i'd love for someone in the financial industry to drop some science on what is going on.
my understanding is that the sub-prime mortgages that were being dealt out like crazy are finally catching up with the banks. people cannot afford to pay their rising mortgage payments and are defaulting. homes are not being resold for what the banks had anticipated. banks are losing money. hedge funds are getting creamed because the lenders who bought up all this subprime debt are not getting the returns they expected with so many defaults. there have been several hedge funds that got wiped out completely over the past few weeks. other investors are scared off by the housing/mortgage crash as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
someone fill in the blanks. i'd really like to know what is causing the market to take such a nose dive and what needs to happen for it to stop crashing.
thank george bush for the THREE TRILLION DOLLAR DEBT TO CHINA this KUNT has borrowed more $$$$$ THAN ANY sitting president fuck him and all of his BRAINLESS SUPPORTERS the economy had a SURPLUS of cash under Clinton now we are trapped in an endless unwinnable war and endless mounting debt this is the same guy that wanted to put what little of the failing gutted social security program that is left into the stock market great going asswipe think you'll live to see your social security benefits?.....think again
i'd love for someone in the financial industry to drop some science on what is going on.
my understanding is that the sub-prime mortgages that were being dealt out like crazy are finally catching up with the banks. people cannot afford to pay their rising mortgage payments and are defaulting. homes are not being resold for what the banks had anticipated. banks are losing money. hedge funds are getting creamed because the lenders who bought up all this subprime debt are not getting the returns they expected with so many defaults. there have been several hedge funds that got wiped out completely over the past few weeks. other investors are scared off by the housing/mortgage crash as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
someone fill in the blanks. i'd really like to know what is causing the market to take such a nose dive and what needs to happen for it to stop crashing.
Do you know that more people nowadays aren't worried about getting a home they're more worried about how they're going to kept their home. Shit is looking real bad. Atlanta was or still is on the top list when it comes to foreclosers.
i'd love for someone in the financial industry to drop some science on what is going on.
my understanding is that the sub-prime mortgages that were being dealt out like crazy are finally catching up with the banks. people cannot afford to pay their rising mortgage payments and are defaulting. homes are not being resold for what the banks had anticipated. banks are losing money. hedge funds are getting creamed because the lenders who bought up all this subprime debt are not getting the returns they expected with so many defaults. there have been several hedge funds that got wiped out completely over the past few weeks. other investors are scared off by the housing/mortgage crash as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
someone fill in the blanks. i'd really like to know what is causing the market to take such a nose dive and what needs to happen for it to stop crashing.
You are correct, subprime mortgage defaults are rising, and it has been the primary force behind the recent downturn. The reason American mortage defaults affect markets all over the globe because most of these mortgages have been securitized: the banks responsible for the original loan have sold them to investment banks, which bundle together the payments and resell the bundles as mortgage-backed securities to hedge funds and institutional investors worldwide. When the payments stop coming in due to defaults, the investment banks are unable to pay their obligations to their investors, and suffer huge losses a la Bear Stearns. Once the cash stops flowing, the overnight rates that banks charge each other for short term loans shoots up, and then liquidity disappears. The major central banks intervened last week, pumping in more money to ease liquidity fears and stabilize credit markets.
If you hold stock, now is not a good time to sell. Markets are cyclical, and overall the U.S. economy looks decent. Inflation is low, and other sectors such as manufacturing and exports are strong. When you buy stock, it is important to think long term, and I mean at least 10 years. Over 50% of active money managers fail to beat the market BEFORE fees in any given year. Taking a long term, diversified approach is your best bet if you want to insulate yourself from excessive risk. I know a few other dudes were talking about index funds and no-load mutual funds with minimal fees in another thread, which is good advice. Unless you have unique information or good luck or are a serious professional, attempting to play the market will almost always fail in the long run.
As for China dumping U.S. bonds, that won???t happen anytime soon. A plunging dollar would make Chinese exports a whole lot more expensive, and their economy is heavily dependent on Americans buying Chinese goods. China is also hosting the Olympics next year, and is looking to improve their stature in the international community. Dumping government bonds would not be a good look for them.
