Are you changing your behavior in response to current events? - Page 9

Re: Are you changing your behavior in response to current events?

There's alot of smoke and mirrors in that article. I don't really have the time to point it out right now - but I'm sure others will.

re: the prior posts about derivatives; lets not confuse the securitization of mortgages with the derivative investments. The tranches in particular... Securitization is a good thing - when done properly with suitable assets. I, however, have always been suspect of derivatives. Complexity never reduces risk. Eggheads need to relearn this about every ten years or so.

There is NO risk-free investments - but people turn themselves into suckers every day looking for this. (even presently - buying treasuries at a huge premium looking for 'safety')

and lets not forget - derivatives may have brought down Lehman, but it was good ole fashioned bad loans that did in Wachovia.

Re: Are you changing your behavior in response to current events?

I think that is an oversimplification. There is no doubt that certain derivatives, such as commodity futures and stock options, are extremely helpful in moderating risk. Just ask the farmer who needs to lock in a price for his crops or the airline that wants to better estimate its fuel costs. I will say, however, that the leverage involved in derivatives --both regulated and the OTC variety--can lead to huge losses if one is not careful.

I also believe that while risk often gets a bad name, we need to allow people and businesses and individuals enough leeway to have opportunity for success. There has been a lot of commentary lately on how some firms took too much risk, and much of it has merit. However, it is unreasonable in many cases to run a business based on the odds of a once-in-a-lifetime (or once in 10 lifetimes) type of risk. For example, my auto insurance policy is fairly large. But if I happen to plow into a busload of kids, that insurance runs out pretty quickly. I don't think it's prudent for me to have $50 million in insurance coverage due to the odds of such a calamity. Similarly, many firms probably gauged the odds of the recent banking meltdown at somewhere over 7 standard deviations from the norm (i.e, close to impossible).

Getting back to the original topic, I've changed my travel/vacation plans from a European vacation to something a little closer to home. But we'll see...the market is looking better lately.

Re: Are you changing your behavior in response to current events?

Maybe, but not here. The debate represented by the WSJ article, on one side, and the McClatchy article, on the other, is fundamentally political and will take this thread in a direction that will get it closed.

OK, I'll bite. What's the difference? Or rather, what's the distinction you're trying to make? Securitization of mortgages creates a certain form of derivatives. And . . . ?

(Please do not lose sight of the fact that the "prior posts about derivatives" have stated directly that derivatives per se are not the problem. That includes securitization of mortgages, which went on for a long time without risk to the financial system. Then things got crazy.)

Here's where we're talking past each other. The failure of this or that institution, while a serious matter, is not what brings down the system. It's the inability (or unwillingness) of the institutions that remain to continue doing business as usual with each other. That's a derivatives-related issue, but I suspect we're going to have to agree to disagree on that.

M.

Re: Are you changing your behavior in response to current events?

A few months old, but the point remains: the crisis truly spares no one ;-)

It's not easy being less rich

Money quote:


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H

Re: Are you changing your behavior in response to current events?

Lifes a bitch when you are less rich! I can almost see some valid points in the article but I still find it hard to sympathize with any of them, especially the ones who want to keep up appearances or the men who worry their wives' will leave them, let her, if she is that shallow and that is what the marriage is based on.

Re: Are you changing your behavior in response to current events?

I'm not planning to change anything at all . Once you get into a mindset to change your lifestyle and go into a shell - sort of, you get conditioned to work towards a lifestyle that you don't want ..

Re: Are you changing your behavior in response to current events?

I'm not planning to change anything at all . Once you get into a mindset to change your lifestyle and go into a shell - sort of, you get conditioned to work towards a lifestyle that you don't want ..

Re: Are you changing your behavior in response to current events?

Oklahoma State is having to make some changes......

Oklahoma State projects affected by donor's losses - NCAA Football - CBSSports.com Live Scores, Standings, Stats

Re: Are you changing your behavior in response to current events?

Typically not. However, you can buy put options on stocks you don't own, or trade other derivatives in which you don't own the underlying security.

Re: Are you changing your behavior in response to current events?

