Scobleizer - Latest Comments in We’re in a death spiral

Re: We’re in a death spiral

sanjosemike — Thu, 09 Oct 2008 21:00:08 -0000

NEITHER PARTY DESERVES ANY "REWARDS"

Both political parties led us down this road. Bill Clinton signed a major deregulation bill. Congressional Democrats encouraged (and allowed) Freddie Mac and Fannie Ma to write un-capitalized loans. The Republicans dropped nearly all regulation for large corporations, and allowed the resulting good and bad paper to be re-packaged together and resold.

Corporation execs garnered enormous, bloated salaries while their companies languished. The Repubs encouraged this, as well as permitting corporation execs to over-value their companies to encourage investment, even though their profit margins were inadequate to support that.

What a MESS.

This is going to be painful. Two weeks ago, I thought it might take a month or so for the bottom to occur. I was WRONG!

The market could easily go to less than 4,000 in the coming weeks.

If you're over 55, GET OUT of the market.

It's all a matter of age. You may not have too much longer to protect your 401K. It could take easily another 10 years to wind down from the effects of the worst possible market calamity since 1929.

I am sorry to hear myself say this.

But it is reality.

sanjosemike

Re: We’re in a death spiral

Michael — Thu, 09 Oct 2008 16:30:09 -0000

People panicking is causing these loses which is causing panic... There is a LOT of money to be made through all this nonsense. Just be careful what you invest in.

Re: We’re in a death spiral

CoolProducts — Wed, 08 Oct 2008 16:25:49 -0000

"Lucky I’m isolated at college. Hopefully the economy will have recovered by the time I graduate."

You're kidding..

I'm in college too and I feel the crunch myself..

Maybe I should quit reading the WSJ for awhile?

Re: We’re in a death spiral

Ernesto — Wed, 08 Oct 2008 14:54:01 -0000

The dirty little secrete is that the bad mortgages are not the main problem. They were the spark that lit the pile of gasoline soaked straw. Gathering the straw and soaking was pure human greed. Wall Street has been involved in the biggest Ponzi scheme in the history of mankind, then they blame the poor. The real problem had to do with
Credit default swap
markets.
As I have written in my own blog, this is simply the Biblical truth found in 1 Tim 6:10 Love of money has caused this death spiral

Re: We’re in a death spiral

Rich — Tue, 07 Oct 2008 22:24:34 -0000

Check out this entry by the FDIC:
http://www.fdic.gov/bank/an...
Included is this fun summary of our economy: "The Banking Industry Appears Well Positioned for the Next Recession..."
Date? March 2006 - two years and the world is a whole different place...

Re: We’re in a death spiral

Chris Heuer — Tue, 07 Oct 2008 19:21:53 -0000

I want to affirm the comments made by a few people above - the economy is largely based on models that are divorced from every day life. In short, it is largely a construct of our beliefs about it - whether it is growing or shrinking is also affected in such a way. The more we contribute to the challenges we are facing with inflammatory and sensationalist titles such as this, the worse it is going to be for everyone.

I dont mean to ignore the reality, I just mean dont exacerbate it. The great depression, and from what I understand the failure of WaMu was in some measure a result of a 'run on the banks' - what does this mean really? it means that people freaked out and thought they needed to horde cash in their matresses. By reducing the amount of cash the banks had on hand, it changed their leverage - how much they had outstanding in loans against the deposits. So when the deposits dropped below a certain point, it required them to file bankruptcy even though they weren't 'out of cash' per se.

The point is, what it is, is up to us. Real leadership in a time like this requires calm, rational thought.

Re: We’re in a death spiral

Erwin Blonk — Tue, 07 Oct 2008 18:43:01 -0000

In the late 80s the Sovjet Union fell because it completely regulated the economy, resulting in corruption and a black market out of control. No, I'm afraid Ronald Reagan had little to do with it, since the economy started to slow down in the 70s, the downfall was a matter of time. Economies based on extreme principles will not work.

One other extreme principle is complete deregulation because markets will sort themselves out (hint: they won't). Now here one can claim Ronald Reagan has had a hand in. The S&L crisis was the first fruits of this labor, this one is yet another. But somehow few see it as the failing of a deregulated economy, where banks are allowed to use financial instruments that put layer on layer of leverage products that stand away miles from the real economy, where goods and services are actually produced. Of course we are far away from a barter economy and taking a loan to buy a house or start a business is great, if not necessary. But a loan that is 5 times your annual income for your third car or a bank taking a loan orth many times their assest and buying and reselling mortgages with it, or using it to trade in options and futures (never, ever trade in derivates with money you don't own), that's insane.

