Black Monday on Wall Street/London?

[azza33]

(Snick @ Sep. 28 2008,21:22) same same, since the bonds are based on properties (mortgages, CDOS, etc..)

I understand why you are saying same same....

But its not!

If property prices were not crashing, borrowers would see a future and many would battle to pay off the mortgages.
Then bond holders would get some return on their investments.
And consequently the implosion in the CDO and all other markets would not have happened.

Instead, as many property owners are only seeing large negative equity positions accumulating and continually downward spiraling prices, they don't pay at all, walk away and hand the keys back.
Nil bond return, CDO markets collapses, bank defaults etc ... current environment.


So its very much a property collapse!

[azza33]

Nice get Snick!

That's amazing that AIG is linked back to Drexell and Michael Milken.

btw... i admire Michael Milken... very interesting fellow!

[Snick]

azza33, I'm agreeing with you it is a property collapse. And that collapse caused the bond market to collapse, and liquidity to freeze, but the Fed plan is aimed at the Bond Market not the Property Market.

One (whimsical) alternate plan was for the Fed to buy up all the unsold and empty homes on the market, and then burn them to the ground ! That would help the property market, and would be cheaper than 700 Billion !

[azza33]

(Snick @ Sep. 28 2008,21:38) azza33, I'm agreeing with you it is a property collapse. And that collapse caused the bond market to collapse, and liquidity to freeze, but the Fed plan is aimed at the Bond Market not the Property Market.

OK we are now on the same page

But i am a believer also that they are trying to save the skins of many of the exisiting banks such as CITIBANK whom i am sure would breach TIER 1 & 2 capital requirements if they wrote down there Tier 3 assets to levels like Merryl did.

[mirimark]

(Snick @ Sep. 28 2008,18:43) The market will surge Monday, and lose it by the end of the week when some other domino falls.

[azza33]

How did we get to this point?

Personal Observation:

As you may or may not have worked out, i work in the financial industry and lend money for a living.
During this time, i being telling management they are making crazy decision with lending policies - especially that low doc and easy, fast credit.

However, the key to why everything has fucked up so badly in my eyes is actually quite simple.

There are two competing forces at an lender:

1) People who make credit decision - risk control
2) Sales

Over the past decade Sales has been able to influence risk in my observations.
The sales influence at my workplace has been disturbing to say the least.
Quite frankly, sales should NEVER be able to directly consult with the risk control area.
Any decision by risk should be final and Sales should have no ability to argue to manipulate the situation.
Unfortunately this has not been the case and risk control has been very weak - the rest is history.

Strangely, banks are very knee jerk organisations and until a major event occurs they seem to just coast along awaiting the next tsunami.

[Tomcat]

(azza33 @ Sep. 28 2008,21:20) The process is well advanced and 500 billion of garbage has been written off;

eh!.. what do you mean written off.

The taxpayer picks the bill up dont they, around 3,000 bucks per USA household. That will have an effect .. besides this is far from over. How much toxic debt is actually extant in the world that we dont know about?, we will find out pretty soon.

Forget what the markets say tomorrow as this will blow up again any day. How many institutions can be saved in total is the big question?

Time to dig a bunker ....

[azza33]

No Tomcat, the write-offs are assets on companies balance sheets.
These assets are stripped from the balance sheets of the companies and the poor shareholder equity is smashed.

Then they raise capital to improve the asset position of the company, and effectively dilute the value of the existing guys when the new money from China, Japan, Middle east buys a chunk of the company.


The $3000 per household could relate to the new plan being put forward.

[azza33]

Interestingly i read that New York city depends heavily on taxes paid by Wall street companies and especially the financial stocks to service its budget.

Due to the massive losses, these companies won't be paying taxes for a long time!

So poor old NYC is in a bind and will need to get revenue from somewhere else!
- I wonder who? ummmm... average Taxpayers

[JaiDee]

Nothing much will happen IMO


at least that's what I am praying for!

my 401K has gone backwards long enough

[TTChang]

(azza33 @ Sep. 28 2008,22:12) ......, i work in the financial industry and lend money for a living.  ... i being telling management they are making crazy decision with lending policies - especially that low doc and easy, fast credit.  However, the key to why everything has fucked up so badly in my eyes is actually quite simple.

There are two competing forces at an lender:  1) People who make credit decision - risk control   2) Sales

Over the past decade Sales has been able to influence risk in my observations..

Azza, me too.  The reason I left Banking 3 years ago was probably that I wasn't prepared to sell my soul for the sales targets - and I was working for one of the more conservative ones  

House of Cards? There were only a few really talented guys I worked for.  And Henry Paulson wouldn't have been amongst them. OMG, is our economic wellbeing in his hands?  

I voted down 5%+ ..... I'm not even sure that a good deal is going to appear.

[strocube]

Thanks for this discussion guys. I know fuck all about finance, but it was even obvious to me that this situation with inflated property values was a fucking bubble. I can remember joking with friends a few years back about the tulip bubble of 1673.
When you've got Radio Shack managers buying 700k homes you know something is not right.
My gut feeling about the bail out, is that it is socialism for the investment class. However, some people are saying if the thing is left to collapse, the consequences could be far worse for more people than the cost of the bail out. Is that right? I don't know.

[manarak]

European Markets will open stable (i.e. +/- 1%), the USA will announce that the plan is finally accepted by all parties, with some compromise. The announcement will take place before european markets close. After the announcement, all markets will go up by a solid 3%.

[Tomcat]

(azza33 @ Sep. 28 2008,22:19) No Tomcat, the write-offs are assets on companies balance sheets.

According to the Daily Telegraph it states that USA Govt are to buy up to 700 Billion of troubled assets from ailing banks. This is what i was alluding to....some poor sucker has to pay

[Snick]

Not looking good right now, can I change my vote to "Abandon hope" ?