What does this say about the culture of reaching for yield, as if the assumption is “yield can do no wrong” ?
if you’re treasurer of a company with a defined benefit scheme with unhedgedliabilities then you have a choice. reach for yield and hope or be replaced by someone who will reach for yield…
seems you get better economic analysis here than from wall street… great call, herr doktor tacitus
Scary, isn’t it?
Didn’t the CEO of JP Morgan request that their company exit the mortgage based assets game late 2006? Maybe that’s why their market cap is now on par with the big players like Citi now.
They have been saying atleast have 20% of your assets in gold. People do not realize that the banks can hit and run. Take all your money and you will not get it back. Gold is always going to go up in times of crisis. Even you could pay for stuff in stores with gold. But money is just that paper. The value can change to the paper it is written on. That is why everyone should have a back up plan. You can not trust the banks have you trusted them with even the slightest mortgage. They can hike intereest in a day and that is the low end.
Any “asset” is only good if you can use it as a media of exchange, which means you would need to find someone willing to accept it. This is the biggest problem I’ve seen with things like gold, junk silver, liquor, etc. (all of which have been suggested as “investments”).
IMO there are three kinds of “investments.”
- those that gain in value (preferred)
- those that hold value (next preferred)
- those that lose value (best to avoid…)
Gold is one of those that holds value. It really doesn’t increase in value, but follows a “real” underlying valuation/reflection of the economy. Illustrated as such: an ounce of gold in 1800 would have bought a man a good suit of clothes. And ounce of gold in 1900 would have bought a man a good suit of clothes. An ounce of gold in 2000 would have bought a man a good suit of clothes. The “price” of the gold may have fluctuated/increased, but what you got for it stayed the same, hence it held it’s value. It is still subject to market forces and people “playing the market” with it, but in the long run it can stay relatively stable.
(As a historical example of “playing,” I recall the run-up in silver precpitated by who I remember as ‘the Hunt Brothers’ many years ago. The increase couldn’t be sustained, and like yesterday’s tech stocks or today’s housing market eventually collapsed.)
The one asset that people don’t own and has been outperforming pretty much everything since Mar-July is… USD cash.
You’re not serious are you? The Euro and Pound sterling are at highs against the US Dollar. When I lived in the UK, the pound was 1.25 US dollars today it’s 1.72.
Is it a better time to invest in something early in the move when almost nobody is on board? Or to wait till much later in the move when the public is involved? All these books about the dollar crisis - the economic situation in the US is dire to be sure, but the real crisis is in Europe and the emerging markets.
Here is a picture of the Euro since 2003
The dollar is weak. It’s not that the euro is really any stronger. What the euro chart reflects is that the federal reserve bank allowed and encouraged the value of the dollar to fall fall for the past two years. So far everything is going according to plan.
Wow, it punched through that trend line with authority.
And the problem was ignored…Until it was to late!
And the hammer fell!
How is it that so many of us saw this coming for so long, and Bush, his Administration and Congres turned a blind eye.
And now the 700 billion dollar bailout that Bush promised would come back to the taxpayers has gone from buying mortgages and/or investing in banks, to what appears to be a free handout!
I don’t think they turned a blind eye. No doubt saw it coming and hoped no one would notice, or at least that it wouldn’t hit until after someone else was in office to take the blame.
I’m now trying to figure out how to get in line for that free money…
I’d find it hard to believe they didn’t plan for it coming… then again… I have a hard time believing anyone can be that stupid, but Bush & co did get “re elected”, so what do I know? These short term thinking problems all these guys seem to have is astounding. Business and government seem not only to be converging, but losing all awareness of anything that makes any sense whatsoever for medium to long term stability and viability.
Wow, even got catlord to step in and respond! I ain’t seen you around in what seems like forever.
Good to see you back, stick around for awhile, if ya can. 
Makes it “cheaper” for the government to fight a war …
I think in many businesses the thinking became centered on immediate profits and large bonuses and the mind-set that either the party would last forever or who cares if it comes to and end as long as I get mine.
I am also convinced that these huge paychecks, bonuses etc. are wholly undeserved. First, you do not have the kind of performance that warrants it especially looking at long-term strategic planning. Second I have become convinced that you could probably train just about any “smart” person to do those jobs reasonably well. From the looks of it several of the smart people here on this forum certainly would not have done any worse.
Mark-in-Dallas: I’m single again, so I have time to be here. lol I’ll be around for a bit.