[I stole this more or less from an English comedian] If, in the UK, I go to Ladbrokes and want to place a bet worth my annual income on the price of oil going up 15% in 3 months, they'll say 'go home, son, you're drunk'. Banks will not only take thes bets, they will place them themselves, several times a day. With a straight face. It's legal too. Go figure.

Why should I still take the captains of the financial industry (or any industry, remember Enron?) seriously when they prove time and time again they either don't have a clue or see no problem in gambling with other peoples money (and why should they? they get a severance bonus the size of a small countries' GDP and the state will hand them a blank corporate wellfare check for the bank itself)?

The economy cannot be influenced let alone be controlled. So don't do your best to make it worse. Just make sure you build reserves in case of a storm.
And anyone who thinks that keep spending will avert recession: you are as naive as they were in the Sovjet Union. Everything will work in a growing economy. The cardhouses of completely regulated and completely unregulated economies will fall over the first slight bump. There is a middle way. CEOs and governments: redeem yourself be finding it. Now.

Re: We’re in a death spiral

Josh Fraser — Tue, 07 Oct 2008 18:19:07 -0000

read this: http://tinyurl.com/3g6myl

Re: We’re in a death spiral

John — Tue, 07 Oct 2008 15:06:27 -0000

Robert A. is right. It's called "saving," not "hoarding." Nothing wrong with it, good times or bad.

Re: We’re in a death spiral

Jeremy Toeman — Tue, 07 Oct 2008 12:17:24 -0000

We are only in a "death spiral" as long as the media keep telling us we are. The mere reporting of "panic" helps CAUSE panic. Maybe you can use your power/influence to help remind us of the GOOD things going on, as the more we hear about companies creating revenue, opportunities, and jobs, the more confident we will all get.

Re: We’re in a death spiral

Robert Accettura — Tue, 07 Oct 2008 09:37:41 -0000

"Hoarding" isn't a bad thing. It's what should have been happening all along.

For years people have been spending more than they are earning. Now suddenly everyone is either building savings either by choice or by force. Regardless it's a good thing.

Personal savings does help insulate against recessions, which are a normal part of a healthy economy. It pads us for the hard times (that's why it's strongly suggested you have some).

What's the lesson to learn here? Never spend more than you can afford, always put a % of your cash into a place with enough liquidity and stability that you can quickly retrieve it at a moments notice (savings account, money market account, etc.).

Unfortunately everyone is feeling it, even if they weren't the individuals (and companies) who made these mistakes.

Re: We’re in a death spiral

Craig Overend — Tue, 07 Oct 2008 08:11:55 -0000

Robert, if only more people should have listened to Nassim Nicholas Taleb's(mp3) Long Now Seminar talk.

Re: We’re in a death spiral

Dawn — Tue, 07 Oct 2008 02:46:45 -0000

What's to be afraid of? During recessions what money you do have goes farther, your taxes get lower (unless Obama is elected), stronger companies are created, kids and adults alike learn invaluable lessons about saving and budgeting, people start looking out more for their neighbors, families and friends become more creative as they can no longer afford to buy gifts or have somebody else intertain them....

In the grand scheme of things, money isn't as important as we all try to make it out to be. Recessions provide a good, healthy reminder of that.

Re: We’re in a death spiral

Mark M86 — Tue, 07 Oct 2008 00:58:10 -0000

If you have been managing your finances responsibly and avoided the allure of non-traditional mortgages and buy-now-pay-later consumerism, and have no immediate plans to retire, there is no reason to panic. But there is plenty of reason to be cautious and pro-active with what’s left of your money. Cutting-back on discretionary spending is a natural and prudent reaction to this environment, particularly if you work in a market segment that is experiencing or will be affected by the fall-out of the real-estate and credit market downturns. As I work for a company that’s been drastically affected by the current crisis, I can tell you that planning for a 25% decrease in salary is something that realistically needs to be considered. At the very least you should not plan on any big salary adjustments or bonuses for the near term.

I think the stock market still has a ways to go before there's a sustained reversal, (I’ve been predicting low 8,000’s for a while now), so you need to look at your holdings and sell off those that are still at-risk. I think the credit crisis isn't over yet, and won't be until the major consumer credit companies get beaten-up. That will surely be the next wave as people already overextended run out of available credit to off-set their expenses, and start defaulting on balances as they divert available cash to essentials. Companies big into consumer debt will take losses as they write-down balances, increase interest rates to cover risk, and then write down more balances. This will spill over into consumer product sales as credit for new flat-screen TV's and iPods disappears. Coal might be a popular and even sensible Christmas gift this year!

