The Economy, stupid

[mr_genius]

I feel like I'm throwing money away by contributing to my 401k.

 

if the market goes back up, which it probably eventually will, you are actually buying at a good rate right now. could work out for you. for people who are retired and need their savings; yea they are getting rocked. but the market has risen by so much over the decades they are still coming out way ahead.

[Balta1701]

As if they haven't done enough damage. Thousands of subprime mortgage lenders and brokers—many of them the very sorts of firms that helped create the current financial crisis—are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

 

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country's swooning economy.

 

For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes. But now there's a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what's happening—or incapable of stopping it. They're giving mortgage firms licenses to dole out 100%-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions.

Link.

[StrangeSox]

if the market goes back up, which it probably eventually will, you are actually buying at a good rate right now. could work out for you. for people who are retired and need their savings; yea they are getting rocked. but the market has risen by so much over the decades they are still coming out way ahead.

 

I think you need to keep investing and just expect that the market will, eventually, turn itself around, because if it doesn't, you have much bigger problems than losing a few thousand dollars.

 

When I look at my 401(k) balance, which has lost over 60% of its value now (I've only been in it for a year so it doesn't hurt too much), I just keep telling myself "You're buying it all on sale now."

[NorthSideSox72]

if the market goes back up, which it probably eventually will, you are actually buying at a good rate right now. could work out for you. for people who are retired and need their savings; yea they are getting rocked. but the market has risen by so much over the decades they are still coming out way ahead.

Exactly. For the long term investor, this is a buying opportunity that will pay off later. Its really just the people who are about to retire that are in the biggest trouble, as far as stock prices go.

 

[vandy125]

Exactly. For the long term investor, this is a buying opportunity that will pay off later. Its really just the people who are about to retire that are in the biggest trouble, as far as stock prices go.

 

I think of it in the way that I am paying the same amount of money with each paycheck. So, right now, I am picking up a lot more stock for a cheap price than if everything was still sky-high. My $100 picks up 50 shares at the current price instead of the 25 it was before. When it does go back up in value, I will have a lot more shares going up in value.

[Balta1701]

Thankfully, the deputy editor of the Wall Street Journal editorial page has figured out what we need to do to solve all of our economic problems; we need to say "Merry Christmas" more and screw those other holidays around the same time.

[StrangeSox]

Thankfully, the deputy editor of the Wall Street Journal editorial page has figured out what we need to do to solve all of our economic problems; we need to say "Merry Christmas" more and screw those other holidays around the same time.

 

LOL. Lack of Jesus is what caused this.

[DBAHO]

Citi's share price is collapsing ATM.

 

Crisis meeting being held b/w the CEO and his execs this afternoon, break up of the business could very well be the outcome.

[NorthSideSox72]

Citi's share price is collapsing ATM.

 

Crisis meeting being held b/w the CEO and his execs this afternoon, break up of the business could very well be the outcome.

C was around 20 just over a month ago. It opened today at about 5.20, and is now trading at ~3.70. Yikes.

 

[southsider2k5]

C was around 20 just over a month ago. It opened today at about 5.20, and is now trading at ~3.70. Yikes.

 

Like I outlined a couple of weeks ago, now their costs are skyrocketing and you should be seeing a run on deposits pretty soon. It shouldn't be long before this too belongs to JP Morgan, or the like.

[Balta1701]

Time for me to cash out the rest of my citibank credit card points?

[southsider2k5]

Time for me to cash out the rest of my citibank credit card points?

 

I would say so. And quick.

[Balta1701]

I would say so. And quick.

That's what I figured. Glad I blew 80% of them in Vegas last summer.

[southsider2k5]

That's what I figured. Glad I blew 80% of them in Vegas last summer.

 

Most likely they will get aquired before something happens, but if they don't quickly, and they go insolvent, they are worthless.

[StrangeSox]

I would say so. And quick.

 

What about National City? I heard they were being bought out by PNC, but I still see them advertising somewhat heavily. When one banks buys out another, do I lose all my points?

[NorthSideSox72]

Most likely they will get aquired before something happens, but if they don't quickly, and they go insolvent, they are worthless.

C won't go insolvent. They don't have enough bad plays, and still have quite a few positive cash flow centers. Plus their market presence in retail is huge.

 

Even if they are broken up or acquired, of course, they won't just get rid of people's points or what not. That would cause customers to flee - the opposite of what they want. Oddly, they'll take away employee benefits before customer benefits.

 

This is the same for the Big 3 auto companies. Unless they become truly insolvent and inoperable, the warranties on cars will remain intact, or else they'd be writing their own corporate death warrants.

 

[Balta1701]

C won't go insolvent. They don't have enough bad plays, and still have quite a few positive cash flow centers. Plus their market presence in retail is huge.

