http://www.nytimes.com/2008/10/02/bu...ll&oref=slogin

``That Thursday evening, however, time was of the essence. In a hastily
convened meeting in the conference room of the House speaker, Nancy
Pelosi, the two men presented, in the starkest terms imaginable, the
outline of the $700 billion plan to Congressional leaders. €œIf we
dont do this,€� Mr. Bernanke said, according to several
participants, €œwe may not have an economy on Monday.€�''

So, last Thursday Bernanke said that if his 800 billion proposal is
not passed immediately, "we may not have an economy on Monday".

But guess what, it was not passed, it is Thursday, and we still have
an economy.

Make your own conclusions.
--
Due to extreme spam originating from Google Groups, and their inattention
to spammers, I and many others block all articles originating
from Google Groups. If you want your postings to be seen by
more readers you will need to find a different means of
posting on Usenet.
http://improve-usenet.org/

"Ignoramus23721" wrote in message
...
http://www.nytimes.com/2008/10/02/bu...ll&oref=slogin

``That Thursday evening, however, time was of the essence. In a hastily
convened meeting in the conference room of the House speaker, Nancy
Pelosi, the two men presented, in the starkest terms imaginable, the
outline of the $700 billion plan to Congressional leaders. ?oIf we
don?Tt do this,?� Mr. Bernanke said, according to several
participants, ?owe may not have an economy on Monday.?�''

So, last Thursday Bernanke said that if his 800 billion proposal is
not passed immediately, "we may not have an economy on Monday".

But guess what, it was not passed, it is Thursday, and we still have
an economy.

Make your own conclusions.

Ok. "May" suggests a possibility of less than 50%, and we still have an
economy, so Bernanke was right. d8-)

However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread this
has become, but anecdotes show that it's happened very suddenly.

--
Ed Huntress

On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:


"Ignoramus23721" wrote in message
m...
http://www.nytimes.com/2008/10/02/bu...ll&oref=slogin

``That Thursday evening, however, time was of the essence. In a hastily
convened meeting in the conference room of the House speaker, Nancy
Pelosi, the two men presented, in the starkest terms imaginable, the
outline of the $700 billion plan to Congressional leaders. ?oIf we
don?Tt do this,?? Mr. Bernanke said, according to several
participants, ?owe may not have an economy on Monday.??''

So, last Thursday Bernanke said that if his 800 billion proposal is
not passed immediately, "we may not have an economy on Monday".

But guess what, it was not passed, it is Thursday, and we still have
an economy.

Make your own conclusions.

Ok. "May" suggests a possibility of less than 50%, and we still have an
economy, so Bernanke was right. d8-)

However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread this
has become, but anecdotes show that it's happened very suddenly.
===========
Showing again the futility of pumping in essentially infinite
amounts of "money" at the top and expecting some of it to ooze or
trickle down to the actual productive/value-added activities at
the bottom.

George Soros's suggestion of bypassing the mega banks and
brokerages by direct government purchase of timed convertible
preferred stock in the smaller regional and local banks on the
condition they lend this additional capital looks better all the
time.

As the convertible preferred becomes common stock over a phased 5
to 10 year period it can be sold by the feds back into the free
market, hopefully at a profit to the taxpayers.

Most anything is better than "investing" taxpayer money in the
worthless sham securities called CDOs, and giving the banks and
brokerages that created this crap yet another opportunity to
*AGAIN* put it to the American taxpayers and investors.

As one columnist observed, this is not a Wall Street "bailout,"
it's a Wall Street "*TIMEOUT*" designed to move the implosion
after election day and if possible after Inauguration Day.

FWIW -- Higher education just took it in the shorts. For details
click on:
http://www.nytimes.com/2008/10/02/ed... &oref=slogin



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).

