Posted: Sun Jan 20, 2008 1:02 pm Post subject: Re: Surviving a Financial Meltdown
I've invested almost everything I have (I've kept some energy funds) in GLD and the ProShares Ultrashort funds and they have been paying off like gangbusters. I was all self-congratulatory on my brilliance until I read the Ticker forum listed above and realized that even the Ultrashort funds could go belly up and leave you with nothing since those funds use the same financial instruments as all the other crap. I think I'm going to hold on to them for a while longer and hopefully get out of them before they too seize up. Hopefully Bank of America will be the last man standing and I'll still be able to get cash out, but maybe I should have a few grand on hand to literally put in the mattress. I'm debt free which is good, but if I lose my job and am out on the street like everyone else I don't know what I'd do. Even if I am sitting on a pile of food I don't think it would be long before the other residents of the tent city wise up about my stash. I already have a good sleeping bag, portable stove, water filter, and a good pack from my backacking hobby. _________________ One of these now am I too, a fugitive from the gods and a wanderer, at the mercy of raging Strife.
--Empedocles
Posted: Sun Jan 20, 2008 1:03 pm Post subject: Re: Surviving a Financial Meltdown
Chaparral wrote:
I'd add that cash in USD (for those of us in the states) will be far preferable to gold or silver in the near term as the metals will crash along with all the other stocks and commodities. Most people recognize greenbacks more than K-rands and quarter eagles anyhow.
Precious metals won't crash. Margin buyers will be flushed out, but the core of purchasers who buy pms are the type who have already made basic preps, including stores of cash, on hand. In nominal terms some commodities, even with demand destruction, due to sharp interest rate cuts and devaluation of the dollar and weakening of other currencies, should go up. There's going to be a rush into tangible assets, apart from land and housing, already used and abused as a safe haven.
Posted: Sun Jan 20, 2008 1:33 pm Post subject: Re: Surviving a Financial Meltdown
I've been thinking that if this turns out as the worst-case scenarios have been predicting, Osama Bin Ladin has got to be laughing his ass of and will be able to claim that he succeeded in destroying America. Afterall, 9/11 caused Greenspan to lower rates to 1% to restore confidence which is what has caused much of this mess. _________________ One of these now am I too, a fugitive from the gods and a wanderer, at the mercy of raging Strife.
--Empedocles
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 3:45 pm Post subject: Re: Surviving a Financial Meltdown
For those who may have missed this on another thread, here are two posts I made on the financial meltdown, which don't offer advice, but show that this is a very real crisis. In military terms, its as if you are sitting in your foxhole in the middle of the night and the trip flares on the perimeter defense are going off. You can't see exactly who is coming or in what force, all you know is that someone is coming. So, hunker down, go to 100% security, and get ready for whatever comes your way.
seahorse wrote:
Go ahead and attack Cramer, but everywhere we look, it appears all banks are in trouble and scrambling for "additional capital" even the prestigious Swiss bank UBS
Quote:
reports that UBS is losing assets under management in its Swiss private banking and asset management businesses, as a result of its problems linked to the subprime mortgage crisis.
Quote:
A third Swiss Sunday paper, called Sonntag, warned that the exposure of Swiss banks to the U.S. commercial real-estate market - which has so far suffered not nearly as much as that for risky home loans - is also huge.
The worse of the article is this:
Quote:
but that the future outlook was subject to the resilience of the U.S. economy.
Housing hasn't bottomed, and already people question whether the banking industry can survive. So, how will banks survive the bigger issue, defaulting commercial loans:
Quote:
In a second table, the newspaper lists the size of commercial mortgages. That of Credit Suisse amounts to $22.57 billion and that of UBS to $10.07 billion.
In December, Credit Suisse Chief Executive Brady Dougan had confirmed in a newspaper interview, that the bank has sizable exposure to this market.
"There are other areas, such as commercial mortgages and loans for corporate buyouts, where we have a markedly bigger exposure. In these areas, we need more patience," Dougan had said in an interview with Swiss daily Tages Anzeiger.
