Investment Advice

So, as best I can tell, the US Government (not the Federal Reserve) just bought up all the bad mortgages in the United States.

There is a 70% chance that Democrats will control the White House and both houses of Congress in January 2009.

There is very little chance that the Democrats will allow the Federal Government to foreclose on those bad mortgages and kick voters out of their homes.

Therefore, my investment advice right now is to default on your mortgage. Just stop paying it. Open an E*Trade account and put the money you would use for your mortgage into Euros, or Pounds Sterling. There will be no negative consequences against you. Democrats won’t make 5 million families homeless. Moral Hazard? What’s that?

32 comments

  1. muffin15 says:

    There’s your headlines of the day:

    (BN)

    *U.S. TREASURY TO INSURE GOOD WEATHER ALL WEEKEND

    *FEDERAL RESERVE TO INSURE PERSONAL HAPPINESS

    *U.S. TREASURY TO REPAIR TOM BRADY’S DAMAGED KNEE

    *CONGRESS TO GUARANTEE HAPPY DAYS ARE HERE AGAIN

  2. IndyInjun says:

    Farris and every Peachpunditeer:

    Worse.

    They bought up toxic financial instruments that were selling for 10 cents on the dollar, when taken to market.

    The loss in home values is “only” 30%.

    The difference is what the FRAUDSTERS did with the loans – the bad ones AND THE GOOD ONES. The mortgages were sliced, diced, and spliced into instruments that were composites of good and bad.

    To TRY to recover even a minimal amount takes a cost prohibitive amount of legal and accounting time.

    So this deal might have started out with subprime loans and the Community Reinvestment Act, but it ended with $ million prime mortgages, municipal bonds, money market funds, and auction rate securities.

    Quit swallowing the GOP line that this is a ‘subprime’ mess.

    The Fed had already bought between $700 and $900 billion of worthless SECURITIES. If it were MORTGAGES there would be 3 to 5 times the residual value.

    Worst of all the US government will be making INFINITE funds available to the FRAUDSTERS who did this, which will simply explode.

    Today America was lost.

    The Founders weep.

    The German Finance Minister from 1925 and Mussolini are smiling.

  3. IndyInjun says:

    Postscript – If this is a $500 billion bailout, isn’t it in addition to the $900 in bailouts that preceeded it?

    Don’t AIG mid-level managers make sort of STRANGE federal employees?

    The ban on short trading will be extended to the election, because the FRAUDSTERS want this house of inflating balloons to stay put until their stooge is in place.

  4. muffin15 says:

    this is a great write up of what happened over night … http://www.nytimes.com/2008/09/20/washington/19cnd-cong.html?ei=5070&emc=eta1

    Buzz they heard you call….
    -While Democrats initially said after the meeting that they planned to use the administration’s proposal of a huge rescue effort to win support for an economic stimulus package, they pulled back slightly on Friday morning, saying that their top priority was to help put together the bailout package and stabilize the economy.

    But it was clear they continued to examine ways to make clear that the government was stepping up not just to help the major financial firms but also to protect the interests of American taxpayers and families by safeguarding their pensions and college savings, and by preventing any further drying up of consumer credit.-

  5. muffin15 says:

    Well since the govt made $50 bill on their loan to AIG today…. you can use some of that money we loaned that we never had! check is in the mail..nice w/e

  6. Chris says:

    Buzz, while you’re there, can you find me a 3 bedroom flat, maybe 1200 sq ft?

    Oh and some French Language tapes.

    I’ll pay you back on the latter with a wheel barrow of greenbacks.

  7. Doug Deal says:

    Buzz,

    Ever notice how the South side of anything is nearly always the “bad” side of anything.

    Of course, since you are going to France, all sides are the bad side.

    Chris,

    You need to negotiate in today’s money. When he gets back, you can ask him for change for your $10,000,000 note, and it would be like it is free.

  8. btpull says:

    We start with a socialist policy that every American deserves to own a home. We then get the financial community to make loans to people who cannot repay them by letting the financial community resale the loans in the form of mortgage backed securities to the Federal Government via Freddy Mac and Fanny Mae. The financial firms make billions in the process.

    When the scheme blows-ups the securities that have not been previously purchased by Freddy and Fannie are implicitly guaranteed via an outright purchase by the Federal Government.

    The Federal Government will now hold the securities, absorb the losses and then will resale the securities back to the financial firms at a deep discount. The financial firms will again make billions.

    This is a truly amazing scam being put on the American people. Are the news agencies not bright enough to figure this out? Or are they just playing stupid?

  9. Bill Simon says:

    Doug,

    I’ve never gotten into sucking meat out of the crawdads. That big pile of oversized shrimps just turns me off for some reason.

