Lessons Learned From This Financial Crisis

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Milty the USA will break into 4 autonomous economic zones. With a Confederation for a National Governemnt.

[Zeke]

And the Euro or the Chinese currency as the new money?

[rvanderpyl]

What we have learned.

If you screw up big enough, the goverment wil rescue you....

[jyl]

Rescue who?

BSC shareholders lost >90% of their money, most BSC employees lost their jobs, BSC top execs lost most of their personal wealth (which was mostly in BSC stock) and their jobs.

Same for FNM, and FRE.

We'll see what happens to AIG. So far, shareholders have lost 95% of their money, and have a good chance of losing the rest. Employees and execs will go over time as the company is broken apart and sold off.

Originally Posted by rvanderpyl

What we have learned.

If you screw up big enough, the goverment wil rescue you....

[jcommin]

Fintstone: Plan was to downsize and walk away with some cash. It is just not as much as it was 2 years ago - I kinda mourning a loss here. Housing was the best investment in the early in the decade. I'm altering my plan. As I said in a previous post. I'm probably in better shape than most. I have savings but I'm concerned about heath care and it's cost. This is a real unknown; probably the next crises.

I had AIG stock and sold last year. Owning stock in companies that go the way of AIG, BSC and others in no fun. Pensions are lost, stock options gone, and stock holders have nothing. In the early 2000's I had World Com, Global Crossing, Exodus Communication and was wiped out. Some companies tie their pensions to their stock. I was lucky, I'm over 50 and was allowed to more out of my companies stock and I did - before it went bankrupt. I did loose stock options. I did too upset over that because it wasn't tangible enuff for me to miss.


All:
We are headed for some adventurous times. Now that a large portion of our finance community is nationalized - we holding the bag. Our consumptive nature props up the entire world.

The new order: Have - Have not and Really have.

Maybe all those futuristic movies where everything is gone and the ones left are in survival mode are more fact than fiction.

[Noah930]

Originally Posted by rvanderpyl

What we have learned.

If you screw up big enough, the goverment wil rescue you....

Wow, that's generous. Call me a cynic, but in time, I'd venture: none.

[Nathans_Dad]

With all due respect to the OP, I'm not sure I would call the current situation a financial crisis. Unemployment has ticked up a bit but still is much less than 10% (compared to 25% during the Great Depression). The real estate market in some areas has experienced a correction from an unsustainable bubble. Many financial companies who tried to make a quick buck off that bubble are now paying the price.

Most Americans can still easily put food on their table and a roof over their head. Once those two things become difficult to do, THEN we have a financial crisis.

[CRH911S]

Sounds like you are still "in the money" with your house if you bought in '98 and you are at '01 prices. people who look at homes they live in to be the piggy bank to retire on are sadly mistaken. On the other hand, you got a nice place to live without putting up with the annoyance of a landlord, a tax writeoff, the opportunity for some small appreciation. This idea of ones home funding their retirement in a new one...and not a very wise one...although some folks are luck into such a situation. Buying a home 18 years before retirement and expecting it to provide a significant amount of retirement is amazing. Perhaps 30 or 40 years might make a bit more sense.

I can agree with the "in the money" comment but after that the remarks are questionable.
My parents worked hard and eventually purchased a home, one block west of Brand Park, in Glendale, Ca. in the early 60's but before that they purchased their business' in North Hollywood back when vines still lined Magnolia. To make a long story short North Hollywood Redevelopment purchased my parent's propertys, situated near the corner of Lankershim/Magnolia and Union Oil the corner lot. But this wasn't until nearly thirty plus years later. Being a farmer from Iowa and rancher from Montana my parents didn't have much but their land. Through it all they say people get rich and the same people go broke but they always had their land and their value of an honest days work for an honest days pay.
I think jcommin is speaking to the same set of values and attempting to understand the current financial situation and to continue moving toward his retirement goals. What Bush is proposing is perplexing to me as well.
To me the value of learning to deal with the pain is more important than attempting to do stupid things to avoid having to take responsibility. What will the lesson of the bail out be?
I can relate to jcommin as I have similar concerns.

[Wickd89]

I agree.
It is great to help others, but first you have to help yourself.
You have to be strong, to make others strong.......

Our country is bankrupt. We are getting in a deeper hole, every single day. The national dept is a simple but real example of the direction of our country.

When they say that the "cost of not fixing this problem" is unmentionable, I believe it is a full collapse of the free market economy; as we know it.

I am presently moving all my stock into bonds and hope I can save myself from going down much further.

[dentist90]

There are certain types of disaster... hurricanes, floods, earthquakes, fires... that we have no control over. Why in the heck do we humans insist over and over again on adding to the list with financial greed??
Simplified:
Greed leads to risky practices, which lead to overinflated bubbles, which lead the eventual realization and panic, which leads to collapse, which leads to prudence again, which leads to repair and recovery, which leads to complacency, which again opens the door for greed.
How many times is the market going to repeat this before financiers catch on? Endlessly, as greed will never be eradicated.

[dentist90]

Originally Posted by Wickd89

... I believe it is a full collapse of the free market economy; as we know it.

I am not an economist, but I often wonder how and when capitalism will fail. To me it is like a big pyramid scheme: Investors only want in if they can get double digit growth of their investment. That can occur as long as there is room for increasing the size of the business (new customers and markets). As the global market is saturated the only way to make your company bigger is to gobble up other companies.
Eventually you will have expanded to every conceivable market in the world, gobbled up all weaker competitors and the world's population will be saturated so that birth rates will equal death rates. What then... try to find new markets on Mars?
At that point I would suspect that a dollar put in the bank will be worth the same $1 fifty years later so there will be no need to struggle to keep up with inflation.