"Ed Huntress" wrote:Ok. "May" suggests a possibility of less than 50%, and
we still have an
economy, so Bernanke was right. d8-)
^^^^^^^^^^^^^^^^^^^^
Actually, "may" suggests a probability of less than 100%, as in, "I feel
fine today, but I may not be alive tomorrow."
^^^^^^^^^^^^^^^^^^^^^
However, credit has been frozen for many small businesses, and they are
essentially treading water, (clip)
^^^^^^^^^^^^^^^^^^^
It's worse than that for many--car dealers, for example are getting a double
whammy. Their customers cannot get loans approved, but also, their
inventory is "floored." meaning that the cars in the showroom were purchased
on credit. Some car dealers are already closing.

On Thu, 02 Oct 2008 15:51:45 GMT, "Leo Lichtman"
wrote:


"Ed Huntress" wrote:Ok. "May" suggests a possibility of less than 50%, and
we still have an
economy, so Bernanke was right. d8-)
^^^^^^^^^^^^^^^^^^^^
Actually, "may" suggests a probability of less than 100%, as in, "I feel
fine today, but I may not be alive tomorrow."
^^^^^^^^^^^^^^^^^^^^^
However, credit has been frozen for many small businesses, and they are
essentially treading water, (clip)
^^^^^^^^^^^^^^^^^^^
It's worse than that for many--car dealers, for example are getting a double
whammy. Their customers cannot get loans approved, but also, their
inventory is "floored." meaning that the cars in the showroom were purchased
on credit. Some car dealers are already closing.
==================
And not just the little ones either
http://www.bloomberg.com/apps/news?p...d=a4tKxbx1zGu0

and the customers take it in the shorts [again]
http://www.click2houston.com/news/17601971/detail.html

http://www.forbes.com/2008/10/01/aut...?feed=rss_news
http://rds.yahoo.com/_ylt=A0WTTkkL9e...n=money_latest
http://www.sfgate.com/cgi-bin/articl...d=rss.business
http://biz.yahoo.com/cnnm/081001/093...pain.html?.v=4


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 executives at the bank I worked for are being moved up a few floors- The
windows don't open!!!

Rob



"F. George McDuffee" wrote in message
...
On Thu, 02 Oct 2008 15:51:45 GMT, "Leo Lichtman"
wrote:


"Ed Huntress" wrote:Ok. "May" suggests a possibility of less than 50%,
and
we still have an
economy, so Bernanke was right. d8-)
^^^^^^^^^^^^^^^^^^^^
Actually, "may" suggests a probability of less than 100%, as in, "I feel
fine today, but I may not be alive tomorrow."
^^^^^^^^^^^^^^^^^^^^^
However, credit has been frozen for many small businesses, and they are
essentially treading water, (clip)
^^^^^^^^^^^^^^^^^^^
It's worse than that for many--car dealers, for example are getting a
double
whammy. Their customers cannot get loans approved, but also, their
inventory is "floored." meaning that the cars in the showroom were
purchased
on credit. Some car dealers are already closing.
==================
And not just the little ones either
http://www.bloomberg.com/apps/news?p...d=a4tKxbx1zGu0

and the customers take it in the shorts [again]
http://www.click2houston.com/news/17601971/detail.html

http://www.forbes.com/2008/10/01/aut...?feed=rss_news
http://rds.yahoo.com/_ylt=A0WTTkkL9e...n=money_latest
http://www.sfgate.com/cgi-bin/articl...d=rss.business
http://biz.yahoo.com/cnnm/081001/093...pain.html?.v=4


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).

"Rob Fraser" FraserRacing"AT"RobFraser.Net wrote in message
. ..
The executives at the bank I worked for are being moved up a few floors-
The windows don't open!!!