If you hold stock, now is not a good time to sell. Markets are cyclical, and overall the U.S. economy looks decent. Inflation is low, and other sectors such as manufacturing and exports are strong. When you buy stock, it is important to think long term, and I mean at least 10 years. Over 50% of active money managers fail to beat the market BEFORE fees in any given year. Taking a long term, diversified approach is your best bet if you want to insulate yourself from excessive risk. I know a few other dudes were talking about index funds and no-load mutual funds with minimal fees in another thread, which is good advice. Unless you have unique information or good luck or are a serious professional, attempting to play the market will almost always fail in the long run.
I'm in the index fund camp. This is just like the investing and budgeting stuff that was discussed here last week. I'm invested in Vanguard index funds and they've got some good commentary to chew on... I've highlighted some key points.
Putting market volatility in perspective Recent volatility in stock prices has been a hot topic for market analysts, and is likely to remain so for at least a few days. It's reasonable to expect that the headlines have been somewhat disconcerting???even if you're not the type of investor who makes a habit of daily market-watching.
It's important, however, to tune out the media "noise" and put these market swings in perspective.
Just a few weeks ago, both the Dow Jones Industrial Average and the broader Standard & Poor's 500 Index were in record territory: The S&P 500 was up nearly 10% since the beginning of 2007, the Dow up more than 12%. By early August, both indexes had lost considerable ground, but both remained ahead of where they started the year.
"There's no doubt that a big drop in stocks can be tough on your nerves???and your account balance," said Gus Sauter, Vanguard's chief investment officer. "But in a period like this, it's important to maintain a long-term outlook."
As painful as some of Wall Street's recent down days have been, it's worth noting that we've seen nothing like the record for a single-day decline: On October 19, 1987, both the Dow and S&P 500 plummeted more than 22%, falling from far lower levels than where they stand today.
Even taking the latest numbers into account, the major indexes have done quite well over the past 12 months. As of Thursday, the S&P 500 was almost 15% ahead of where it stood a year ago, while the broader market, as measured by the MSCI US Broad Market Index, was up almost 20%. That's well above the long-term average annual return for U.S. stocks.[/b]
"Stocks have been tremendously strong over the past few months, and we've had a very healthy rebound since the long bear market that began in early 2000 and stretched into 2003," Mr. Sauter said. "So it's not at all surprising to see a pullback."
Of course, no one can ever say with certainty whether stocks will continue to decline or whether they'll quickly rebound and return to record levels. What is clear is that few, if any, investors have demonstrated the ability to consistently pick the right times to get in???or out???of the markets.
"We've long advised investors not to react much to market movements, because we don't think it's a successful way to invest," Mr. Sauter said.
He also offered this thought for "bargain hunters": Although a market decline undoubtedly makes stocks cheaper, he doesn't recommend that investors "buy on the dips." Rather, Vanguard suggests that investors stick to their long-term asset allocation plans.[/b]
"The stock market never goes straight up," Mr. Sauter said. "To be a successful investor over the long term, you need to understand this, and you need to react rationally when the market doesn't go your way.
"Successful investing is a rational, not an emotional, pursuit. If you've made conscious, deliberate decisions based on your personal financial goals, time horizon, and your tolerance for risk, there's no reason to change your plans."
my understanding is that the sub-prime mortgages that were being dealt out like crazy are finally catching up with the banks. people cannot afford to pay their rising mortgage payments and are defaulting. homes are not being resold for what the banks had anticipated. banks are losing money. hedge funds are getting creamed because the lenders who bought up all this subprime debt are not getting the returns they expected with so many defaults. there have been several hedge funds that got wiped out completely over the past few weeks. other investors are scared off by the housing/mortgage crash as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
someone fill in the blanks. i'd really like to know what is causing the market to take such a nose dive and what needs to happen for it to stop crashing.
you're essentially correct with what you are stating. A couple years back, China decided to not peg their currency to the US dollar anymore, which slowly started this downward spiral. With such a huge country disconnecting its currency from ours, the dollar started to lose value relative to other major currencies and the housing boom (financed by China, mostly) started to lose steam because in many major markets, the prices got to the point where people could not justify the principle on a home loan, even at a time when the prime rate was incredibly low, and creative lending made the homes affordable, albeit temporarily. Not only that, but the deflated dollar combined with the increasing price of purchasing property decreased the percieved purchasing power of the dollar in other markets. In a sense, the housing market got to the point where price inflation was "artificial." So yeah- the temporary "interest only" and adjustable rate mortgages are hitting that 5 year intro period deadline now, and suddenly Joe and Mindy Condoowner get a mortgage bill in the mail w/ a $6500 minimum- and foreclose. SoCal has one of the highest foreclosure rates in the nation right now, SF is hit hard too, highest in 25 years or something. It's insane, but it was brought out by people not understanding the business cycle and overestimating what they could afford... As far as hedge funds and banks- they get the shit end of the stick right now, but really, it was from their own short-sighted investment strategy- they were too heavy into the boom markets, acting like they didn't learn shit in the late 1990's. Shit is hitting the fan now, but I'm not crying for Bernanke to cut the rate- I don't even think he should have flooded the market with cash last week- the feds job is not to bail out wall street or ensure investors a good return- it is to control inflation... but the last Fed chairman who came out and said that (in plain english) was Volker, and dude was crucified for it.