Despite the fact that many here don't like Cramer, no one has yet disputed the facts underlying Cramer's very grave concerns. They are very real. Its almost impossible to imagine how a financial collapse can be avoided. It will, at the very least, require massive intervention by the Fed, quite possible desparate measures including the stupid stuff spouted off by Hillary that interest rates should be frozen. In the end, I don't see how even the Fed can do anything about it. In the end, debt either has to be paid or is wipe out, either written off the books or through bankruptcy. I don't see these massive debts can ever be repaid, not even by the Federal coffers. The debts are simply too big for individual companies to write off and stay in business. Their only out will be bankruptcy, just like for individuals. So, it seems like a financial armageddon. I've yet to hear anyone say how this can rectifiy itself, and I am all ears.
Here are some memorable quotes from Ludwign Von Mises concerning credit booms and bust.
Quote:
True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.
Quote:
The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration.
Quote:
True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.
How is it these quotes were all before the Greenspan era but still ring a bell with us? As the Bible says, "There is nothing new under the Sun."
It appears that we will all have the misfortune of revisiting the Great Depression. We look back at the last Depression and refer to our Grandparents who suffered through it as the Greatest Generation. Are our children ready for the coming "disastrous . . . moral ravages"? Will our children emerge from this as the next Greatest Generation?
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 3:50 pm Post subject: Re: Surviving a Financial Meltdown
Again, I would like to re-emphasize selling anything you don't need. Financial crisis or not, you can always use the money. But, if this financial crisis is brewing, you definitely want to sell it now while it may still have some value. Sell if before everyone else starts selling all their possessions in financial desperation. For example, toys like boats, RVs, old camper trailers, 4 wheelers, anything that may have value, sell now while you can.
Also, with the stock market dropping 2000 points this month, it appears the big boys are already running for the doors, and probably we should join the stampede.
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 4:06 pm Post subject: Re: Surviving a Financial Meltdown
Although this thread wasn't intended to debate a financial meltdown, I am including news about the trouble banks are in so that people will understand this is a real crisis brewing and individuals need to take action to protect themselves. Its no different than living in Florida and being told there is a hurrican heading your way. Maybe it hits, maybe it doesn't. If it does hit, who knows at what Category it will hit. But, no matter what, there are always things you do to prepare for any storm, including financial ones.
Here's the latest bad news:
seahorse wrote:
This is a post from LATOC. These dismall stats are probably typical of a lot of smaller US banks. After all, why would they be in any better shape that the big boys?
Quote:
My broker dumped me into this national bank in Florida a couple years ago. It is small but I sell it tomorrow. This is from the FDIC.
PAST DUE CONSTRUCTION & DEVELOPMENT LOANS $11, 577
Loan Reserves $ 3,087
This bank is heavily insured by FDIC. Over half the deposits.
I Know, I know... just dump it! But this might be rather normal in high roller states like California and Florida. The December 31, 2007 numbers are not due yet but they must be a disaster.
This is an old local bank where the Oranges are turning into housing developments. These Republican Booster Club Mason types probably do not know what hit them.
Joined: Mar 12, 2007 Posts: 1004 Location: As close as I can get to the beginning of the pipe.
Posted: Sun Jan 20, 2008 4:07 pm Post subject: Re: Surviving a Financial Meltdown
Seahorse, it looks like your fight or flight response has kicked in. Can I ask what tipping point or bit of news triggered your adrenal gland? Or was it just synthesis of everything? _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 4:11 pm Post subject: Re: Surviving a Financial Meltdown
seahorse wrote:
US financial crap storm blowing into Canada:
Quote:
BCE investors fear market turmoil may shutter sale
TheStar.com - Business - BCE investors fear market turmoil may shutter sale
January 18, 2008
THE CANADIAN PRESS
MONTREAL–Shares in BCE Inc. (TSX: BCE) continued to fall Friday as nervous investors fear U.S. credit market problems could jeopardize the $51.7-billion sale of the telecom giant to a private equity consortium.
The Montreal-based company's shares were down for the fifth consecutive day, losing 18 cents to $36.35 in trading early Friday afternoon.
The shares are down from a peak of $41.80 in July.
Analysts say investors now believe there's only a 50/50 chance the sale announced in June will proceed to a group led by the Ontario Teachers' Pension Plan. The group offered $42.75 per share for BCE and plans to finance the deal with up to $40 billion of debt.
Investors appear to be spooked that the ongoing credit crisis in the U.S. could force banks to renege on their commitments to finance the largest deal in Canadian history.