Rob

Shucks. I get a special kick out of watching the Wall Street Swan-Diving
championships every decade or two. g

--
Ed Huntress






"F. George McDuffee" wrote in message
...
On Thu, 02 Oct 2008 15:51:45 GMT, "Leo Lichtman"
wrote:


"Ed Huntress" wrote:Ok. "May" suggests a possibility of less than 50%,
and
we still have an
economy, so Bernanke was right. d8-)
^^^^^^^^^^^^^^^^^^^^
Actually, "may" suggests a probability of less than 100%, as in, "I feel
fine today, but I may not be alive tomorrow."
^^^^^^^^^^^^^^^^^^^^^
However, credit has been frozen for many small businesses, and they are
essentially treading water, (clip)
^^^^^^^^^^^^^^^^^^^
It's worse than that for many--car dealers, for example are getting a
double
whammy. Their customers cannot get loans approved, but also, their
inventory is "floored." meaning that the cars in the showroom were
purchased
on credit. Some car dealers are already closing.
==================
And not just the little ones either
http://www.bloomberg.com/apps/news?p...d=a4tKxbx1zGu0

and the customers take it in the shorts [again]
http://www.click2houston.com/news/17601971/detail.html

http://www.forbes.com/2008/10/01/aut...?feed=rss_news
http://rds.yahoo.com/_ylt=A0WTTkkL9e...n=money_latest
http://www.sfgate.com/cgi-bin/articl...d=rss.business
http://biz.yahoo.com/cnnm/081001/093...pain.html?.v=4


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 Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:



However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread this
has become, but anecdotes show that it's happened very suddenly.


I know that I'm stupid, after all I'm only an engineer, but...

The banks are refusing to do what banks do i.e. lend money for profit. If Ford
said they were going to stop making vehicles, they would cease to exist within
the day, the other vehicle makers would have a field day and the creditors
would be selling the plant and real estate to get their money back. If a bank
refuses to do its normal business, surely it should be wiped out just as fast.

Wouldn't this sort of response encourage the other banks to cease these
pathetic strikes and go-slows that they are holding.

What I'm saying is that governments shouldn't be saying that they will support
the banks, they should be saying "go about your business in a normal way or
you won't even have a pair of shorts to cover your nakedness"


Mark Rand
RTFM

On Thu, 02 Oct 2008 10:43:32 -0500, the infamous F. George McDuffee
scrawled the following:


Most anything is better than "investing" taxpayer money in the
worthless sham securities called CDOs, and giving the banks and
brokerages that created this crap yet another opportunity to
*AGAIN* put it to the American taxpayers and investors.

Damned straight!


As one columnist observed, this is not a Wall Street "bailout,"
it's a Wall Street "*TIMEOUT*" designed to move the implosion
after election day and if possible after Inauguration Day.

While giving the President and other bigwigs gobs more unrestricted
power.


FWIW -- Higher education just took it in the shorts. For details
click on:
http://www.nytimes.com/2008/10/02/ed... &oref=slogin

Question of the Day: WTF is a small northern state university doing
with a hundred and sixty million in throw-around cashish?

-
If the gods had meant us to vote, they'd have given us candidates.
--------------

"Mark Rand" wrote in message
...
On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:



However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread
this
has become, but anecdotes show that it's happened very suddenly.


I know that I'm stupid, after all I'm only an engineer, but...

The banks are refusing to do what banks do i.e. lend money for profit. If
Ford
said they were going to stop making vehicles, they would cease to exist
within
the day, the other vehicle makers would have a field day and the creditors
would be selling the plant and real estate to get their money back. If a
bank
refuses to do its normal business, surely it should be wiped out just as
fast.

Check with us tomorrow. It may happen -- not because they don't want to, but
because they can't. Only there's nothing to sell, except some computers and
nice furniture.


Wouldn't this sort of response encourage the other banks to cease these
pathetic strikes and go-slows that they are holding.

They are going slow because they are scared out of their wits that they
won't have enough cash to pay for a run on the securities their customers
are holding, or a call on their margins. They're holding onto what cash they
have. John has been telling me in e-mail about the value of something called
the TED spread. It's very high. Banks aren't lending to each other. You
probably can find an explanation of what the TED spread is on the Web.


What I'm saying is that governments shouldn't be saying that they will
support
the banks, they should be saying "go about your business in a normal way
or
you won't even have a pair of shorts to cover your nakedness"

They can't go about their business in a normal way. In a week or two they
may not have a pair of shorts, either.

Much of this is over my head, Mark. We're being inundated with the basics,
but if you want know more, I hope that John Carroll or Unka' George will
pipe up.

