wall Street plunged again in a crisis of confidence Wednesday as anxieties about the financial system still ran high after the government's bailout of insurer American International Group Inc. The Dow Jones industrial average dropped about 220 points, and investors seeking the safety of hard assets and government debt sent gold, oil and short-term Treasurys soaring.

The Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company after it lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has its tentacles in various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy. The ramifications of the world's largest insurer going under likely would have far surpassed the demise of Lehman.

"People are scared to death," said Bill Stone, chief investment strategist for PNC Wealth Management. "Who would have imagined that AIG would have gotten into this position?"

He said the fear gripping the markets reflects investors' concerns that AIG wasn't able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren't in trouble, and now the market isn't sure who can and can't be believed.

The two independent Wall Street investment banks left standing _ Goldman Sachs Group Inc. and Morgan Stanley _ remain under scrutiny, as does Washington Mutual Inc., the country's largest thrift bank. Morgan Stanley revealed its quarterly earnings early late Tuesday, posting a better-than-expected 7 percent slide in fiscal third-quarter profit. It insisted that it is surviving the credit crisis that has ravaged many of its peers.

Lehman filed for bankruptcy protection on Monday, and by late Tuesday had sold its North American investment banking and trading operations to Barclays, Britain's third-largest bank, for the bargain price of $250 million. Over the weekend, Merrill Lynch & Co., the world's largest brokerage, sold itself in a last-ditch effort to avoid failure to Bank of America Corp.

In midafternoon trading, the Dow fell 219.59, or 1.99 percent, to 10,839.43 after earlier being down nearly 400. After a nosedive Monday, the index is down more than 5 percent on the week, and has fallen more than 23 percent since reaching a record close of 14,164.53 on Oct. 9 last year.

Broader stock indicators also plunged. The Standard & Poor's 500 index dropped 32.21, or 2.65 percent, to 1,181.39, while the Nasdaq composite index fell 72.79, or 3.30 percent, to 2,135.11.

Fewer than 350 stocks rose on the New York Stock Exchange, while nearly 3,000 fell.

The stock market is likely to see heavy back-and-forth movement as traders continue to assess the flood of news that has poured in over the past several days.

On Monday, the Dow lost 504 points, the largest tumble since its drop following the September 2001 terror attacks. On Tuesday, it rose 141 points, after the Fed decided to leave interest rates unchanged.

Short-term Treasurys moved sharply higher as investors sought a safe place for at least the near future. Analysts reported heavy buying in T-bills, which range from three months to a year in maturies. But the yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.44 percent from 3.43 percent late Tuesday as longer-term debt fell.

The dollar was lower against other major currencies.

Commodities prices that have slumped in recent weeks amid growing signs of economic weakness, soared because of the appeal of hard assets.

Gold for December delivery shot up as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session; that was its largest one-day gain ever in dollar terms.

Crude oil that had also skidded lower amid a slowing economy rebounded $6.01 to $97.16 a barrel on the Nymex after the government reported a drop in domestic crude and gas inventories. Oil dropped by about $10 a barrel on Monday and Tuesday amid concerns that economic weakness will hurt demand.

"It's still uncertain ground we're treading. We just have to move on a daily basis," said Jack A. Ablin, chief investment officer at Harris Private Bank.

The government took other measures Tuesday to help alleviate the turmoil in the markets. The Treasury said it will start selling bonds for the Fed to aid it with its lending efforts, while the Securities and Exchange Commission said it will strictly prohibit naked short-selling starting Thursday.

Short-selling is when traders borrow shares of a stock they expect to fall and sell them _ if the stock does indeed fall, the traders buy the cheaper shares to cover the borrowed ones and profit from the difference. Naked short-selling occurs when sellers don't actually borrow the shares before selling them; it's a practice some say is partially responsible for the huge drop in the shares of investment banks like Lehman, Merrill Lynch and Bear Stearns Cos., which JPMorgan Chase & Co. bought earlier this year.

Among financial names getting hit, Goldman Sachs fell $22.15, or 16 percent, to $110.86 and Morgan Stanley fell $7.47, or 26 percent, to $21.23.

"People are afraid of the unknown and they don't know what's on the books of these companies," said Joe Saluzzi, co-head of equity trading at Themis Trading. "The first reaction in a situation like this is to sell."

Saluzzi noted that surging gold prices and other measures of investors jitters indicate that anxiety is building.

"There is a lot more fear today than there was on Monday and Tuesday," he said.

Indeed, the Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 12 percent Wednesday.

Saluzzi is somewhat optimistic that the nervousness could be nearing a crescendo, which could squeeze out more investors and then clear the way for a snapback rally.

But the woes of the financial sector could also exacerbate problems facing other parts of the economy, given that individuals and businesses rely on the nation's money centers.

The Commerce Department reported Wednesday that home construction fell by 6.2 percent in August to 895,000 units, the slowest pace since January 1991. Slumping demand for houses, sinking home prices and mortgage defaults have been the catalysts behind Wall Street's turmoil _ and the risky mortgage-backed assets held by the nation's banks are not apt to regain in value until the housing market turns around.

NYSE volume came to a heavy 1.32 billion shares.

Overseas, Japan's Nikkei stock average rose 1.2 percent after AIG's rescue, but Hong Kong's Hang Seng index lost 3.6 percent. Britain's FTSE 100 fell 2.25 percent, Germany's DAX index fell 1.75 percent, and France's CAC-40 fell 2.14 percent.

 p4jkafla wrote: 

No, in the post war period.  Most of the large declines were more isolated and more easily defined/valued (eg, the mexican loan crisis in the early 90s, S&L scandal).  As to the impact on corporate earnings, I dont think we've yet really felt the impact of the financial market meltdown on the manufacturers, retailers...For example, in retail we are just starting to see a sales impact and slight uptick in bankruptcies. The tightening credit is starting to play out while other factors are also coming to play.  For example, take the Lehman default...what of all the counterparties in the derivative transactions that they offset?  What happens to a grain producer, or consumer like Kraft who hedged their exposure, but now find their counterparty (Lehman) is unable to live up to their obligation (this could be a big issue in the airlines who hedge their jet fuel exposure).  My point is, the financial meltdown, fuel and commodity inflation...are just starting to really impact your bricks and mortar corporations (not to mention the banks are still are having trouble writing off all their losses).  The first line of defense is to squeeze inventory and working capital; next comes layoffs...and the dominoes keep falling. 

 black321 wrote: 
First, I think I agree with you about more bad news. The market, however, is a forward looking valuation entity, with prices driven by earnings expectations. Once its participants see, with relative certainty, that corporate earnings have begun to climb (or even just stopped falling), it will begin to positively value those companies again.

If I read your post correctly, are you arguing that systemic issues (such as a lax regulatory environment) weren't present in pre-war market declines?

 p4jkafla wrote: 

I'm just guessing there's more bad news than good news ahead in the next year or two.  In the past (post war period), the market jolts were mostly less systemic.  1 year on and we still dont understand what happened and/or how much damage there is.