So, government-insured 3.5-4.5% CD’s and high-yield savings accounts are looking like safe harbor right now; particularly compared to the 30% hit the stock market has collectively lost over the past 12 months. Individual corporate bonds might generate better yields, if you are confident in the company’s ability to pay off. The return on federal stuff isn’t worth the effort, and I think muni’s are going to be a problem in 12 to 18 months as tax revenues drop to reflect what’s happening with real-estate markets.

I think it will be a cold winter, quite literally, for many people. But I also think the bottom of the real-estate market is in sight, and by late next summer prices should stabilize. As real estate stabilizes, so should the credit and stock markets. Residential rental properties look like a good investment if they can be purchased at good prices. A big factor in how long this might go on is the severity of the upcoming winter and price of oil, natural gas and coal. Energy commodity markets will play a big part in this equation, as they have over the past 3 or 4 years in driving oil over $50, then $75, then $100 a barrel. Personally, I think some government limits on speculation are going to be needed to keep prices under control.

The people I feel the sorriest for are those who were due to retire in the next 5 or 10 years. I was on track to semi-retire in 10 years. But now my portfolio has taken a huge hit, my company pension is uncertain, and Social Security isn’t looking too good with all this bail-out money being passed-around. Fortunately, at 48 I still have time to build it back up, and maybe with prudent investment and rebounding markets, I can rebuild my losses and still retire as planned. Or maybe I have to buckle-down and save even harder to retire in 20 years.

With any luck, some good will come out of all this. I believe in free markets and capitalism, but I think that there does need to be better control and accountability in the banking, investment and financial services industries. Looking back through history, we see time and time again that these industries have failed to exercise restraint and have resulted in many of our financial crises. We need to do a better job of encouraging long-term growth versus short-term profits. We need to develop and implement long-term strategies for reducing the cost of energy: more oil drilling, more nuclear power, more biomass power, more wind power, more solar power, more electric cars, higher taxes on inefficient cars, lower taxes on diesel cars and fuel; leave nothing off the table. And we need to find some plan for rewarding corporate execs for meeting these long-term goals, rather than focusing on bumping short-term gains and salaries, (I advocate paying execs in stock rather than dollars, negotiated once a year and requiring 50% to be held for at least 24 months).

And consumers need to learn to shun the plastic economy. People should not be buying groceries or paying for Happy Meals™ or Grande Cappuccinos with credit cards. No more 30 years of $10-per-month payments at 24% interest for a new HDTV. Take $80 or $100 out of the bank on Monday, fill your car with gas, (saving 10-12¢/gal versus credit), and live the rest of the week on what’s left.

But most of all, we need to learn to resist the Madison Avenue, and even government campaigns to believe we can spend our way out of financial turmoil and charge our way to nirvana. Gluttony, not frugality, is the sin.

BTW, I am not an economics or financial expert, nor do I play one on TV. I've just got some common sense and street smarts, and my predictions haven't been off-base for a long time. Your mileage my vary considerably!

Re: We’re in a death spiral

francine hardaway — Mon, 06 Oct 2008 21:15:08 -0000

Stop being a fearmonger. It's not the end of a world, it's the bottom of a fierce cycle compounded by 24-hour news and an election coming. Everyone notices everything in real time, and the President yelled "fire" in the crowded theatre, which caused the stock market to plunge. The stock market is just the stock market. It's not the economy, and it's certainly not the end all and be all of life.

Now if I were told I had a serious illness, I might be fearful. But over MONEY???? Future money? Paper losses?

Get your priorities straight.

Re: We’re in a death spiral

Alan Kleymeyer — Mon, 06 Oct 2008 20:50:41 -0000

Those that should be worried are the ones that need money from their investements NOW. If you weren't planning to sell before the recent drops then don't sell now, soley based on the market price of your investements. You only lose money if you sell. If the fundementals for the company have changed then sure you should reevaluate your holdings.

Re: We’re in a death spiral

Darwin — Mon, 06 Oct 2008 20:35:46 -0000

Hi Everyone,

we can be fearful and do nothing or goes berserk. But I want to encourage everyone to keep our heads up and keep on doing great things. For me, I'm steaming ahead with my startup, and I hope everyone is the same. Fear is a bitch, and we need to kick it in the rear. Onward!

Re: We’re in a death spiral

Zach — Mon, 06 Oct 2008 19:39:00 -0000

If someone is naive enough to think the dollar is the most postive thing that is coming from this mess they are sorely mistaken.

