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More subprime news.........oh boy

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More subprime news.........oh boy

Old 03-09-2008, 07:09 AM
  #1  
nat
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Default More subprime news.........oh boy

I think the investment bankers and Mr.Greenspan have screwed us all, we have the banks now melting down from results of thier own actions, and the fed throwing hundreds of billions at them to shore them up.

will this be painful for us regular "Joe Sixpacks"?


here is a link about the banks and another about the fed


Banks face "systemic margin call," $325 billion hit: JPM
Sat Mar 8, 2008 9:23am EST
By Walden Siew

NEW YORK (Reuters) - Wall Street banks are facing a "systemic margin call" that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.

JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group's mortgage fund also failed to meet $37 million in margin calls this week.

"A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages," according to the report co-authored by analyst Christopher Flanagan. "We would characterize this situation as a systemic margin call."

The credit crisis that began about a year ago will likely intensify after Friday's weak February U.S. employment report "that most definitely signals recession," JPMorgan said.

Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.

"The weak February employment report points to an economy in recession," JPMorgan said.

The JPMorgan report included a revised bleaker forecast for subprime-related home prices. The bank now sees prices falling 30 percent, from its prior 25 percent forecast. Those prices have declined 14 percent since mid-2006, JPMorgan said.

The U.S. jobs results also came after the Federal Reserve expanded the amount of its short-term auctions to $100 billion in total in the central bank's latest effort to ease credit concerns. Ongoing concerns about bond insurers, known as monolines, and their effort to save their top ratings also are weighing on market sentiment.










next


http://www.guardian.co.uk/business/2...conomics/print



Federal Reserve gives emergency help to Wall Street banks

Pure coincidence. That was the message from the Federal Reserve as it made the announcement that it was giving emergency help to Wall Street banks, just as dreadful employment numbers were announced.

If you believe that, as the saying goes, you will believe anything. The Fed knew about the fall in non-farm payrolls, knew what the reaction of the financial markets would be, and took pre-emptive action. The impact, though, was short-lived.

Wall Street has a touching faith in the omniscience and the omnipotence of the Fed, but it is not quite that gullible. So what is the explanation for the Fed's action?

There are three points to bear in mind. The first is that today's employment report is the clearest indication yet that the US economy is in recession, with the slump in the housing market spreading to other sectors.

The second is that the credit crunch has entered a new and potentially even more dangerous phase. Despite cuts in the Fed funds rates, interest rates paid by companies and individual borrowers have been rising as credit has become scarcer and, as a result, more expensive.

The Fed funds rate has been slashed from 5.25% last summer to 3% today — and will be cut again on March 19, but the fear is that the US central bank is, as Keynes once put it, pushing on a piece of string.

Finally, the Fed's apparent indifference to the current level of inflation in the US — the headline rate is well above 4% — has spooked investors in the foreign exchange markets. The dollar is in freefall, dropping to record lows against the euro and prompting a flight into the safe haven of gold.

This, of course, has added to the upward pressure on the cost of living and has made it more difficult for the Fed to come up with the sort of eye-catching cut in interest rates later this month that the markets were starting to price in.

In recent days, there had been speculation that Ben Bernanke, Fed chairman, might be persuaded to cut rates by 75 points later this month or even announce the second inter-meeting reduction in borrowing costs this year.

Today's decision to pump extra liquidity into the financial markets is a sign that this is not going to happen. Quite rightly, the Fed has taken the view that anything other than a half-point cut on March 19 would smack of panic and lead to a meltdown in the dollar.

In truth, though, that may still happen. The Fed would like us to think it is still in full control of events; the opposite is the case.
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Old 03-09-2008, 08:38 AM
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Default Re: More subprime news.........oh boy

One thing Ito consider is if it's smart to spread around bank and CD accounts (including accounts held inside IRAs) to different institutions to make sure that you don't exceed the FDIC insurance cap in any one of them.

http://www.fdic.gov/deposit/deposits...ed/basics.html

It's not very likely to be a problem, but since it doesn't cost anything to be safe, why not?

Tom O


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Old 03-09-2008, 08:43 AM
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nat
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Default Re: More subprime news.........oh boy

fdic can't cover what is coming
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Old 03-09-2008, 08:57 AM
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Default Re: More subprime news.........oh boy

nat, do you think one of the major banks will go tits up? If so which one?
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Old 03-09-2008, 09:02 AM
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Default Re: More subprime news.........oh boy

citibank
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Old 03-09-2008, 09:06 AM
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nat
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Default Re: More subprime news.........oh boy

From what i hear, more than one is going tits up, the fed is already gearing up thier staff to cover the bank failures

I wonder how many online brokerages are exposed also?


