On Thu, 25 Sep 2008 17:01:07 -0500, F. George McDuffee
wrote:

On Thu, 25 Sep 2008 15:19:36 -0500, cavelamb himself
wrote:
snip
If we don't bail out the financial houses, there won't be any credit
for anybody - a depression happens, and everybody suffers.
snip
--------------
It is exactly at this point that the non sequitur starts.

Indeed, it can be argued [and I tend to agree] than many of our
current socio-economic problems are the result of the financial
"great houses" and their "high rollers," and the sooner we are
rid of them the better.

There was credit long before there were the great houses of
finance, and there will be credit long after they are gone. What
there won't be [for a while] if the great houses disappear are
the huge piles of [other peoples] money controlled by the "high
rollers" and "generous sports."

There will of course be huge paper losses, but these will be born
mainly by the "high rollers," their stock and bond holders, and
the hedge and private capital funds. The depositors in FDIC
institutions will be compensated up to 100k$ per account. [Which
IMNSHO is a *MUCH* better use of the tax payers $s]

If this were allowed to happen there would be little risk of
inflation as the total supply of money would probably go down
slightly, not increase drastically as under "Bazooka" Paulson's
plan, and there will be ample number of banks and credit unions
to provide the required credit for "normal" human activities.
{Now if you want to buy the entire country of Bolivia on E-Z
credit, that might be a different story.}

This would also concentrate the losses on those who caused and
profited by the asset bubble creation, although there would be
some collateral damage [in the military sense] to the average
person who had a pension plan, 401k, mutual funds, etc. invested
in these so-called "assets."

Note that many of the people screaming the loudest for a
governmental bail out are the same people that ground entire
American communities into the ground in the name of profit, free
enterprise and the free market such as [Neutron] Jack Welch of
GE.
------

I am a dumb investor in 2 lots of shares, starting in 1990 or so
and today received a half yearly dividend of $84 from one of them
which works out at about 6% pa on my original investment with
potential 70% capital gain if I sell, the others return about $2300
pa which is about 10% on original investment, however some time ago, I
sold some for more than I originally paid, so the remainder are
effectively free.

I am of the opinion that this so-called loss from mortgages is
pure bull**** and a means for the greedy to get cash from the US
taxsuckers. That is the wrong term, politicians are taxsuckers, how
about taxvictims?.

Let us try a few simple figures.

US population ~ 300 million, average family size = 4
therefore use 75 million houses, farms & apartments for these
calculations.

At a guess, 20% of them would be wholly owned, no mortgage
leaving 60 million with mortgages of say $500k each. I think that
figure is excessive but this is only hypothetical anyway as it is
based on everyone buying a house and not renting from another owner.
What portion of the population rents ? 25%? Anyway this ignores
rentals

Total mortgage debt = 60 million x .5 million =

3,000,000,000,000 that is ( I think ) 3 trillion in funny
US accounting figures.

Now, how many of those with mortgages are actually going to
default ?? I think that anyone owing less than $200k will continue
to pay off their loan as it is unlikely their house will drop to less
than this and they would have to rent to live somewhere and rent would
be similar to, or more than house payments.

Guess 40% of those 60 million mortgages will be paid off in
due course, that brings the amount down to 1,200,000,000,000 of
POTENTIAL losses if the houses & land covered by the mortgages dropped
to ZERO value, which is impossible.

Say they drop to 50% of value, that is 600,000,000,000 (600
billion ? ) of hard assets owned by banks and a potential write down
of asset values by the same amount.

That leaves 36 million potential foreclosures People have to live
somewhere so the banks can rent the properties to the families who
have to live somewhere.
What is a fair rent ? Say $200 per week = $10K pa

36 million @ $10 k = 360 billion per year (360,000,000,000)
so in 3 years that write down of asset value is covered by rents
received.

My perception is that banks will have a hard time over the next 5
years due to dealing with "funny money" and will have to write down
assets but should not go bankrupt if something like the following is
used to help them keep their cash flow at realistic levels.

The simplest solution would be for the US congress to pass laws
requiring sellers of "funny money" bonds etc. to buy them back from
the purchasers at selling cost, that way the inflated values would
come back to bite the creators. Let the crooks feel the pain, but be
kind, give them a tax write off for this tax year ( not cumulative for
following years) only if they have paid tax in previous years.

Then, lend money to the original mortgage lenders at a realistic
interest rate, to be repaid from rental income or when the property is
sold. Title to the property to be held by US Govt until sold and
bail-out loan repaid in full. This will keep lending institutions
solvent and eventually the taxpayer's loan will be reimbursed ( to be
squandered elsewhere !)


GM etc want 25 billion gift to keep them in business ?

Annual production 3 million vehicles ??

That is a subsidy of about $8000 per vehicle built.

There is obviously something seriously wrong with their costing and
financial accounting they must use "funny money?"
Let the *******s be bought out by someone who can run the
business profitably and ban executive parachutes and excessive
salaries for the incompetents. No subsidies

Alan

On Fri, 26 Sep 2008 16:08:25 +0800, wrote:
snip
There is obviously something seriously wrong with their costing and
financial accounting they must use "funny money?"
snip
==========
A nice analysis and I believe a correct conclusion. The whole
thing does not "add up" as you demonstrate.