Watch when this 700 billion dollar bailout does to our inflation, and the continual destruction of the dollar the government is doing that isn't even restoring confidence to the markets.

No, the best thing we get about this is cheap markets and lucrative deals ;)

Re: We’re in a death spiral

Thomas Beek — Mon, 06 Oct 2008 19:26:38 -0000

If you can still invest, some savvy people are saying, "buy silver."

(The good news is that most of us cannot afford more debt.)

Re: We’re in a death spiral

Genaro Moreno — Mon, 06 Oct 2008 19:01:15 -0000

Dr Ron Paul said: "We are looking at the movement of America being a democracy toward a socialist society"

The U.S. is not a democracy. It's a PLUTOCRACY. The measures will not move America toward socialism. These measures are set in motion to protect the wealthy. Simple as that.

Re: We’re in a death spiral

Bob Ngu — Mon, 06 Oct 2008 18:33:29 -0000

If you have spare cash, invest smartly now and wait it out, that's what Warren Buffet did with some of his billions, it's smart finance.

Re: We’re in a death spiral

Gregg — Mon, 06 Oct 2008 18:30:40 -0000

The markets are going down because they are overvalued.

Grab anything with a straight edge, a ruler, a piece of paper and lay it over the plotted points on the following 3 charts connecting around 1982 to 1994. Notice where the trend line take you for 2008.

http://finance.google.com/f...
http://finance.google.com/f...
http://finance.google.com/f...

Dow = 7000
Nasdaq = 1200
S&P 500 = 750

Re: We’re in a death spiral

wolfsbayne — Mon, 06 Oct 2008 18:28:52 -0000

perfect reason why you shouldn't vote democrat this year. the dems have blocked any chance of reform for freddie and fannie over the years.

the dems guarding freddie and fannie coupled with the mandate that banks maintain a portfolio of 50% of subprime loans is at the heart of this mess.

if you don't believe that, please just shut your computer off and jump out your window.

Re: We’re in a death spiral

Kelly Adams — Mon, 06 Oct 2008 17:57:15 -0000

The good news? This is a fantastic time to buy stock. This is "deal of the century" time. All you need is a bit of available money.

Another piece of good news? Some (most?) people only learn by being seriously disrupted, and I'm expecting a lot of learning is going on right now. The pattern of buying more of everything than you can possibly afford based on the assumption that your earning power will increase "next year" is a self-destructive. Yet a lot of folks have been living this way for years. Buying a $300,000 home with a $200,000 mortgage is reasonable behavior (and yet can still get you in serious trouble). The folks who really need a lesson are the ones buying a $300,000 home with a $400,000 mortgage- how can that be a smart thing to do? And yet it is done.

The one thing that I really wish would change likely never will, and that is the all consuming extreme greed that pervades our society. Healthy growth is 10% per year; cancerous growth is 10% on top of whatever you made last year. 30% this year? Nice, but it better be 35% next year, and your company is a dog if isn't growing at 43% the year after that. Heck, what is wrong with a healthy profit, damn the annual expectation of endless growth?

Back in ancient times (30 years ago), a firm wouldn't lay staff off unless they were losing money. Now they lay people off if their profit didn't grow as much as expected. At every turn, the greed leads to incredibly self-destructive behavior: we are eating our own children here.

Re: We’re in a death spiral

Mike — Mon, 06 Oct 2008 17:26:49 -0000

Lets step back and look at this from a little distance before going crazy....

The economic gains of the last 5 or so years were based on a bubble. Like the tech bubble before it, this one is bursting and we're sliding heavily. The difference between the tech bubble and the housing bubble is that this bubble had a lot more individuals buying into it. The tech bubble had the benefit of not really dealing in tangible things like houses.

Remember that the Dow didn't cross 10k until April of 1999. We spent much of 2002 and 2003 below 10k on the DJIA. We're not even close to our lowest point of 7527.4 on Oct 3th 2002 (Since crossing 10k).

Did we have some massive recession or depression in 2002? Nope. Were times tough in the job market? Yup. Did we bounce back from it fast? Heck yeah.

People are panicing worse than they should. Sensationalist media, and some incredibly irresponsible money decisions are amplifying to the point where people are thinking it's the financial End Times. Even with the loss of 30% on the DJIA since October 2007, we still have very low unemployment. GDP still grows. Outside of banks you don't hear about companies closing their doors left and right. In fact, so far the companies most hurt by this are the ones who were exploiting the bubble the most, who were playing the subprime game.

Everyone repeat after me: It's. Not. As. Bad. As. It. Looks.