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modom (palindrome guy)[_2_]

On Sun, 3 Aug 2008 17:06:01 +0000 (UTC), (Steve
Pope) wrote:

>modom (palindrome guy) > wrote:

>>It's no wonder that no less an investing wizard than Warren Buffett
>>called derivatives "financial weapons of mass destruction." In the
>>current credit crisis nobody can tell what they're worth anymore. And
>>the so-called over-the-counter trade in derivatives is largely
>>un-regulated. The really smart guys who dealt them turned out to be
>>just as clueless as the schlub who lost his house. They got Monopoly
>>money mixed in with the real stuff and can't sort it back out.
>>
>>The S&P financials index has fallen 32% this year. So far. I've seen
>>two years of gains in my retirement investments disappear. So far.
>>
>>There's a reason for regulations in the financial markets.
>
>This is as succinct a description of the problem as I've seen.
>I hope your retirement savings recover some of these losses.
>I'm seeing a similar issue, although for me the still-mounting losses
>have not yet wiped out the previous year's gains.
>
We're in it for the long haul -- ten more years, at least. And I
misspoke in my anger: the loss of two years' gains applied only to the
one mutual fund, not to the whole shebang. The whole portfolio has
taken a hit, but not as bad as that.

I'm about to do some serious rebalancing -- keep putting it off
because of inertia and a vague hope that financials will rebound.
Overall that's a dumb idea; nobody times the market right. But man,
am I kicking myself when I KNEW there was a housing bubble and didn't
connect the dots to my exposure to banks. I knew the speculators and
house flippers were going to get creamed and failed to see that I was
positioned for a hit from the fallout.

When we bought our current house about four years ago, a real estate
agent friend told us she'd seen people getting mortgages for 110% of
the appraised value of the property. In retrospect, big loud clanging
bells should have tolled in my head. I already knew that
loan-originating banks nowadays sell mortgages, so they don't
necessarily have as much of an interest in the quality of the loans as
they once did.

Ah, hindsight.

>> Bush said the other day that Wall Street got drunk and now it
>> has a hangover. I'd say it's time to find a bartender willing
>> to cut the drunks off in time.
>
>The problem is that most recovery proposals involve taking
>actions that will prop up the value of U.S. residential properties
>(mostly, by providing yet more money for real estate loans).
>The idea is the property values need to be propped up, not
>only to protect what's left of the CDO values, but so that
>local governments have enough of a tax base. This is a particular
>problem in California.
>
>A secondary problem is that, since the federal government did
>drop the ball on regulating this thing, the foreign investors
>from Emirates or Singapore do not feel they should take a total
>loss and the feds should step in with some cushion. I can't
>exactly blame them for this. After all the feds were supposed
>to be regulating loan originators and borrowers and they weren't.
>
Yeah, the debt issued by Fannie and Freddie to help them buy their $15
trillion in mortgages is held all over the world. This means that
even investments in the European market and Asia are at risk for more
losses because of bad loans in Florida etc.

Our taxes are paying to guarentee that debt now. The alternative, it
appears, is unthinkable.

Maybe rebalancing should include a bean can (OBFood) buried in the
back yard.

--
modom

I have long maintained that Texans are not easy to love: we are, like anchovies, an acquired taste.
-- Molly Ivins
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