Registered User
Joined: 10/26/2005
Posts: 238
|
Should we love them or leave them? AB
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
My opinion ... for what little it's worth ...
The common stock is done ....
As far as the preffered stock goes ...
Major banks have been lobbying the Treasury for the last several weeks trying to preserve the value in the preferred stock ... as they are major holders of the preferred ...
Everybody has known that this was coming ... Bill Gross from Pimco called the Treasury's bluff late last week ... saying that they would no longer purchase any of the debt ...
When the largest bond buyer in the world tells you that you're "cutt off" ... that ought to get your attention as the smart money will likely follow that lead ...
This is going to be a political hot potato ...
If you save the banks' investments ... and screw the common shareholders ... then there will be outrage ...
If you let the banks' investments go south with the common shareholders ... then you just weaken their balance sheets all that much more ...
So ... I doubt that they will tell anybody what their "plan" is until after the November election ...
And my best guess would be that they will find a way to screw the common shareholders ... and leave the banks barely scathed ... if not unscathed ...
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
Looking at this from the standpoint of the best way to play it ...
I would say buy a financial institution that has been badly beaten because of large holdings of Fannie and Freddie debt (not their common or preferred stock) ... as that debt is now guaranteed with the full faith and security of the US ... ROFL ...
Then ... when the bounce is over ... get into a hard currency ...
This is going to cost hundreds of billions of dollars ...
That I'm sure will be printed just for the occasion ...
|
|
Registered User
Joined: 2/5/2006
Posts: 1,148
|
QUOTE (realitycheck) Looking at this from the standpoint of the best way to play it ...
I would say buy a financial institution that has been badly beaten because of large holdings of Fannie and Freddie debt (not their common or preferred stock) ... as that debt is now guaranteed with the full faith and security of the US ... ROFL ...
Then ... when the bounce is over ... get into a hard currency ...
This is going to cost hundreds of billions of dollars ...
That I'm sure will be printed just for the occasion ...
sounds like another bailout, designed to help wall street(debt holders anyway) not main street.
will it solve the housing crisis? probably not.
not sure why this is big news, when everyone knew it was coming.
|
|
Registered User
Joined: 12/31/2005
Posts: 266
|
socialism at its finest.
bailout the banker and finaciers. do nothing for homeowners.
the government can also now set mortgage rates, since they own fannie and freddie.
and at the end of the year paulson will surely move on, leaving the next admin to deal with it.
leave them
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
I find it odd that we're not hearing more about this in the mainstream press ... calling it out for what it is ...
A bailout of Wall Street ... at the expense of the US Taxpayer ...
Who wins in this ?
Every individual, financial institution, government, pension fund, etc .... who holds the subordinated debt of Fannie & Freddie ...
Who loses ?
The US taxpayer just watched the US National Debt potentially increase a gargantuan amount ...
There are no "free lunches" ... somebody pays for everything ...
So ... where will the money come from to pay for this ??
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"sounds like another bailout, designed to help wall street(debt holders anyway) not main street."
Where do you think main street gets its money from?
---------------------------------------------------------------------------------
"The US taxpayer just watched the US National Debt potentially increase a gargantuan amount ..."
emphasis on "potentially".
Thanks
diceman
|
|
Registered User
Joined: 2/5/2006
Posts: 1,148
|
QUOTE (diceman)
"sounds like another bailout, designed to help wall street(debt holders anyway) not main street."
Where do you think main street gets its money from?
---------------------------------------------------------------------------------
"The US taxpayer just watched the US National Debt potentially increase a gargantuan amount ..."
emphasis on "potentially".
Thanks
diceman
well, i've been under the impression most average people work at a job for their money, from that money they pay taxes(for government bailouts and such).
after that, the rest of their dollars(which also happen to be declining in value because of inflation, (due to government bailouts and such), is the where the majority of the publics get their spending money,
i didn't realize the majority of people were drawing money off a fund of bank stocks. lol.
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (diceman)
"sounds like another bailout, designed to help wall street(debt holders anyway) not main street."
Where do you think main street gets its money from?
---------------------------------------------------------------------------------
"The US taxpayer just watched the US National Debt potentially increase a gargantuan amount ..."
emphasis on "potentially".