--
Ed Huntress

Ignoramus23721 wrote:

But guess what, it was not passed, it is Thursday, and we still have
an economy.

And if we hold off, maybe we will have a debt that can be paid off in a century or so.

Wes
--
"Additionally as a security officer, I carry a gun to protect
government officials but my life isn't worth protecting at home
in their eyes." Dick Anthony Heller

On Thu, 02 Oct 2008 11:29:49 -0500, the infamous F. George McDuffee
scrawled the following:

And not just the little ones either
http://www.bloomberg.com/apps/news?p...d=a4tKxbx1zGu0

and the customers take it in the shorts [again]
http://www.click2houston.com/news/17601971/detail.html

Mega freakin' ouch!


http://biz.yahoo.com/cnnm/081001/093...pain.html?.v=4

Awww, the poor Hummer dealer is having trouble offing his $60,900,
6.2L, 4+ ton, 10 MPG rust buckets, is he? sniffle,sob,HONK

-
If the gods had meant us to vote, they'd have given us candidates.
--------------

On Thu, 02 Oct 2008 23:33:30 +0100, Mark Rand
wrote:

On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:
snip
I know that I'm stupid, after all I'm only an engineer, but...

The banks are refusing to do what banks do i.e. lend money for profit. If Ford
said they were going to stop making vehicles, they would cease to exist within
the day, the other vehicle makers would have a field day and the creditors
would be selling the plant and real estate to get their money back. If a bank
refuses to do its normal business, surely it should be wiped out just as fast.

Wouldn't this sort of response encourage the other banks to cease these
pathetic strikes and go-slows that they are holding.

What I'm saying is that governments shouldn't be saying that they will support
the banks, they should be saying "go about your business in a normal way or
you won't even have a pair of shorts to cover your nakedness"


Mark Rand
RTFM
========================
Major problem here is the assumption that these "banks" accept
deposits and lend money. In actuality, they are like the Detroit
automobile companies, who still make a few cars. In both cases
their major revenue streams results from arcane financial
transactions, the creation and sale of dodgy/worthless financial
products/securities and market manipulation, not their assumed
and at one time primary activity, i.e. accepting deposits and
making loans, or making cars and trucks.

In the case of the banks, "Mr. Market and reality" has suddenly
invaded the Board Room, "busting every head in sight," and as
indicted in other posts, the executives and directors suddenly
realize that every other major financial institution's position
is just as bad as their own, with cooked books, inflated assets,
and un/under stated liabilities [SIVs, conduits, SPEs, and lord
knows what else].

Thus there is a very real possibility that any money they lend to
another major bank or financial institution will *NOT* be repaid,
and even with CDS "insurance" they may still lose the money if
the counter-party [most likely another major bank or brokerage]
defaults. While small scale lending may still occur, this is a
side-line and distraction from what they see as their major
business.

Current CDS rates indicate the market {which in American
financial mythology is never wrong} projects from a 10% to 50%
probability of bankruptcy within 5 years of *ALL* the major
banks, brokerages, and other financial players such as GE.
[Individually, not at the same time].

While high yield [i.e. junk] bonds can be sold, the rates are
very high and the banks want that cheap central bank 2% money and
are not willing to pay 10 -12 % [or more] to borrow from each
other.

FWIW -- the bond prices for securities from these mega
organizations have fallen so they are yielding 12-15% [and more].
The cheap screw major tier financial players are unwilling to pay
this much for new money, so they don't get any.

While I don't like George Soros's politics in other areas, he
appears to be exactly correct when he advises the central banks
to stop injecting operationally infinite amounts of money at the
top (they can't inject any more as the institutions don't have
the capacity to absorb it any faster) which promptly disappears,
but rather to inject funds into the smaller regional and local
banks in amounts from a few million to a few billion, through the
purchase of convertible preferred stock [no vote] (or common
stock warrants with a 5 to 10 year exercise date) up to about 20%
of capital, after these have been "vetted" by the FDIC auditors.