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Old 03-09-2008, 09:24 AM
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Default Re: More subprime news.........oh boy

I think we're also going to have a crash in the stock market in the near future. Not to be gloom and doom but I'm looking at exiting maybe 65% and staying in cash for a couple of months or so.
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Old 03-09-2008, 10:25 AM
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nat
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Default Re: More subprime news.........oh boy

joeyd - 3/9/2008 11:24 AM

I think we're also going to have a crash in the stock market in the near future. Not to be gloom and doom but I'm looking at exiting maybe 65% and staying in cash for a couple of months or so.


the value of cash is going down


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Old 03-09-2008, 10:41 AM
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Default Re: More subprime news.........oh boy

Nat,
Not as fast as a good correction in the market, I think the writing is on the wall right in front of us. I'm thinking for 3-6 months in cash and then get back in. I know it's difficult to time the market but this looks gloomy in my opinion.
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Old 03-09-2008, 10:50 AM
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Default Re: More subprime news.........oh boy

the dollar is getting destroyed
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Old 03-09-2008, 12:55 PM
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Default Re: More subprime news.........oh boy

nat - 3/9/2008 10:25 AM

joeyd - 3/9/2008 11:24 AM

I think we're also going to have a crash in the stock market in the near future. Not to be gloom and doom but I'm looking at exiting maybe 65% and staying in cash for a couple of months or so.


the value of cash is going down



I remember some time back you were pushing gold, I wished I had listened.....
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Old 03-09-2008, 01:53 PM
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Default Re: More subprime news.........oh boy

re. the FDIC thing....

http://www.fdic.gov/news/news/press/2008/pr08021.html

Press Releases
FDIC Approves the Assumption of the Insured Deposits of Hume Bank, Hume, Missouri

Hume Bank, Hume, Missouri, was closed today by the Commissioner of Missouri's Division of Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect depositors, the FDIC Board of Directors approved the assumption of Hume Bank's insured deposits by Security Bank, Rich Hill, Missouri.....

....At the time of closing, Hume Bank had approximately $1.1 million in 33 deposit accounts that exceeded the federal deposit insurance limit. These customers will have immediate access to their insured deposits, and they will become creditors of the receivership for the amount of their uninsured funds....

Now maybe the FDIC can cover a meltdown, maybe it can't (they can, in fact, even if they have to run the printing presses day and night and drop the dollar to par with the yen) , but I know I would sure rather have cash than become one of the "creditors of the receivership for the amount of their uninsured funds".

While I've never been a gold bug, I read recently that an ounce of gold would have bought a good men's suit in 1776, 1865, 1917, 1968 and today. That's one way to maintain purchasing power.

Tom O
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Old 03-09-2008, 04:26 PM
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Default Re: More subprime news.........oh boy

toleary - 3/9/2008 4:53 PM

While I've never been a gold bug, I read recently that an ounce of gold would have bought a good men's suit in 1776, 1865, 1917, 1968 and today. That's one way to maintain purchasing power.

Tom O
I don't need to buy a new suit, i just want some groceries and gasoline.

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Old 03-09-2008, 07:04 PM
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Default RE: More subprime news.........oh boy

OMG....some banks will fail.......does that mean our lives are over? Hell no. The economy, political system and our neighbors need a nice big douching. Citi does not deserve to be held together as a single company. Sell off the divisions to better operators, tell the stockholders and bond holders they made a mistake and their investments may be worthless. Boo friggin hoo.

Capitalism only works if the winners and failures are rewarded or penalized for their decisions. We will be a better economic system the sooner that realization takes place.
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Old 03-09-2008, 08:07 PM
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Default Re: More subprime news.........oh boy

"Capitalism only works if the winners and failures are rewarded or penalized for their decisions. We will be a better economic system the sooner that realization takes place."

DING DING DING! Let the "banks" (most of the banks that are in the deepest trouble don't do retail banking anymore) that helped create this mess figure it out on their own. Which means many people lose their jobs, unfortunately probably not the ones who deserve to. The Fed should not cut rates any further. Equity markets must be put on the back burner for the moment. Fed needs to concentrate on curbing inflation. The rate cuts *might* help the Dow/NASDAQ (last one didn't) but they are also stoking the inflation fire, which is hurting your average American who has a performing mortgage, car loan, low credit card balances, etc. Rate cuts are hurting the people who don't deserve it, and that's going to drag the recession on that much longer (not going to touch the current price of a barrel of light sweet crude, whole 'nother can of worms there). The people who took out ARMS and bought properties when they had no chance of keeping up with the payments, the bankers who encouraged the mortgage brokers to push these types of loans on these people, the mortgage brokers themselves......no bailout programs. You created this mess, you deal with the cleanup.

BTW, I just bought a place, and several mortage brokers I spoke with pre-approved me for loans up to $200K more that what I can realistically afford. THEY'RE STILL AT IT. Un-effing-believable.
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Old 03-09-2008, 08:31 PM
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Default RE: More subprime news.........oh boy

I don't agree with most gov't bailouts, handouts or subsidies. Although I would like to see some sort of tax breaks for corporations who try to keep jobs in the states. But I do think that big business just cannot seem to self-regulate. Its as though they need the federal gov't to babysit. I know that goes against the conservatives but time and time again, they manage to screw things up. I don't know, maybe the gov't shouldn't babysit and just let the chips fall where they may. It just seems like a lot of innocent people usually bear the brunt over their misdeeds and mismanagement and the responsible parties go on about their merry way and sometimes even get rewarded for their failures.
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