See my posting on "a peek at the pig in the poke" to see what is
actually in those "synthetic structured residential mortgage
backed collateralized debt obligations" the US taxpayer is about
to buy to keep the "system" working. To think these were AAA
rated by S&P, Fitch, Moodys, etc. and crammed into the pension
funds. Ponzi was a piker and rank amateur.

FWIW -- the 61 Trillion (10^12) $US in CDS [credit default swap]
derivatives may be where the real danger lies.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Fri, 26 Sep 2008 16:08:25 +0800, wrote:
snip
I am of the opinion that this so-called loss from mortgages is
pure bull**** and a means for the greedy to get cash from the US
taxsuckers.
snip
---------
Another thought. While your numbers are correct, there are three
additional classes of CDOs of significant size [comparable to the
mortgage backed CDOs] ticking away waiting to explode.

CDOs "backed" by "student loans"
CDOs "backed" by automotive loans/leases
CDOs "backed" by "credit card receivables"
note that the "collateral" for these is even more imaginary than
for the residential/commercial mortgage backed CDOs.

If these are the atomic bombs of finance, the Dr. Strangelove
doomsday machine may well be the Credit Default Swaps [CDS] that
are known to total 61 trillion [10^12] $US notational/face value,
and as there is no central registry the actual total amount is
likely *MUCH* higher.

FWIW, it appears that the CDSs written by the Financial Products
division of AIG was what brought the entire company down in an
afternoon, when the ratings companies at long last objectively
and fairly assessed the exposure and credit worthiness of the
company. Even under fragmented US state regulation/oversight,
the other AIG divisions such as insurance and aircraft leasing
appear to have been fundamentally sound.

Indeed, it may well be that "Bazooka" Paulson's emergency TARP
[Wall Street bailout] legislation has little to do with real
estate backed CDOs and everything to do with
deactivating/disarming the now ticking CDS "doomsday machine."


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

F. George McDuffee wrote:
On Fri, 26 Sep 2008 16:08:25 +0800, wrote:
snip

There is obviously something seriously wrong with their costing and
financial accounting they must use "funny money?"

snip
==========
A nice analysis and I believe a correct conclusion. The whole
thing does not "add up" as you demonstrate.

See my posting on "a peek at the pig in the poke" to see what is
actually in those "synthetic structured residential mortgage
backed collateralized debt obligations" the US taxpayer is about
to buy to keep the "system" working. To think these were AAA
rated by S&P, Fitch, Moodys, etc. and crammed into the pension
funds. Ponzi was a piker and rank amateur.

FWIW -- the 61 Trillion (10^12) $US in CDS [credit default swap]
derivatives may be where the real danger lies.


Unka' George [George McDuffee]

Pig in a poke, huh?

You do know the expression that comes next, don't you?

Letting the cat out of the bag...


--

Richard

(remove the X to email)

On Fri, 26 Sep 2008 12:18:59 -0500, F. George McDuffee
wrote:
snip
If these are the atomic bombs of finance, the Dr. Strangelove
doomsday machine may well be the Credit Default Swaps [CDS] that
are known to total 61 trillion [10^12] $US notational/face value,
and as there is no central registry the actual total amount is
likely *MUCH* higher.
snip
========
As a follow-up to my own post, the ticking of the Dr. Strangelove
financial doomsday machine just got louder.
==========
WaMu to Have `Significant' Effect on CDOs, S&P Says (Update1)

By Shannon D. Harrington

Sept. 26 (Bloomberg) -- The failure of Washington Mutual Inc.
will have a ``significant'' effect on collateralized debt
obligations that made bets on the lender's creditworthiness,
Standard & Poor's said.

Pieces of 1,526 synthetic CDOs worldwide sold default protection
on Seattle-based WaMu, S&P said in a statement today. WaMu was
seized yesterday by regulators after customers withdrew $16.7
billion over the past 10 days. After JPMorgan Chase & Co. bought
WaMu's bank branch business, the holding company is likely to
file for bankruptcy protection, S&P analyst Victoria Wagner said
in a separate statement today.

Sellers of credit-default swap protection must pay the buyer face
value in exchange for the underlying securities or the cash
equivalent after a bankruptcy filing.

Synthetic CDOs already have been roiled by last week's bankruptcy
of Lehman Brothers Holdings Inc., which was included in 1,889
deals globally, and the government's takeover of American
International Group Inc., which was downgraded three grades to
A-. S&P said 1,619 CDOs made bets on AIG.

Many of the deals also will lose payments and loss cushions from
contracts linked to Fannie Mae and Freddie Mac, the
mortgage-finance companies seized by the government this month.
The takeovers triggered a technical default on the credit swaps.

Of the CDOs that sold WaMu default protection, 514 were in the
U.S., 752 were in Europe, 122 were in Japan and 138 were
elsewhere in the Asia-Pacific region.
snip
-----------
for complete article click on
http://www.bloomberg.com/apps/news?p...pSs&refer=home

Hank "Bazooka" Paulson seems to have skipped over this little
problem also...


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

The New World Order is going to take over and in order to do that all these other kingdoms
have to come *down* !

Don't worry about all these little "kings" falling all around you today. It's just a (?
natural) progression of things toward the "Big Day" when Jesus Christ comes back to set up
HIS kingdom in place of the "almighty" globelists' rule!

Don't Worry. Be Happy! :-)