This is particularly important where these smaller banks held
Fannie or Freddie stock, based on assurances by the regulators of
its safety, which now has zero value, and which has destroyed
much of their regulatory capital base.

This accomplishes two things:

(1) It will get credit flowing at the lower levels where it is
required for feasible and productive activities (i.e. no
leveraged buyouts), because this is where/how *THESE* banks make
their money; and

(2) It cuts the crooks, criminals, incompetents, and
megalomaniacs that infest the top tier banks and brokerages off
from the Federal titty.

The US taxpayers stand a good change of recovery of most of the
money [and possibly a profit] when the stock in the
regional/local banks is sold into the market at a controlled rate
after recovery, and the top tier banks and brokerages will either
replace their management, modify their business practices/models,
and correct their problems or go out of business.


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).

"Ed Huntress" wrote in message
...

However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread
this has become, but anecdotes show that it's happened very suddenly.

Credit seems to be indicative of the health of the financial institution. I
own a small specialty contracting company. I have credit lines, credit
cards, and revolving cash credit accounts for various aspects of my business
in multiples. Some have reduced or frozen my credit lines. A few phone
calls (just phone calls nothing more) have paid off and dumped those and
increased the credit from others to more than compensate. Those small
businesses with decent credit scores and history who have not had a history
of keeping their credit maxed for extended periods can borrow money if they
really need to without even getting creative.

.... and I am not one of those 800 credit scores either. Not by quite a bit.

It seems to me that those financial institutions with a solid base are only
trimming the fat a little. Those with a stupid amount of high risk are
freaking out though. I have had two bank presidents call me asking for my
business in the last week, and one bank board member has been pressuring me.
Not kidding, and I really don't move that much money.

"Bob La Londe" wrote in message
...
"Ed Huntress" wrote in message
...

However, credit has been frozen for many small businesses and they are
essentially treading water, waiting for something to happen so they can
purchase inventory, etc. It's probably too soon to tell how wisespread
this has become, but anecdotes show that it's happened very suddenly.

Credit seems to be indicative of the health of the financial institution.
I own a small specialty contracting company. I have credit lines, credit
cards, and revolving cash credit accounts for various aspects of my
business in multiples. Some have reduced or frozen my credit lines. A
few phone calls (just phone calls nothing more) have paid off and dumped
those and increased the credit from others to more than compensate. Those
small businesses with decent credit scores and history who have not had a
history of keeping their credit maxed for extended periods can borrow
money if they really need to without even getting creative.

... and I am not one of those 800 credit scores either. Not by quite a
bit.

It seems to me that those financial institutions with a solid base are
only trimming the fat a little. Those with a stupid amount of high risk
are freaking out though. I have had two bank presidents call me asking
for my business in the last week, and one bank board member has been
pressuring me. Not kidding, and I really don't move that much money.

Everybody wants your cash right now. You ought to be able to drive a good
bargain if you're a good payer.

--
Ed Huntress

On Thu, 2 Oct 2008 23:01:55 -0400, "Ed Huntress"
wrote:


Everybody wants your cash right now. You ought to be able to drive a good
bargain if you're a good payer.

You wouldn't know it by looking at CD rates. I went shopping today and
the local banks are offering around 2.5%. It looks like you can do
somewhat better by going to a brokerage. What's up with that?

--
Ned Simmons

"Leo Lichtman" wrote in message
...

"Ed Huntress" wrote:Ok. "May" suggests a possibility of less than 50%,
and
we still have an
economy, so Bernanke was right. d8-)
^^^^^^^^^^^^^^^^^^^^
Actually, "may" suggests a probability of less than 100%, as in, "I feel
fine today, but I may not be alive tomorrow."
^^^^^^^^^^^^^^^^^^^^^
However, credit has been frozen for many small businesses, and they are
essentially treading water, (clip)
^^^^^^^^^^^^^^^^^^^
It's worse than that for many--car dealers, for example are getting a
double
whammy. Their customers cannot get loans approved, but also, their
inventory is "floored." meaning that the cars in the showroom were
purchased
on credit. Some car dealers are already closing.