 

Even if they are broken up or acquired, of course, they won't just get rid of people's points or what not. That would cause customers to flee - the opposite of what they want. Oddly, they'll take away employee benefits before customer benefits.

 

This is the same for the Big 3 auto companies. Unless they become truly insolvent and inoperable, the warranties on cars will remain intact, or else they'd be writing their own corporate death warrants.

Your argument makes sense to me. So should I do a cash dump from there or should I be cautious and hold?

[southsider2k5]

C won't go insolvent. They don't have enough bad plays, and still have quite a few positive cash flow centers. Plus their market presence in retail is huge.

 

Even if they are broken up or acquired, of course, they won't just get rid of people's points or what not. That would cause customers to flee - the opposite of what they want. Oddly, they'll take away employee benefits before customer benefits.

 

This is the same for the Big 3 auto companies. Unless they become truly insolvent and inoperable, the warranties on cars will remain intact, or else they'd be writing their own corporate death warrants.

 

Their stock is falling and falling hard. Their cost of insuring $10,000,000 went from $390,000 to $470,000 in a few days. Last year it was $80,000. The next step is the bank run on deposits because people are paniced about the stock price. Any good run on desposits will cause a violation of capital ratios. They pretty much have to either break up the company, which they just said they won't do, sell the company, or go under.

[NorthSideSox72]

Your argument makes sense to me. So should I do a cash dump from there or should I be cautious and hold?

I wouldn't do a cash dump from bank accounts anywhere, even now. Even with all this financial collapse going on, the banks that have crumbled were scooped up and the FDIC didn't even have to get involved in covering the deposits. There is risk there certainly, but I think the chances of losing your C deposits going away are infinitessimally small. And even if that happens, FDIC is there.

 

But, as C restructures in some way, they will inevitably try to cut costs. That could mean things like less rewards, higher fees, higher min bals, etc. So going forward, you may want to look elsewhere. They won't do anything drastic like taking away all your points or your cash, but, they will start chipping away in areas where they can without losing a ton of customers.

 

So, looking around is good, but I wouldn't go doing a panic money pull. Just my view.

 

[NorthSideSox72]

Their stock is falling and falling hard. Their cost of insuring $10,000,000 went from $390,000 to $470,000 in a few days. Last year it was $80,000. The next step is the bank run on deposits because people are paniced about the stock price. Any good run on desposits will cause a violation of capital ratios. They pretty much have to either break up the company, which they just said they won't do, sell the company, or go under.

No doubt they are in deep doo-doo. But from a consumer banking perspective, I just don't think its panic time.

 

Now, higher end investors have a whole different picture to deal with of course. Heck, even money market funds may suddenly start having issues. But people won't lose their bank accounts.

 

[Balta1701]

No doubt they are in deep doo-doo. But from a consumer banking perspective, I just don't think its panic time.

 

Now, higher end investors have a whole different picture to deal with of course. Heck, even money market funds may suddenly start having issues. But people won't lose their bank accounts.

At least from a personal side, I'm not worried about a bank account, I'm worried about a non-FDIC insured rewards program.

 

I think I'm going to play it safe and pick myself up some gift cards.

[southsider2k5]

No doubt they are in deep doo-doo. But from a consumer banking perspective, I just don't think its panic time.

 

Now, higher end investors have a whole different picture to deal with of course. Heck, even money market funds may suddenly start having issues. But people won't lose their bank accounts.

 

They aren't going to lose their bank accounts, but the extras are the first things to go because they are back of the line creditors at the point it fails. Its why places that file bankruptcy invalidate or severely markdown their giftcards. The main creditors force this.

[DBAHO]

There was a good point made in this article also;

 

Citi's share price closed at $4.71 yesterday. If the company is unable to bring it back above $5 before the end of the year big mutual funds and other institutional investors will be forced to sell their entire holdings as rules prohibit them from investing client funds in such cheap stocks.

 

If such a forced sale occurs Citi faces the probability of complete share price collapse.

[southsider2k5]

There was a good point made in this article also;

 

Again, these are the types of reasons that company's are using TARP money to shore up dividends and stock prices.

[NorthSideSox72]

They aren't going to lose their bank accounts, but the extras are the first things to go because they are back of the line creditors at the point it fails. Its why places that file bankruptcy invalidate or severely markdown their giftcards. The main creditors force this.

If they actually fail, as in bankruptcy, yes. What I am saying is, I believe they will not actually go bankrupt.

 

Balta- I have about 100,000 points on a Citi travel rewards type card. I'm not going to take them out. You do whatever makes you most comfortable. I just feel the chances of C going bankrupt are very, very low.