Can growth go on forever? What happens at the end?

[fintstone]

Originally Posted by CRH911S

I can agree with the "in the money" comment but after that the remarks are questionable.
My parents worked hard and eventually purchased a home, one block west of Brand Park, in Glendale, Ca. in the early 60's but before that they purchased their business' in North Hollywood back when vines still lined Magnolia. To make a long story short North Hollywood Redevelopment purchased my parent's propertys, situated near the corner of Lankershim/Magnolia and Union Oil the corner lot. But this wasn't until nearly thirty plus years later. Being a farmer from Iowa and rancher from Montana my parents didn't have much but their land. Through it all they say people get rich and the same people go broke but they always had their land and their value of an honest days work for an honest days pay...

The typical person in this country cannot expect the home they live in to significantly fund their retirement with 15-20 years af appreciation...because they still need a place to live. Obviously, there are rare circumstances (buying in Hollywood in the '60's or finding oil on your property). Although home ownership is a large portion of most folks retirement planning, the place one lives does not make that great a piggy bank, because even if it greatly appreciates and you sell it, you likely have to buy another home at similarly appreciated prices to live in unless you choose a much lesser home or less expensive part of the country...and most folks do not want to work their entire life to live in a shack after retirement. If one wants to fund a significant portion of their retirement with real estate, IMHO, they need to have rental property.

On the other hand, retiring without owning your own home would really be difficult for most...as incomes are usually significantly less.

[Wickd89]

I have always seen it sad that a good company is not considered good, if they are not increasing return or growing market share.

If you have a great company, that makes for example 5% a quarter ROI, why is this bad. Why it have to show %5, then 6% then 8%, etc..
This leads companies to find creative ways of being better, and unfortunately it makes business leaders to cut corners (fire in mass, borrow, play with books, etc); their own personal fate depends on it.

Other democracies have companies that think to long term success and they share ROI in a more steady manner (e.g. the Swiss).. This makes for a steadier economy.

But boy do we Americans love a Rally!!

[Wickd89]

I am not a "doom and gloom" person, but what is going on is really bad.....;-(

[jcommin]

People are hurting. $4.00/gallon gasoline did that. Everything snowballed after that. Go to a restaurant and see busy they are. Add that to the housing bubble, foreclosures, tight credit and you got what you got.

I have said this on other boards, the consumer has spent our way out of the last downturns and they did it on credit. When you have less discretionary spending, you won't spend and we can't grow - certainly not as fast. What you may see is a shift in the way we live - not spend as much (because we can't) and a move away from consumption to saving. That's going to cause a ripple of our service economy. Personally I can't wait to see this. I have worked in manufacturing for over 35 years and I have seen a erosion of jobs and factories leave this country. We need to develop an energy source to remove our dependency on foreigh oil. We could create a new segment - energy .

To grow as a country; you got to have something everyone wants - goods, services and the like. We got to stop worrying about the 'numbers' for the quarter and focus on the long term. This may be painful for some; we are so use to quick fixes.

[Wickd89]

I think most people on this forum are pretty conservative; in politics as well as investment.

The rest of the country is into spending and borrowing. Most of us own our Pcars, because it is a toy that is a reward after earning some cash, saving it, and now have some "fun cash."
When I hear that people have "any" credit card debt, it makes me question their ability to be mature enough to manage their finances.
Credit cards were created to facilitate spending, not to make you over-extend yourself.......

It is obvious when the poorest amongst us still have huge LCD TVs!!


It sounds like it is time to pay the pipper.

[CRH911S]

I agree with what your saying fintstone. I think it's also important to stress certain values, the ones that are passed along from one generation to the next.
I don'l look at my home so much as an investment. People need a place to live and owning a home, to me at least, connects me to the community but more importantly it's a sanctuary that my son knows is always there.
But you and Wayne are correct. Real estate is lousy in terms of investment but there are exceptions. The good principle though, buy and hold good stock still applies.

[jyl]

I thought your point was important enough to merit a new thread.

The indicators you are pointing at are real economy indicators - unemployment rate, housing prices - what I call "Main Street" things, part of our daily lives.

The things I think more about are financial markets indicators - stock prices, credit spreads, balance sheets - what I guess would be called "Wall Street" things.

So the obvious thing to talk about, which is what I started the thread for, is what is the connection between Main St and Wall St?

Anyway, that new thread is now sitting there, if anyone has thoughts.

Originally Posted by Nathans_Dad

With all due respect to the OP, I'm not sure I would call the current situation a financial crisis. Unemployment has ticked up a bit but still is much less than 10% (compared to 25% during the Great Depression). The real estate market in some areas has experienced a correction from an unsustainable bubble. Many financial companies who tried to make a quick buck off that bubble are now paying the price.

Most Americans can still easily put food on their table and a roof over their head. Once those two things become difficult to do, THEN we have a financial crisis.

[tabs]

The Treasury didn't really step in until they saw that a run on the dollar was shaping up. The Chinks had an article in the state run newspaper about moving away from the USD towards other currencies. That sent Gold from $730 and OZ to apx $900 in 2 days.

So what does it matter if your money is NO GOOD?

[jcommin]

Tabs,

You back to my gold in Europe comment eariler. My dad told me stories when his parents lived in Greece. Inflation was high. He described using 'wheelbarrow of money' to buy things. No jobs, lack of money, no hope led them to immagrate to the US.