It's clear that some people just aren't worried about what may happen if
emergency measures are not taken. This is an attitude you see all the time
when things are about to go bad, real bad. No matter what the warning there
are always a bunch of people who say we're not worried about the
consequences. These people are usually buried soon after saying that. It
goes along with "famous last words". You saw this after Katrina and the last
hurricane that hit Houston, people were coming out saying we should have
listened when they warned us not to stay. Well, people are being warned and
they don't want to heed it. Hopefully, the cavalier attitude of these folks
will not carry the day. I for one would rather not see another depression.
If the experts are pretty much all saying this is not something to leave
alone I think it makes sense to listen to them. There are always some people
giving wrong advice. In this case those are the ones saying we don't have to
act, and decisively. Ignore them.

Hawke

Ed Huntress wrote:
"Mark Rand" wrote in message
...
On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:



They are going slow because they are scared out of their wits that
they won't have enough cash to pay for a run on the securities their
customers are holding, or a call on their margins. They're holding
onto what cash they have. John has been telling me in e-mail about
the value of something called the TED spread. It's very high. Banks
aren't lending to each other. You probably can find an explanation of
what the TED spread is on the Web.

http://calculatedrisk.blogspot.com/2...ff-charts.html
The TED spread measures the difference between the three month US Treasury
Bill and the three month Eurodollar Future.

What I'm saying is that governments shouldn't be saying that they
will support
the banks, they should be saying "go about your business in a normal
way or
you won't even have a pair of shorts to cover your nakedness"

They can't go about their business in a normal way. In a week or two
they may not have a pair of shorts, either.

Much of this is over my head, Mark. We're being inundated with the
basics, but if you want know more, I hope that John Carroll or Unka'
George will pipe up.

The practical immediate difficulty manifests first in international trade,
something the US has become increasingly dependent on.

An American importer of Japanese machine tools, for example, has rate
exposures in multiple markets.
Foriegn exchange is the obvious one but there is also interest rate and
commodity risks involved at the very least.
The machine tool builder has a lengthly build cycle from order to shipment
and in that time they can end up with real financial heartburn. What they do
is have their bank or broker create a semi fixed interest rate trigger swap
with a foriegn exchange hedge.

This would be combine a semi fixed Yen interest rate swap and use a Yen/USD
trigger.To come up with a rate, or discount for this, you use the Yen
forward interest rate curve to generate the swap discount and the exchange
rate average over a two year period to determine the value of the flat rate
forward component of the instrument. These are, in effect, an order to buy
dollars and short the flat rate forward.

You now have an instrument that sells for three to five percent of face
value and the flat rate forward need not use a face value at all. The bank
or financial institution involved charges a premium above their costs as a
fee. That's how they make money and it is often refered to as an origination
fee.

When the Japanese ship there machine and the US customer recieves it,
payment is excecuted at the face value of the contract and the banks
involved trade the pieces of paper you built as a hedge to equalize the
amount. Any number of risk factors can be embedded in these instruments and
losses in one market are covered by gains in another.

What we are seeing today is that these transactions are becoming
increasingly difficult to reconcile with hedges. Banks want real money
because they have lost confidence in the value of the paper hedge and the
institutions behind them. They, therefore, have to go to the market and
borrow on a short term basis to complete transactions and it's an excercise
where they have no real choice. Nobody has those kinds of reserves.

Given the failures of so many financial institutions for all kinds of
reasons the interbank lending process has closed up or become horrendously
expensive.

The worlds central banks have tried to solve this by increasing liquidity.
It doesn't work very well because you can't really solve a solvency issue
with liquidity unless ( and this has sort of happened ) you pump so much
money into the system that nobody gives a **** anymore about possible loss.
They just charge a butt load for the service.

As truly global as the US economy has become, you won't be able to buy goods
at all in six months if this isn't fixed but it won't matter - nobody will
have a job before that time comes.