deep and serious co-sign on the 'dont jump with all the lemmings' advice. if youre holding decent stuff and have a long term plan, stick with it. remember the big picture.
As for China dumping U.S. bonds, that won???t happen anytime soon. A plunging dollar would make Chinese exports a whole lot more expensive, and their economy is heavily dependent on Americans buying Chinese goods. China is also hosting the Olympics next year, and is looking to improve their stature in the international community. Dumping government bonds would not be a good look for them.
You're right that they are worried about their reputation, especially with the Olympics looming- but I think you might be surprised... I don't expect a full fledged 'dump' of bonds, but I think that China is rational, and will probably start leaking out their holdings- the bonds are becoming less valuable as time goes on w/ the deflating dollar, and they're not going to hold on to an investment that is putting them in the red. They are heavily dependent on us purchasing their exports, but I think for the most part, the goods we purchase in huge quantities are 'inferior' goods, or cheap manufactures, which we will still purchase even if the price goes up for us a bit.
but the last Fed chairman who came out and said that (in plain english) was Volker, and dude was crucified for it.
Volker might be the best Fed chairman we've ever had for ending stagflation. As far as Bernanke releasing money, I think it was justified. The real bailout would be if he cut rates like Greenspan and we started this whole process over again. Fortunately, the Fed is much more protected from political interference than most government agencies.
They are heavily dependent on us purchasing their exports, but I think for the most part, the goods we purchase in huge quantities are 'inferior' goods, or cheap manufactures, which we will still purchase even if the price goes up for us a bit.
Actually disagree here... consumer sentiment is that we'd rather purchase American-made goods and not worry about dangerous defects, even if the price were to go up a bit. China can ill-afford to lose a large chunk of its export business to the US.
agreed. I think it's incredible how people look back at Volker now and say "what a genius, he was doing exactly what needed to be done," but at the time, they wanted his head on a stake in congress.
You're right that they are worried about their reputation, especially with the Olympics looming- but I think you might be surprised... I don't expect a full fledged 'dump' of bonds, but I think that China is rational, and will probably start leaking out their holdings- the bonds are becoming less valuable as time goes on w/ the deflating dollar, and they're not going to hold on to an investment that is putting them in the red.
I agree with you here. The rapid rise of the Chinese consumer will also play a role, as Chinese firms focus on domestic markets to meet the demand for previously unattainable goods from their own citizens.
If you're panicking right now, the stock market is probably not your thing. Most things are down right now, but what has changed about most companies? Absolutely nothing. They'll recover soon enough. Keep collecting the dividends and keep deferring your capital gains. Too much action will kill your portfolio... I know people who check where everything is at ONLY at month's end. Sure you might miss a buying opportunity or two, but once you have done your research and have your asset allocation, the less time you spend monitoring your portfolio, the better.
I've been meaning to get my share game popping off for almost 2 years now.... I've been doing endless research trouble is my online share dealing account is fucked and I can't get access to start my transition
as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
If they did that shit I could probably buy most of Alabama
The real bailout would be if he cut rates like Greenspan and we started this whole process over again. Fortunately, the Fed is much more protected from political interference than most government agencies.
Greenspan created this whole mess when he cut the rates and sent the housing market into hyperdrive.
Maybe it??s just wrong to believe in something that even the experts don??t seem to have a clue about when it??s getting ruff ?
We have had a hard economic time in Germany for a good decade now with all those people lying and betraying about the real situation - if you look at the financial institutions you now see that they??ve trusted more in lending money to companies playing the house-selling-game in foreign countries than in young companies trying to build up something from scratch in Germany - no need to get angry ?
And if you look back some years for the so called "new market" - are you really suprised by humans acting the same over and over again ?