Bosshank: That’s exactly it. There’s no interest in the medium or long term at all, whether for the company, the government, or the country. Who cares if the company goes under and thousands of people end up on the street because of it? They got theirs! Who cares if we screw up the economy of the entire country, or even the freakin’ WORLD? They got theirs! Who cares if we’re raping the US for gas at $1-$2 per gallon in pure profits (and of course this has to be much worse elsewhere in the world by the looks of it)? They got theirs!
I think it’s time to put all the politicians, sleazy lawyers, crooks, con men, political attack dogs, sheep, lemmings, morons and idiots on a barge that we sail out into the middle of the ocean… and sink.
Think, people. What ever happened to a sense of community? Or caring about your fellow human being? Or a sense of pride and patriotism? Blindly following a warmongering dunce who steals elections and throws our military in harm’s way for political and financial gain is not patriotism! Patriotism is taking care of our country, and the people who make it up. Patriotism is keeping jobs IN the country, because it’s your country! Patriotism is understanding that when someone signs up to serve in the military, they are offering themselves even to the point of being maimed and killed for their country, and that we, out of respect for their devition and patriotism, should never put them in harms way unnecessarily! Patriotism is taking care of our veterans when they come home, not discarding them because it might cost something. Patriotism is being fiscally responsible, not growing the national debt so high that it’s threathening the world economic stability! Patriotism is understanding that the Constitution of the country you live in is to be respected and obeyed, not ignored and changed on a whim! Patriotism is making the whole country united, not saying you’re a “uniter, not a divider” and then doing everything in your power to divide the country so you can do as you please while everyone disagrees over other stuff!
And I think we still haven’t gotten it when it comes to financial responsibility, when we have a $700 billion bailout package that is being treated like a candy bowl, and it’s only a small section of all the bailouts going on.
You can expect that over the next few years, things will be a lot better with Obama in office than they would have been, but we are not going to pull this 747 out of the Bush Nose Dive quickly.
It is not that all leaders and corporate executives are too stupid to think long term. The majority of citizens, at least occassionally, turn their thoughts to the long term also.
Our system has built-in incentives to produce short term results. Think of steering corporations by next quarter’s stock price, or polititians running for re-election trying to get their poll numbers up for the next month. On the personal side, think of easily available loans at low interest rates, and the peer pressure to keep up with socially acceptable consumption. People acting in their own best interest thus steered the society down a perhaps painful path. Something like a modern “tragedy of the commons.”
For the record, the Clinton administration is more to blame for the sub-prime mortgage meltdown than the Bush administration. Clinton pushed for legislation that decreased underwriting requirements for loans/mortgages, and put pressure on banks to make loans accessible to lower income individuals and/or individuals with poor credit (see the community reinvestment act)…going to the extent of penalizing banks who didn’t comply. The overabundance of available mortgage financing caused housing prices to inflate significantly over a short period of time, causing the housing market bubble, and the subsequent housing market bust. It just so happened that all of this came undone during the Bush Administration.
The Clinton administration also repealed the Glass-Steagall act in 1999, which deregulated past restrictions on what could be passed on as a security. With all of these high risk mortgages on their books, the banks took advantage of this opportunity and began packaging these mortgages up into mortgage backed securities…these securities made their way into the investment banks and tied up their ability to lend out the funds necessary for our economy, and all the companies and corporations within it, to operate. This is the cause of the credit crunch and the failure of the investment banks.
In hindsight its easy to say that ‘we should have seen this coming’, but the fact of the matter is, prior to the mortgage meltdown we’re now facing, housing prices and mortgages had historically been very stable, and very safe…and as such, mortgage backed securities were viewed as safe instruments. The conventional thinking prior to all of this is that your home is your safest investment, and the historical data behind mortgage prices supported this notion. The actions taken by the clinton administration caused an economic anomaly in an otherwise long history of stability in the housing market. There are a lot of things that I would blame the bush administration for, but his administration isn’t the root of the economic mess we’re in right now.
Don’t forget…
Oh yes much of this is the fault of our fearless leaders. Much of it lies with big business sending our mfg out of country. But much of this also belongs to us little folk- buying that $900,000 house that we couldn’t afford with an ARM loan, then pulling out any equity and using that to purchase a new BMW, Oh, and don’t forget about those granite counter tops that we just had to have… Greed affected everyone. I see this as a rude awakening for a complacent, spoiled America.
-my 2 cents