Here is one of them: YouTube - Peter Schiff Was Right 2006 - 2007 (2nd Edition)

Was this guy anywhere close to the bailout negotiations? Of course not. That would actually make sense, and we can't have that.

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H

Re: Are you changing your behavior in response to current events?

Wow Thats amazing how Peter saw all this coming and all the other "experts" laughed in his face. So whats he doing now?

Re: Are you changing your behavior in response to current events?

I have cut back on the number of dvd & comic purhases. Not only because I concerned about the economy. But, the fact that I am turning 40 and realize I don't need all of this material stuff cluttering up my house. I rather used the saved money to go to Europe. I went to London for the first time earlier this year. And I am dying to see other parts of Europe.

Re: Are you changing your behavior in response to current events?

The single biggest financial impact to me in the past 3 years has been the fact that we had two children. I'm making more money than I ever made before, and spending it faster than ever before. Daycare, diapers, food, clothes, a change in the types of car we're willing to buy, a change in the school districts we're willing to live in...all because of kids.

If no one had kids, we'd have lots of disposable income, but it would probably cause a Depression because the constant arrival of new births and children on this planet has a HUGE impact to the economy, because it "forces" spending. Before I had kids, I would let my money accumulate and then buy things as I felt like buying them. Now there's stuff that HAS to be bought or paid for. I'm supporting not just two kids but entire industries.

Anyway, back to the original question: no, I'm not changing my behavior in response to current events. But I think it will only be a matter of time before we all feel pain because the tax base has been so depleted. All that potential property tax has been lost, not to mention income tax, etc. So either programs are going to get cut, or taxes will be raised. People won't like either outcome.

Re: Are you changing your behavior in response to current events?

It's easy for people to change things in ways you don't see. For example, I've postponed several major expenditures that aren't absolutely necessary. I can afford them, but I'd rather keep a large cash reserve, because I don't think the worst is over yet. But unless I told you that, you wouldn't know that I'd made any change.

The key phrase is the one in bold. The unemployment rate is higher now, even if it's not the people you know. It's about to get even higher, as retailers close or slim down, and major financial operations like Citibank continue to lay off people.

I don't think you can go by the relatively limited selection of consumers that any one of us is in a position to observe. All statistics indicate that, on a national basis, U.S. consumer spending is way down.

Re: Are you changing your behavior in response to current events?

Aye, and quite likely much of the current spending has gone toward stocking up on essentials (and whatever actual luxury items) at relatively deflated prices for the near term, which would probably extend the slowdown somewhat more than may be obvious.

For instance, it was thought (until very recently) that spending on mobile devices did not seem much impacted at all, but a lot of these things have been getting price slashes (and continue to get them). And in very many cases, people will not be buying more of them for quite some time after this, eg. new phone w/ 2-year contract, good enough iPods, other PMPs, netbooks, etc.

For myself, I'm thinking more or less like Michael as well. For instance, normally, I would probably not hesitate to spring for the current excellent Crutchfield deal on the 61" Samsung LED DLP RPTV (especially considering the rumor that Samsung is bowing out of the DLP market) plus a stand to go w/ it, but I could probably still get by w/ my 6-yo 53" Panny RPTV for another couple years (and possibly more, if necessary). Of course, our car recently got totalled by some drunk(?) driver and needs replacing (w/ some bit of out-of-pocket cost), so that doesn't help...

And yeah, having kids makes a huge diff on one's budget. Without kids, you might not necessarily even think you'd need a house(!) -- certainly, you could get by w/ something smaller and cheaper, if you still wish to own despite the housing bubble. And there's the childcare aspect too -- for a long while, you'll need to either directly pay $$$ for childcare or indirectly pay $$$ w/ someone staying home (unless you happen to have retired parents or very close relatives to do just that at virtually no cost). And then, not long after you stop paying $$$ for childcare, you're looking squarely at impending college costs(!), assuming you send your kids to public schools (and nothing else like piano or violin lessons, etc) up until that point...

_Man_

Re: Are you changing your behavior in response to current events?