Maybe it??s just wrong to believe in something that even the experts don??t seem to have a clue about when it??s getting ruff ?
We have had a hard economic time in Germany for a good decade now with all those people lying and betraying about the real situation - if you look at the financial institutions you now see that they??ve trusted more in lending money to companies playing the house-selling-game in foreign countries than in young companies trying to build up something from scratch in Germany - no need to get angry ?
And if you look back some years for the so called "new market" - are you really suprised by humans acting the same over and over again ?
keithvanhorn
3,855 Posts
Comments
At least wifey's main stock-optioned holdings have actually survived this recent downturn without losing anything at all.
But my AAPL stock?
saying gotta hold out though
my understanding is that the sub-prime mortgages that were being dealt out like crazy are finally catching up with the banks. people cannot afford to pay their rising mortgage payments and are defaulting. homes are not being resold for what the banks had anticipated. banks are losing money. hedge funds are getting creamed because the lenders who bought up all this subprime debt are not getting the returns they expected with so many defaults. there have been several hedge funds that got wiped out completely over the past few weeks. other investors are scared off by the housing/mortgage crash as well as threats from china that they are gonna release the trillion or so in us dollars that they have in reserves on the open market which would lower the value of the dollar.
someone fill in the blanks. i'd really like to know what is causing the market to take such a nose dive and what needs to happen for it to stop crashing.
this KUNT has borrowed more $$$$$ THAN ANY sitting president
fuck him and all of his BRAINLESS SUPPORTERS
the economy had a SURPLUS of cash under Clinton
now we are trapped in an endless unwinnable war and endless mounting debt
this is the same guy that wanted to put what little of the failing gutted social security program that is left into the stock market
great going asswipe
think you'll live to see your social security benefits?.....think again
Do you know that more people nowadays aren't worried about getting a home they're more worried about how they're going to kept their home. Shit is looking real bad. Atlanta was or still is on the top list when it comes to foreclosers.
You are correct, subprime mortgage defaults are rising, and it has been the primary force behind the recent downturn. The reason American mortage defaults affect markets all over the globe because most of these mortgages have been securitized: the banks responsible for the original loan have sold them to investment banks, which bundle together the payments and resell the bundles as mortgage-backed securities to hedge funds and institutional investors worldwide. When the payments stop coming in due to defaults, the investment banks are unable to pay their obligations to their investors, and suffer huge losses a la Bear Stearns. Once the cash stops flowing, the overnight rates that banks charge each other for short term loans shoots up, and then liquidity disappears. The major central banks intervened last week, pumping in more money to ease liquidity fears and stabilize credit markets.
If you hold stock, now is not a good time to sell. Markets are cyclical, and overall the U.S. economy looks decent. Inflation is low, and other sectors such as manufacturing and exports are strong. When you buy stock, it is important to think long term, and I mean at least 10 years. Over 50% of active money managers fail to beat the market BEFORE fees in any given year. Taking a long term, diversified approach is your best bet if you want to insulate yourself from excessive risk. I know a few other dudes were talking about index funds and no-load mutual funds with minimal fees in another thread, which is good advice. Unless you have unique information or good luck or are a serious professional, attempting to play the market will almost always fail in the long run.
As for China dumping U.S. bonds, that won???t happen anytime soon. A plunging dollar would make Chinese exports a whole lot more expensive, and their economy is heavily dependent on Americans buying Chinese goods. China is also hosting the Olympics next year, and is looking to improve their stature in the international community. Dumping government bonds would not be a good look for them.
I'm in the index fund camp. This is just like the investing and budgeting stuff that was discussed here last week. I'm invested in Vanguard index funds and they've got some good commentary to chew on... I've highlighted some key points.
https://flagship.vanguard.com/VGApp/hnw/...7272007_ALL.jsp
August 9, 2007
Putting market volatility in perspective
Recent volatility in stock prices has been a hot topic for market analysts, and is likely to remain so for at least a few days. It's reasonable to expect that the headlines have been somewhat disconcerting???even if you're not the type of investor who makes a habit of daily market-watching.
It's important, however, to tune out the media "noise" and put these market swings in perspective.
Just a few weeks ago, both the Dow Jones Industrial Average and the broader Standard & Poor's 500 Index were in record territory: The S&P 500 was up nearly 10% since the beginning of 2007, the Dow up more than 12%. By early August, both indexes had lost considerable ground, but both remained ahead of where they started the year.
