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alstry (35.39)

Did someone SCREAM "FIRE"

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September 04, 2008 – Comments (11)

"Financial Tsunami"

Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities,

``Unchecked, it can turn a campfire into a forest fire"

"a continuing asset and debt liquidation of near historic proportions"

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDXbHi9QRUgE&refer=home

Is this Alstry talking like this??????

Nope, just Bill Gross from Pimco.....you think he is worried now?????

11 Comments – Post Your Own

#1) On September 04, 2008 at 11:27 AM, givmeabreak (29.01) wrote:

The main take away I got from that article was the the government should get involved and basically bail out the big guys b/c they are not making easy money.

Said the government should open up its balance sheet? That is scary.

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#2) On September 04, 2008 at 11:29 AM, givmeabreak (29.01) wrote:

" The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund. "

WTF!!??? Where is this magical "money" gonna come from?

Sorry the party is/has ended Bill. I guess you're in the same boat as the average guy out there.

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#3) On September 04, 2008 at 11:42 AM, alstry (35.39) wrote:

The simple issue is this, asset values are crashing and assets are very leveraged.  Falling asset values in a leveraged environment creates selling to meet margin calls.

Once people become aware that they are losing equity fast, they start to sell.  Once they realize others are selling too, they start to panic as equity contracts.

Most of America's assets are leveraged.  It was that leveraged that allowed our country to grow for the past thirty years.  Now that we are deleveraging, it is not the end of the world, it is simply that most of America will be poor.

Poverty sucks when you are the only one poor, but when everyone is, it ain't a big deal.

We have been living one big lie for the past few years, now the truth is coming out....how do you think the Enron investors felt when they learned the truth.  This time it is not very different, it is just that we are dealing  with a nation instead of a company.

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#4) On September 04, 2008 at 11:49 AM, givmeabreak (29.01) wrote:

I get that Al, but over and over the guy keeps mentioning the gov't as the solution.

Where will all the funding come from?

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#5) On September 04, 2008 at 12:45 PM, abitare (34.72) wrote:

Billionaire Bill Gross wants a bail out? Go figure? He might get it, but the little guys with out political connections are in trouble.

Please Homeland Security, I know you are reading this, can you put Bill Gross in some nameless prision and water torcher him. Please put the video on youtube for us serfs....

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#6) On September 04, 2008 at 3:44 PM, DemonDoug (80.35) wrote:

Where is this magical "money" gonna come from?

The digital printer, my friend.  No need to create 500B dollar notes when you can just flick a software switch and do that on your own.  The bond markets control so much, and Gross, despite being a total pimp for pimpco, is usually spot on - it is likely the government will backstop the bond markets by straight out printing press.

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#7) On September 04, 2008 at 4:39 PM, jesusfreakinco (28.82) wrote:

So much for free markets.  What a joke.  Is the US any less corrupt than Russia?  I think not...

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#8) On September 04, 2008 at 5:15 PM, rofgile (99.30) wrote:

Today was downright scary to me.  Most of my picks lost 4-5% today!

 

Crazy! 

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#9) On September 04, 2008 at 5:25 PM, MakeItSeven (32.33) wrote:

IIRC, Bill Gross scooped up quite a lot of bonds within the last year for "bargain hunting".  If he has been betting on a government bail out for a profit then his opnion might just be self-serving.

But I agree in principles that, leaving unchecked, the pendulum tends to overshoot to the other side, so seemingly half-hearted attempts to slow it down but not stop its trajectory completely might very well be the best thing to do.

So criticism of the government's attempts to ameliorate the housing problem with some wimpy bills as ineffective probably misses the mark since the purpose is not to prop up the housing market but to slow down its downfall.

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#10) On September 04, 2008 at 5:28 PM, alstry (35.39) wrote:

You havn't seen scary yet. 

We are about to learn that there is very little real equity in America.  Much of America's asset base is leveraged without adaquate cash flow to service the debt.  There is very little cash relative to the debt either.  As asset values collapse, expect the whatever little cash to evaporate trying to meet margin calls. 

Most banks leverage deposits 10 to 1 and more.  As assets collapse in value, how the heck do you think the bank will be able to cover its deposits???

Once people start to realize this, their will be massive liquidation sales occuring simultaneously.  Yellin calls this an adverse feedback loop.  It grows upon itself. 

The people will become aware when the system thinks its OK to tell them.  By that time its too late, there are 10 for sale signs already up on the same street and six office buildings being dumped next to each other.

We are living through the largest deleveraging in human history.

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#11) On September 04, 2008 at 5:33 PM, alstry (35.39) wrote:

Just another thought......

Those with a lot of cash think they are insulated....they may need to think a little deeper.

At the end of the day, everything is leveraged, including our governments, pensions, businesses, and individuals.  An asset collapse as Gross contemplates will wipe out most.

If most are broke, and few are paying taxes......who do you think the government is going to go to to keep things going???

Yes cash is king during times like this, but government is the emperor with the Ace that wins everytime.

 

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