All of this comes right back to the CDS/CDO/Foreclosure issue. There isn't
any trust in the integrity of the worlds banking and financial system and
it's a system that is a lot more dependent on trust and integrity that it is
on money.
We've got LOTS of money. It's the trust and integrity portion of the
equation that a few bad apples have gleefully destroyed.
Nobody wants the other guys paper.

Bad Dog.
Very Bad..........


--

John R. Carroll
www.machiningsolution.com

On 2008-10-03, Hawke wrote:
It's clear that some people just aren't worried about what may happen if
emergency measures are not taken. This is an attitude you see all the time
when things are about to go bad, real bad. No matter what the warning there
are always a bunch of people who say we're not worried about the
consequences. These people are usually buried soon after saying that. It
goes along with "famous last words". You saw this after Katrina and the last
hurricane that hit Houston, people were coming out saying we should have
listened when they warned us not to stay. Well, people are being warned and
they don't want to heed it. Hopefully, the cavalier attitude of these folks
will not carry the day. I for one would rather not see another depression.
If the experts are pretty much all saying this is not something to leave
alone I think it makes sense to listen to them. There are always some people
giving wrong advice. In this case those are the ones saying we don't have to
act, and decisively. Ignore them.

And where were these "experts" before the crisis?

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On Fri, 03 Oct 2008 07:00:56 -0500, Ignoramus26581
wrote:

And where were these "experts" before the crisis?

Causing it.

If I run my business looking only at grabbing the most I can in the
present Quarter and thinking I can do that forever, I deserve to go
down, and there is NO reason why you should bail me out.

Being told, in essense, "We gave loans to Walmart cashiers for
McMansions we knew they could not pay for but thought only of the
bonuses or commissions, then took the junk, rebundled it, and sold it
and sold it, and " If you don't bail us out, we'll trash your
401(k)'s"

Know what? I have been through layoffs and recessions before.
Like most metal workers I can repair or make my own stuff and grow my
own food if I have to. Unlike stock-churning, widow fleecing paper
shufflers, I have SKILLS.
To hell with it. Years ago these people were gentlemen enough to hurl
themselves through windows. Let them go do it.
I am semii-retired, and living in part on my 401(k). I'll survive. Go
ahead, hold it for ransom, trash it or whatever. As long as the
people who caused this go down, it's worth it.
Forty years in Fortune 500's I watched incompetent senior management
get their golden parachutes after ruining divisions. Even fifteen
years ago it cost us $9MM to get rid of one of these worthless
parasites, after he drove his division to closure...and then he went
on to a bigger position.
We eliminated R&D because it only returned 8% CPFF, and learned that
we could make much more spinning off stupid new issues. Guess what?
In five years we had NO new technology to sell..but that's OK, because
the quarterly balance sheet looked good and the parasites got their
bonuses.
Then it all fell down. Eating the seed corn, as it were.

An example of the mentality is last week a London banker threw himself
in front of a train because his net worth went from 550MM to 330.
"I can't LIVE with a Net Worth of ONLY 330MM!"

IF ONLY SOMEONE WOULD HAVE GIVEN HIM 220MM!
O The Humanity.

Well, *I* could live on 330 MM Pounds or Dollars just fine.
And I would not even have to have a vegetable garden, nor raise
chickens, which is what I a lilkely to be doing next year.

"Ned Simmons" wrote in message
...
On Thu, 2 Oct 2008 23:01:55 -0400, "Ed Huntress"
wrote:


Everybody wants your cash right now. You ought to be able to drive a good
bargain if you're a good payer.

You wouldn't know it by looking at CD rates. I went shopping today and
the local banks are offering around 2.5%. It looks like you can do
somewhat better by going to a brokerage. What's up with that?

That sounds like a question for John Carroll.

--
Ed Huntress

"John R. Carroll" wrote in message
...
Ed Huntress wrote:
"Mark Rand" wrote in message
...
On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:



They are going slow because they are scared out of their wits that
they won't have enough cash to pay for a run on the securities their
customers are holding, or a call on their margins. They're holding
onto what cash they have. John has been telling me in e-mail about
the value of something called the TED spread. It's very high. Banks
aren't lending to each other. You probably can find an explanation of
what the TED spread is on the Web.

http://calculatedrisk.blogspot.com/2...ff-charts.html
The TED spread measures the difference between the three month US Treasury
Bill and the three month Eurodollar Future.