"There's no doubt that a big drop in stocks can be tough on your nerves???and your account balance," said Gus Sauter, Vanguard's chief investment officer. "But in a period like this, it's important to maintain a long-term outlook."
As painful as some of Wall Street's recent down days have been, it's worth noting that we've seen nothing like the record for a single-day decline: On October 19, 1987, both the Dow and S&P 500 plummeted more than 22%, falling from far lower levels than where they stand today.
Even taking the latest numbers into account, the major indexes have done quite well over the past 12 months. As of Thursday, the S&P 500 was almost 15% ahead of where it stood a year ago, while the broader market, as measured by the MSCI US Broad Market Index, was up almost 20%. That's well above the long-term average annual return for U.S. stocks.[/b]
"Stocks have been tremendously strong over the past few months, and we've had a very healthy rebound since the long bear market that began in early 2000 and stretched into 2003," Mr. Sauter said. "So it's not at all surprising to see a pullback."
Of course, no one can ever say with certainty whether stocks will continue to decline or whether they'll quickly rebound and return to record levels. What is clear is that few, if any, investors have demonstrated the ability to consistently pick the right times to get in???or out???of the markets.
"We've long advised investors not to react much to market movements, because we don't think it's a successful way to invest," Mr. Sauter said.
He also offered this thought for "bargain hunters": Although a market decline undoubtedly makes stocks cheaper, he doesn't recommend that investors "buy on the dips." Rather, Vanguard suggests that investors stick to their long-term asset allocation plans.[/b]
"The stock market never goes straight up," Mr. Sauter said. "To be a successful investor over the long term, you need to understand this, and you need to react rationally when the market doesn't go your way.
"Successful investing is a rational, not an emotional, pursuit. If you've made conscious, deliberate decisions based on your personal financial goals, time horizon, and your tolerance for risk, there's no reason to change your plans."
So yeah- the temporary "interest only" and adjustable rate mortgages are hitting that 5 year intro period deadline now, and suddenly Joe and Mindy Condoowner get a mortgage bill in the mail w/ a $6500 minimum- and foreclose. SoCal has one of the highest foreclosure rates in the nation right now, SF is hit hard too, highest in 25 years or something. It's insane, but it was brought out by people not understanding the business cycle and overestimating what they could afford... As far as hedge funds and banks- they get the shit end of the stick right now, but really, it was from their own short-sighted investment strategy- they were too heavy into the boom markets, acting like they didn't learn shit in the late 1990's.
Shit is hitting the fan now, but I'm not crying for Bernanke to cut the rate- I don't even think he should have flooded the market with cash last week- the feds job is not to bail out wall street or ensure investors a good return- it is to control inflation... but the last Fed chairman who came out and said that (in plain english) was Volker, and dude was crucified for it.
They are heavily dependent on us purchasing their exports, but I think for the most part, the goods we purchase in huge quantities are 'inferior' goods, or cheap manufactures, which we will still purchase even if the price goes up for us a bit.
Volker might be the best Fed chairman we've ever had for ending stagflation. As far as Bernanke releasing money, I think it was justified. The real bailout would be if he cut rates like Greenspan and we started this whole process over again. Fortunately, the Fed is much more protected from political interference than most government agencies.
Actually disagree here... consumer sentiment is that we'd rather purchase American-made goods and not worry about dangerous defects, even if the price were to go up a bit. China can ill-afford to lose a large chunk of its export business to the US.
I agree with you here. The rapid rise of the Chinese consumer will also play a role, as Chinese firms focus on domestic markets to meet the demand for previously unattainable goods from their own citizens.
If they did that shit I could probably buy most of Alabama
Greenspan created this whole mess when he cut the rates and sent the housing market into hyperdrive.
That's what I'm saying. Cutting rates excessively has the potential to put inflationary pressure on the economy at large.
We have had a hard economic time in Germany for a good decade now
with all those people lying and betraying about the real situation -
if you look at the financial institutions you now see that they??ve trusted more in lending money to companies playing the house-selling-game in foreign countries than in young companies trying to build up something from scratch in Germany - no need to get angry ?
And if you look back some years for the so called "new market" -
are you really suprised by humans acting the same over and over again ?
Aber hallo
ganz fer umme ?
If anyone's interested, I run a fantasy stock market game w/ some friends. If anyone's interested in playing, send me a PM.