Adding to the uncertainty are reports of several large deals collapsing over financing problems.
The prospective buyers of Canada's largest telecommunications company called the concerns "noise" and said it continues to focus on closing the deal in the second quarter of this year.
Joined: Apr 03, 2004 Posts: 6580 Location: My Grandkids' Farm
Posted: Sun Jan 20, 2008 4:17 pm Post subject: Re: Surviving a Financial Meltdown
Would not one depending on a paycheck want to put a big emphasis on keeping it.
Be the best employee they can be? Volunteer enthusiastically for latrine duty should it come to that?
Cash, of course is King, but water and food (and seeds for a well-worked kitchen garden) in the pantry trumps cash every time in my book.
But as we have seen cash is buying less and less nowadays with the devaluing dollar.
I’m thinking the same as I always have; build your skills, tools and pantry and limit your exposure to oil and a Pink Slip.
Consult here for others' thoughts.
Seahorse I'd love to see you post up your 5 Rules there. _________________ Make a plan and work it:
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 4:28 pm Post subject: Re: Surviving a Financial Meltdown
Iaato,
My fight or flight syndrome has kicked in. It wasn't a sudden reaction but was instead the product of the last few years seeing this housing boom go bust from my perspective as a lawyer dealing with a lot of real estate issues.
For example, as early as 2004, I began to worry about the real estate issues, maybe even 2003. I was worrying, bc our office has a few banks as clients, realtors, developers, builders and materialmen. Suffice it to say, I saw problems brewing.
I was so concerned, that in 2005 I sold three rental properties I owned. It was hard to get my wife to agree to it. In fact, she only did it bc I basically demanded it and she didn't want to strain our relationship. But, everyone, including her, thought I was crazy, bc real estate prices had never been better.
Thank God we did. Looking back, we sold at the peak of real estate prices nationally.
Now, I've seen things get real ugly. Lots of bankruptcies, lots of developments which will never be finished, local sales tax revenues dropping, cities reducing budgets, cutting programs. I've got a claim against an estate where a builder committed suicide. I've had people in my office that can't pay their utility bills.
But, this is still only the beginning. Our local housing market hasn't bottomed yet? How do I know? Because the big projects haven't been foreclosed yet. They will, bc the building and buying has stopped. These few big builders, when they go, will take some of the local banks with them, thus the local banks have been carrying this dead weight as long as possible, but that will end.
The housing bust isn't over, and now the commercial bust is starting to rear its ugly head. A local bank here has projected that the commercial side is overbuilt. Locally, we've had the beginning of a few foreclosures on built but unsold commercial buildings. If the banks are straining under the housing bust, I ask myself how can they survive the commercial bust layered on top? If anyone sees an out, I surely want to know.
From everything I can gather, the housing and commercial busts are national trends. So, when I see guys like Cramer talking about this being a national problem, I don't have to be convinced.
This is a banking crisis unprecedented since the Great Depression. This is far bigger than the S&L crisis of the 80s, this is not the tech bubble which never affected banks, this isn't a 70s oil crisis, this is a crisis which could very easily bring down the US and world banking system, a crisis talked about by many, not just Cramer who is coming late to the game.
My tipping point is it seems to be upon us. We've shed 2000 points from the stock market in 2 weeks. This tells me the big boys are running, and maybe I should be running. We've got Bush and the Republicans proposing bailouts to ward off a recession (hah, we should be so lucky). So, when the Federal gov't starts talking about passing out money, literally disregarding free market capitalism and giving out welfare to everyone, this tells me there is a real big problem and it is upon us. A trip flare just went off.
Joined: Jun 13, 2007 Posts: 3642 Location: Minniesotuh
Posted: Sun Jan 20, 2008 4:36 pm Post subject: Re: Surviving a Financial Meltdown
I suspect that the 'free' money (who are we borrowing it from??) is just a treat to keep the kiddies quiet a bit longer. _________________ "RRrrruuuunnnn!!!" ~Apocalypto
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 4:43 pm Post subject: Re: Surviving a Financial Meltdown
I posted this article back in December 07. Its worth reading again, bc this isn't only Cramer ranting. This comes from a banker in the UK. Notice the part where he says if somethings not done, it will make 1929 look like a walk through the park (my emphasis in bold).