Thanks
diceman
Well ...
It WILL cost the US taxpayer in a BIG way .... there is NO doubt there ... even Paulson is not denying that ...
$100 Billion to start ...
(Remember back when $100 Billion was a lot of money ?)
But ... in truth ... this WILL BE in the hundreds of billions .... and it MAY BE in the Trillions ...
What measure do you use to determine when a financial system has failed ?
What percent of it does the government have to take over ... or guarantee in order the quantify the condition ?
The FDIC is already looking toward the Treasury to act as a backstop for them ....
And wasn't it Paulson who's been telling us for the last several months what good shape Fannie & Freddie were in ?
And word from the meetings was that he "bullied" the boards into the takeover ...
I'll tell ya ... at this point ... if Bernanke or Paulson were to tell me that the sky was "blue" ... I'd have to get up and go take another look ...
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
Pretty good story about this on CNBC dot com ... entitled "Few Stand to Gain on This Bailout, and Many Lose" ...
|
|
Registered User
Joined: 11/1/2005
Posts: 240
|
seems like this happens every 10 yrs or so? maybe 20?
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"well, i've been under the impression most average people
work at a job for their money"
Exactly. You don't help wallstreet without helping main street.
You cant "punish" wallstreet without hurting main street.
(and this would be a world of hurt)
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"Well ...
It WILL cost the US taxpayer in a BIG way .... there is NO doubt there ..."
------------------------------------------------------------------------------------------------
Its funny. I never see anyone run the "costs" of the "free" solutions.
(heh, heh)
Ya see were already gonna pay for it. Were just making it official
now.
--------------------------------------------------------------------------
"$100 Billion to start ...
(Remember back when $100 Billion was a lot of money ?)
But ... in truth ... this WILL BE in the hundreds of billions .."
---------------------------------------------------------------------------------
Obviously all the facts aren't in. If the templates from the other
banking crisis are followed. As much as possible will be put on
the banks to dig themselves out of their holes.
(some say Latin America loan default was worse as all our
banks were in trouble) Remember that this will take years
and be up against about 80 trillion dollars of GDP.
(a few hundred billion is probably cheap)
For those that don't understand. This isn't designed to solve the
problem by itself. Its designed to buy time. If I owe you 50K
and I make 50K a year. Chances are good your not gonna get
paid. If I can pay 10K a year for 5 years its more likely you
will get your money.
-----------------------------------------------------------------------
"The FDIC is already looking toward the Treasury to act
as a backstop for them"
-----------------------------------------------------------------------
It all depends on what you want to fear. What the FDIC might
do? vs. What it absolutely positively will have to do.
As you know I'm a "small government" guy but when your
starving to death and someone brings you a sandwich it
doesn't seem right to ask if it was paid for with tax dollars.
Ultimately this is like war, poverty, disease and oppression.
I don't like it, but not much I can do about it.
Everyone cries and whines but no one has told me what
switch you throw to make things fair, equal, and balanced
No greed. No rich, poor, no inflation. When we run a
race. We all cross the finish line at the same time.
When you have freedom. Your free to screw things up.
When you don't? Things still get screwed up its just
without your freedom.
Thanks
diceman
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (diceman)
Remember that this will take years
and be up against about 80 trillion dollars of GDP.
(a few hundred billion is probably cheap)
So ... you're thinking that this is going to be a 5-6 year process ?
Could be ... but I must admit that I would be a bit surprised ...
Historically ... "unwinding" tends to be an accelerating process ...
But who knows ?
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"So ... you're thinking that this is going to be a 5-6 year process ?"
--------------------------------------------------------------------------------------------------
Obviously it depends on what you mean by "this" in
"this is going to be a 5-6 year process".
(gee I sound like Clinton)
I'm just speculating based on other "disasters".
----------------------------------------------------------------------------------------------------
"Historically ... "unwinding" tends to be an accelerating process ..."
----------------------------------------------------------------------------------
That's why the government stepped in.
These two in an accelerating unwinding would spiral out of control.
This stuff needs time to work itself out. Time and acceleration don't
mix.
Obviously congress still has to dip its hands in the mix. How much
the mess is truly cleaned up and how much the process is changed
will determine if this just becomes a fond memory like other
failures or an on going burden.