    Maybe I had a traumatic event somewhere in my childhood involving live crawdads…

  10. bowersville says:

    Bill,

    That’s where the gentiles have it right with the trinity. It takes celery, onions and bell peppers to swallow the crawdads.

  11. I checked some of the more liberal websites because I wanted the best, not partisan, anti-Bush, estimate of the total cost of the Iraq War.

    The National Priorities Project has the cost at $555 billion and counting http://www.nationalpriorities.org/costofwar_home

    That’s for all 5 years. Now we’re trying to find between $700 and $900 billion for bailouts?

    I would hope every single Republican in Congress votes against the proposal. Let’s let the outgoing President and the Democrat Congress be responsible for this bit of economic stupidity.

    Bush can make the proposal, but it will take Harry and Nancy to make it happen.

  12. btpull says:

    “I would hope every single Republican in Congress votes against the proposal. Let’s let the outgoing President and the Democrat Congress be responsible for this bit of economic stupidity”

    I am sure it will pass with a 90%+ yes vote. Remember it is a government policy that caused the mess (a policy has been in affect since the 1930’s), it is the same government that allowed the financial firms and mortgage firms to reap the benefits of the policy, it is the same government that absorb the risk, which it is now formally passing on to you and me. This whole “bailout” is just a continuation of the process.

  13. IndyInjun says:

    Cobb NAFPP:

    Excellent POV.

    2 weeks ago Sec. Paulson said there would be NO BAILOUT of Lehman Brothers, but within days it was discovered that bankrupt Lehman had made a payment to JPM Chase of $138 billion WHICH WAS REIMBURSED BY THE FED. This was one-year’s spending in Iraq made without Congress’ approval.

    The GOP is screaming about Obama’s$900 billion in new spending, but this one will eclipse Obama many fold.

    HOW can this be only a $500 billion bailout, when the Fed has already spent $700 buying toxic securities to NO EFFECT?

    Is this an ADDITIONAL $500 billion.

    Whatever it is, it won;t be enough.

    The government will be putting $5 trillion in the hands of the very fraudsters who looted the country.

    Good luck controlling the costs of THAT.

  14. btpull, I’m fairly confident that your prediction will be the one that plays out.

    Indy, there is no way of controlling those costs. The check is supposed to be the Congress or the President and both seem willing for their various interests to be protected.

    I did not mind so much the bailout of Feddie and Fannie, they are government created institutions. It would be the same as the treasury bailing out the post office. We could argue if Freddie and Fannie should have been created in the first place and if they should be dismantaled. I would say “no” to the first and “yes” to the second, but that’s different debate.

  15. odinseye2k says:

    Sen. Bernie Sanders (yeah, the Socialist) made an excellent point in outlining fundamental principles for fixing Wall Street:

    “If it is too big to fail, then it is too big to exist.” In other words, if we are going to be able to just sit back and yell “Timber!” when the next asset bubble comes to pop, we need to have it so that the failures do not wipe out a given capability of the US economy. In this case, the ability of credit to be provided, but in the future who knows? Road-building? Defense equipment manufacturing?

    Ecology shows us that we need bio-diversity to guard against plagues and crop wipe-outs. Since free-market economies also deal in Darwinian principles, I would imagine the same diversity is required for a robust economy.

  16. Doug Deal says:

    odin,

    I agree with your last point. I am against large multination corporations because they destroy the free market system. For free market concepts to work, it needs many players acting in their own self interest, not a tiny group of corporations cooperating for their mutual benefit, which seems to be what we have moved to.

    A market dominated by a small handful of very large companies is no better than a communist planning board allocating the means of production over the next 5 years. Just like the example you use for bio-diversity, when too much of the market share utilizes the same methodologies, when something goes wrong, it is a doozie.

    My solution would be for the federal government to use its powers under the commerce clause to severely limit the size of companies that do business in the financial sector, so any number of them can be chopped down without draining billions of dollars from the public treasury and causing problems that could actually harm national security.

  17. IndyInjun says:

    What about the assertion today by Paulson that toxic securities owned by foreign banks would also be rescued?

    What about the provisions that the decisions are not open for review, even by the courts?

    So Paulson can decide to bail out RBS, say by $10 billion, simply on his OK and it cannot be challenged.

    Didn’t the founders take up arms over less than this?

  18. btpull says:

    These same foreign banks along with foreign governments holds billions if not in the trillions of dollars of our Federal Debt that needs to be recycled periodically.

    If we burn them on the debt that we used to fund our mortgages, they can bring our economy to its knees by refusing to recycle our Federal Debt as it matures.

  19. GreenAllTheWay says:

    All you need to do is ask Steve Perkin’s wife and her HOA Board. they have figured out the entire banking industry, come up with failing banks to watch, and threfore logic would suggest that they know the ones that are successful…so, if you need investment advise,just ask Steve.

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