What I'm saying is that governments shouldn't be saying that they
will support
the banks, they should be saying "go about your business in a normal
way or
you won't even have a pair of shorts to cover your nakedness"

They can't go about their business in a normal way. In a week or two
they may not have a pair of shorts, either.

Much of this is over my head, Mark. We're being inundated with the
basics, but if you want know more, I hope that John Carroll or Unka'
George will pipe up.

The practical immediate difficulty manifests first in international trade,
something the US has become increasingly dependent on.

An American importer of Japanese machine tools, for example, has rate
exposures in multiple markets.
Foriegn exchange is the obvious one but there is also interest rate and
commodity risks involved at the very least.
The machine tool builder has a lengthly build cycle from order to shipment
and in that time they can end up with real financial heartburn. What they
do
is have their bank or broker create a semi fixed interest rate trigger
swap
with a foriegn exchange hedge.

This would be combine a semi fixed Yen interest rate swap and use a
Yen/USD
trigger.To come up with a rate, or discount for this, you use the Yen
forward interest rate curve to generate the swap discount and the exchange
rate average over a two year period to determine the value of the flat
rate
forward component of the instrument. These are, in effect, an order to buy
dollars and short the flat rate forward.

You now have an instrument that sells for three to five percent of face
value and the flat rate forward need not use a face value at all. The bank
or financial institution involved charges a premium above their costs as a
fee. That's how they make money and it is often refered to as an
origination
fee.

When the Japanese ship there machine and the US customer recieves it,
payment is excecuted at the face value of the contract and the banks
involved trade the pieces of paper you built as a hedge to equalize the
amount. Any number of risk factors can be embedded in these instruments
and
losses in one market are covered by gains in another.

What we are seeing today is that these transactions are becoming
increasingly difficult to reconcile with hedges. Banks want real money
because they have lost confidence in the value of the paper hedge and the
institutions behind them. They, therefore, have to go to the market and
borrow on a short term basis to complete transactions and it's an
excercise
where they have no real choice. Nobody has those kinds of reserves.

Given the failures of so many financial institutions for all kinds of
reasons the interbank lending process has closed up or become horrendously
expensive.

The worlds central banks have tried to solve this by increasing liquidity.
It doesn't work very well because you can't really solve a solvency issue
with liquidity unless ( and this has sort of happened ) you pump so much
money into the system that nobody gives a **** anymore about possible
loss.
They just charge a butt load for the service.

As truly global as the US economy has become, you won't be able to buy
goods
at all in six months if this isn't fixed but it won't matter - nobody will
have a job before that time comes.

All of this comes right back to the CDS/CDO/Foreclosure issue. There isn't
any trust in the integrity of the worlds banking and financial system and
it's a system that is a lot more dependent on trust and integrity that it
is
on money.
We've got LOTS of money. It's the trust and integrity portion of the
equation that a few bad apples have gleefully destroyed.
Nobody wants the other guys paper.

Bad Dog.
Very Bad..........


--

John R. Carroll
www.machiningsolution.com

See? This is why I'm a writer instead of a financial guy. My guts would be
on the floor before I got to the second paragraph of that. d8-)

--
Ed Huntress

Ed Huntress wrote:
"John R. Carroll" wrote in
message ...
Ed Huntress wrote:
"Mark Rand" wrote in message
...
On Thu, 2 Oct 2008 10:43:19 -0400, "Ed Huntress"
wrote:




See? This is why I'm a writer instead of a financial guy. My guts
would be on the floor before I got to the second paragraph of that.
d8-)

LOL

--

John R. Carroll
www.machiningsolution.com

Rob Fraser wrote:

The executives at the bank I worked for are being moved up a few floors- The
windows don't open!!!


They will be closer to the roof, too.


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