Thanks
diceman
|
|
Registered User
Joined: 2/21/2007
Posts: 797
|
does it really matter? just so the con artists who initiated this sub prime mortage con game are enjoying their huge commissions while relaxing on the beaches in the caymen islands, that's what's important. these guys knew what eventually would happen. they preyed on the young, and maybe not so financially educated people in our country. promises, promises, promises. "sure you can afford this 2000 sq. ft. house next to the country club. look at how we can manage your mortage payments so everything works out until you start earning , (in your dreams) six figures. " i work with a young guy who got one of these mortages, no down payment, pay only this small amount for this time period then everything gets readjusted. "but don't worry about a thing, we'll make sure that you will always be able to afford the payments. well, now he and his wife and their child are now living with his parents. he's probably one of the the luckier ones. but on the other hand, you just can't blame the con men. remember your parents and some of us older people, we started in an apartment, then moved up to the "starter" house, then eventually to the house that we could truly afford. the younger generation doesn't want to wait, "i want it all now". the big house, new suv's in the drive way, every new electronic gismo ever invented, 3 kids right away, 4 credit cards maxed out. how's this working out?
i really don't know how this mess got to where it is and how it will affect people and the economy or how long it will last. i think maybe the subprime mess may not have been as massive as it was if the oil crisis hadn't forced the fed to take the drastic measures that they did. that's just my uneducated opinion. maybe i'm way off base. hopefully this won't last 5 or 6 years, that would probably be a long time not to hear from my "financial advisor". he'd always call every month at statement time and tell me how good he was doing, he must have lost my phone number a couple of months ago. i'll probably have to call him to make sure he still has it. oh well it doesn't do any good to complain but it helps the stress level. LOL!!!
|
|
Registered User
Joined: 8/10/2008
Posts: 3
|
Perhaps this is just repeating the basic question, and no one really knows the answer to it, but what about a highly speculative purchase of some FRE or FNM on the change it will be worth at least a few dollars a share in 2-5 years? I know everyone has been saying 'it's dead, Jim" but... can it be said with high probability now that FRE shares at $0.50 and less are here to stay? No, I'm not about to do it - but I don't know much about corp. finance so I have no idea.
ps perhaps it should be said that even if it's a play, it would probably be worth waiting to see if it goes
even lower, what with recent events with LEH etc and talk that the stock would become 'worthless.'
I guess in the end the question is, given the terms of the bailout, is it possible for the common stock to appreciate at all in the future? Or are the terms of the bailout too unspecified so far?
Sorry, a bit longwinded ;)
|
|
Registered User
Joined: 12/7/2004
Posts: 393
|
Even tho congress may want to pass judgement, FRE and FNM will no longer be public companys. Thus their common and preferred stock will be worthless.
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (laphill) Even tho congress may want to pass judgement, FRE and FNM will no longer be public companys. Thus their common and preferred stock will be worthless.
Major financial instituions have been lobbying the govt for weeks to preserve the preferred stock ...
In the takeover ... the govt entered at the level of preferrred shareholders ...
To make the preferred stock worthless is to make the govt's position worthless ...
Do ya really think that THAT is gonna happen ...
Just like always ... it's the little guy that gets SCREWED !!
|
|
Registered User
Joined: 9/22/2005
Posts: 849
|
Sounds like this is a case of
Bend over and touch your toes and
I'll show you where the wild goose goes.
|
|
Registered User
Joined: 5/1/2007
Posts: 158
|
FNM and FRE common is going to zero, preferred is taking a large haircut, and so it goes. Preferred may go to zero eventually, or quickly. I figure about 6-8% of the FNM/FRE assets (mortgage loans) get written off. That's about $300-400 billion.
I also figure it can end quickly if we get another 1 million net immigrants per year. More bodies, more demand for housing. Mexico, the Philipines, China, Middle East? Or, we could make 1 million more babies per year. That would require major tax reform (i.e. cut SS/Medicare/Medicaid spending by 30-40%). Politically unlikely. And the President who does this would be as loved as Gorbachev in Russia - that is to say, less than 1% favorable ratings.
|
|
|
Guest-1 |