Quote:
Call to relax Basel banking rules
By Edmund Conway, Economics Editor
Last Updated: 1:13am GMT 16/12/2007
The Government must suspend a set of key banking regulations at the heart of the current financial crisis or risk seeing the economy spiral towards a future that could "make 1929 look like a walk in the park", one of Britain's leading economists has warned.
Cutting through the normal banking rules
Peter Spencer has called for a suspension of the Basel system of banking regulations
Peter Spencer, of the Ernst & Young Item Club, said conflicts caused by the Basel system of banking regulations, which determine how much capital banks must raise to keep their books in order, are the root cause of the crunch and were serving to worsen the City's plight.
The regulations meant that banks forced to take off-balance sheet assets from troubled structured investment vehicles on to their books had little choice but either to raise money from abroad or cut back dramatically on their spending, he said.
He warned that, if London's money markets remained frozen and the authorities retain the strict Basel regulations, the full scale of the eventual credit crunch and economic slump could be "disastrous".
Dismissing the assumption that banks are not lending to each other on the money markets because they lack confidence in each others' potential solvency, he argued that they were, in practice, prevented from lending the cash at all because it could leave their balance sheets falling foul of the Basel regulations.
"If these funding routes are not reopened it will have massive consequences for the economy as a whole," he said. "It will make 1929 look like a walk in the park."
He dismissed as "window dressing" the move announced by central banks around the world this week to pump extra money into the money markets and increase the type of collateral they will accept in return, in an effort to get them running again.
"This won't get to the core of the problem: the fundamental lack of collateral. As these problems drag on, the consequences for the macro-economy of not relaxing [the Basel regulations] are unthinkable."
Not only do the regulations, which stipulate that banks must have a minimum of 8pc capital among their liabilities, deter banks from lending to each other, they will also limit the amount they can lend to households and businesses. This could escalate the anticipated economic downturn next year significantly, he said.
His warning follows a speech from Bank of England markets expert Paul Tucker, who said changes to these banking regulations were one of the weapons at his disposal in dealing with the credit crisis.
Prof Spencer said that although Basel II - an updated version of the accord - may loosen the regulation slightly, it is unlikely to be enough to improve the situation.
"The Bank is staring into the abyss," he said. "The Financial Services Authority must go round and check that all banks are solvent, and then it should cut the Basel capital requirement level from 8pc to about 6pc.
"Until then, with the money markets frozen, the Bank will have to go on being the lender of first resort, rather than of last resort."
Information appearing on telegraph.co.uk is the copyright of Telegraph Media Group Limited and must not be reproduced in any medium without licence. For the full copyright statement see Copyright
Joined: Apr 03, 2004 Posts: 6580 Location: My Grandkids' Farm
Posted: Sun Jan 20, 2008 4:45 pm Post subject: Re: Surviving a Financial Meltdown
Horse, the flare went off 3 years ago when the execs of the biggest developers in the US started selling stock in their own companies under the guise of diversifying their portfolios.
The time to start sounding this bell might just be long past and yelling FIRE now might get some folks trampled.
Suggesting get down might be more practical advice at this time coming from someone with your experience and insight.
What do you think? _________________ Make a plan and work it:
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Sun Jan 20, 2008 4:51 pm Post subject: Re: Surviving a Financial Meltdown
Yes, everyone needs to get down and take this serious. You're absolutely right, that the first signs were way back when the boys in the know started selling their own stock.
Getting serious to me would include cutting out any unnecessary expenditures now, save the money, and learn to do more on less. For example, if you eat out now, stop. Eat meals at home. You save gas and money. Don't take dailey trips to the store, once a week max. Look and shed any unnecessary monthly expenditures, even seriously consider doing away with things like cable or the daily paper if you get them, turn down your thermostat, turn off lights, just anything and everything, reduce options on your phone service. People can and did get buy without call waiting and stuff like that. Don't buy anything unnecessary! Save that money, get used to less. It can't hurt, no matter what happens. Now is the time to do all those things to reduce that you've only been thinking about. If this thing doesn't hit for a few months, you've saved some money. If we get lucky and it changes from a Cat5 to a Cat1 recession, then, you've saved money. You win either way. But do take it seriously.
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