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OT - Looked up "argumentative" in the dictionary...

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  • #46
    Originally posted by aviemoron
    It was in the US but the ripples ran back to just across the road from here.
    Close, but you have it backwards......

    The ripples were HERE in the US, really.

    There is a lot more investment capital among the super-rich, and it was all looking for an outlet that could make money. Twice as much money as 10 years ago, much more than the productive output of the entire world.

    So.........

    What was the hot market? Ah, yes, US mortgages. The "mortgage-backed security".

    And what was that?

    First there is a sort of "bundling" of many mortgages into a profitable item, paying (theoretically) a good dividend. Shares of that income potential are then sold as the "security" which, obviously, is "mortgage-backed" since that is where the income is from.

    So, There were LOTS of rich europeans and asians etc looking for investment, and only so many mortgages in the US........ (is this sounding familiar yet?)

    So, what to do? The price of these securities was rising due to demand, so many acted to supply this demand from foreign investment for the securities. They issued MORE mortgages, and duly bundled and sold shares, etc.

    But, how did they GET these mortgages? Well, that was easy.........they issued a mortgage to anyone who wanted one, and was essentially willing to lie about their income to provide at least a specious basis for issuance. Of course LOTS of perfectly honest people got hooked into mortgages they should not have qualified for...... in many cases because the contracts were in dense legalese, and did NOT reflect the explanations given to them.

    The figuring was that money could be made if as many as 12% of the mortgages (about 1 in 8) went bad.

    Trouble is, 25% went bad...... so the house of cards collapsed. The worst hit are the folks who get turfed out of "their" houses.......

    This is why I say the ripples were IN the US, NOT outside..... The basic huge demand drove the "creation" (with in many cases a good dose of deception, to be sure) of investment vehicles. And this demand was NOT from within the US......

    One could say that the foreign investors basically got what they should have expected, and the people who really got the shaft were the ones who got snookered into bad mortgages right here in the US. THEY didn't do anything but sign on the line

    Now, that money has moved onwards........ The NEW "HOT INVESTMENT" is commodities..... Yep, the biggies..... OIL and FOOD.

    Normally, demand is curbed by price. When it rises too far, demand falls off. I hear about new drivers in India and china, which is true. But they are not rich enough to buy $15 gas in quantity...... nor $200 oil. There has to be another reason why oil jumps the way it has.

    And there is...... Investments in commodity futures. Mind, I am not claiming any "evil conspiracy"..... more like a "lemming behavior". But, that money that lost out in mortgages is still demanding investment vehicles, and now commodities is "it".

    The money is COMPETING to "get in" and the run-up of pricing has been in a considerable part due to "out-bidding" each other to get in. naturally there are indeed "organic" drivers for price rises, but from 30% to 50% of the rises have been sparked by speculators engaged in "competitive bidding", along with added fallout in driving down the dollar, etc.

    obviously it can't go on. There is a limit and it will hit when demand drops enough that some are left "holding the bag" on high priced futures that they have to liquidate lower. Then, the lemmings will drop out as fast as they went in, and reason will probably return, at least to that market.

    There isn't a lot of different investments left to bid on (or bid up), and the whole system of capitalization and inevitable growth may be in for a bit of a shock............. Eventually someone must pay, but what if nobody does?

    BTW, a number of countries which have subsidized fuel for citizens are stopping that. The effect will be to make fuel demand more in accord with costs, which almost has to be an improvement, since a class of fuel users who were not responsible to pay for it will now have to pay, and will lower usage.

    SUVs are not ONLY in the US, they tend to be very popular in areas with subsidized fuel..........................
    Last edited by J Tiers; 06-03-2008, 07:59 PM.
    1601

    Keep eye on ball.
    Hashim Khan

    Comment


    • #47
      Argumentative

      Hi Jerry,
      Thank you for adding your bit. I will not argue because there was a lot of money about but its real origins are unclear( to me)
      What is clear is rampant inflation. What is also clear is what we are running into.How we get out of it- isn't. Personally, I am more than OK and I haven't needed to work for the last 25 years or so.

      What is really bugging me is just how long these forums are going to last because they are indicators of what is much , much larger and distressing outside these once 'hallowed halls.'

      It's the old men dreaming dreams and having visions syndrome.
      Sorry, old friend

      Norm

      Comment


      • #48
        The real "doomsday scenario" financially is that you will be just as poor as anyone else, because investments will be utterly worthless, and land must be actually occupied to be held...

        At that point, most people will be in very sad shape.

        I would speculate that the people on these forums will be better off.

        Either they live in more remote areas, with attendant advantages (and disadvantages, due to roving outlaws), OR and more importantly, we are the folks who are most likely to be able to FIX THINGS, and hence we may be in demand, or at least able to trade un-stealable capabilities for sustenance.

        You can steal stuff, but abilities can only be destroyed or enslaved, never stolen.
        1601

        Keep eye on ball.
        Hashim Khan

        Comment


        • #49
          OT-Argumentative

          Jerry,
          I actually lived not only through the poverty of the 30's but the privations of 6 years of total war starvation and the aftermath.

          Nobody can fling anything at us that we have not experienced before.

          It is as simple or as complicated as that. What happened at 11AM(GMT)Sunday 3rd September 1939 prepared us for anything.

          Norm

          Comment


          • #50
            Originally posted by aviemoron
            At Christmas, the market went arse over tit with loans which were not going to be paid back. It was in the US but the ripples ran back to just across the road from here.
            More than you may realize! The multi-national mortgage companies that were issuing bad loans (Bank of America, Citigroup, Countrywide Financial, JPMorgan Chase, Washington Mutual and Wells Fargo) were re-packaging the mortages as "mortgage-backed securities" that were sold on Wall Street, and bought-up by mutual fund managers.

            So when the sub-prime lenders started defaulting on the mortgages, the mortgage-backed securities washed-out, and a bunch of investment banks world-wide went bankrupt, including Bear-Stearns (who was bailed-out at the 11th hour by the Federal Reserve, which is completely unheard of...)
            "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

            Comment


            • #51
              Argumentative

              Robert,
              Of course, I know. Do you honestly think that I am always playing the clown?

              Must tell you about the fabricated Stent!

              Norm

              Comment


              • #52
                Originally posted by aviemoron
                Of course, I know. Do you honestly think that I am always playing the clown?
                Sorry Norm, I didn't know about the mortgage-backed securities being re-sold on Wall Street until the Economist article about the Bear Stearns debacle. There's also another crisis in the insurance industry -- apparently these idiots were issuing multi-billion dollar financial insurance policies on the mortgage-backed securities, and so now the insurance companies are asking for $13 Billion in Federal relief.

                All these assholes play golf together, so my layman's synopsis of the crisis is that some shyster in Countrywide comes up with a scam to create large numbers of bad loans to high-risk borrowers, then they package them in chunks and re-sell them to their buddies on Wall-Street, who then take out a billion dollar insurance policies on them.

                The CEO's of all three companies (the mortgage company, the investment bank, and the insurance underwriter) make hundreds of millions of dollars on the annual bonuses, and when the pyramid scheme collapses, they quietly step down and take their automatic severance bonus.

                These guys should be in Federal, Pound Me in the $# prison...

                Must tell you about the fabricated Stent!
                I'd love to see that! Is is the Brooks version, like Gagetbuilder made? Or did you use bar stock?
                Last edited by lazlo; 06-04-2008, 12:29 PM.
                "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                Comment


                • #53
                  Argumentative

                  Normal Tactics- It's called 'pi55ing in the same pot'
                  The Stent-- I bought it for £150 and it turned out to have been fabricated out of mild steel sections-- and is bootifooooooool!

                  Recall my comments way back when

                  Cheers

                  N

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