I agree Dave, both Michael and Man-Fai live in NYC!
Certainly one of the most expensive places to live. I promise i live just as good, if not better in many ways, as both of these gentlemen. I do it on a 1/3 (or less, cause i dont know what they make) of what they do. I dont make as much, cause i dont live in NY.

My house in a place like NYC would cost MILLIONS! But of course it doesnt cost that in Oklahoma, or any place else in the middle of the country. (You guys should look at what $250,000 can buy you any place, but the coasts)

When you cant afford the house you live in, you cant afford to live.

When you feel the need to buy a $60,000 car, that also shouldnt cost that much, and the gas for it was costing $800 a month last summer... Hell yea, i can see why people are broke, and cant live!

It shouldnt cost that much to live!

I guess thats what makes people think $25 for a Blu-ray disc is to much. They are lucky to have $25 left after living costs.

I read 1/2 the country makes less than $35,000 a year, individual income. Assuming that you are a 2 income family, and you almost need to be, that $70,000 a year isnt enough to carry a $800,000 mortgage!
We love to watch these house shows, like My House is Worth What?, let me tell you housing costs are WAY to high on the coasts. It HAS to break, they are not worth it. People dont make enough to afford them.
People got caught up in the interest only loans, and now its time to pay the piper. But the average person will never be able to afford a home in many of these places...ever! Not everyone can be a millionaire. I know i am not.

Anyway, i also dont trust the news. They want to sell you bread, they dont give a rats azz about informing, or education anyone. Fear makes people tune in. Fine, tune in.

Michael, Man, you guys could sell your homes, move out here, pay cash with the equity, and live pretty damn good!

You know, i do hope for the best with everyone. I know people are hurting, but its not everywhere and everyone. Some of it we bring on ourself, because if you like to live where the fun is... that costs, and in my opinion, it cost to much for the average person, in those areas.

Oh yea, Michael, and Man, i dont want you guys to think i am singling you out. I enjoy your thoughts, and feedback. You guys really know your stuff!
I hope you guys are doing well. Once again, i wish everyone well wishes, and hope for the best. I just find it interesting how different it can be in other parts of the country, that you may never of heard of, much less been to. Sure we have our problems in Oklahoma, due to these current events. I would be crazy to have my head in the sand, but it sure isnt like i read about in the paper.

Re: Are you changing your behavior in response to current events?

Search Youtube for the Community Reinvestment Act, there is a nice video on how alot of this got started thats been pulled once already.

Re: Are you changing your behavior in response to current events?

[quote=RickER]
Anyway, i also dont trust the news. They want to sell you bread, they dont give a rats azz about informing, or education anyone. Fear makes people tune in. Fine, tune in.
[quote]

Amen, major news media wants to tell you how bad it is to keep you tuned in, they could give a crap less about this country.

Re: Are you changing your behavior in response to current events?

Who said anything about the news? I'm talking about basic statistics. Facts are facts. Unemployment is higher, consumer spending is lower, and billions of dollars of value have evaporated from the stock market and real estate. Now, one can disagree over the significance and impact of those facts, but disputing that they exist is like saying there's no gravity merely because you can't actually see it.

I have this sense of deja vu. Last year, after Bear Stearns failed, I noted (in a different thread) that this was symptomatic of a major upheaval in the economy -- an obvious observation, I thought, and not one requiring any special insight. Several people couldn't wait to tell me how overblown the whole thing was, strictly a product of the "news" exaggerating everything.

Since then, we've had Lehman Brothers, WaMu, Merrill Lynch, the bailout, a stock market meltdown, huge layoffs, repeated emergency interventions by the Fed and a general acknowledgement that the country is in recession. As we speak, Citicorp, one of the world's biggest financial institutions, is breaking itself up and selling off pieces. And still, there are people who want to dismiss what's happening as a media creation. I guess the old saying continues to be true: Denial isn't just a river in Egypt.

My comments have nothing to do with any person's or region's cost of living. I was simply noting that ancedotal evidence is a limited tool for assessing the economic state of the country, especially in a global economy. It tells you a lot more, for example, that, in the last two months of 2008, China's exports experienced the steepest declines in the last ten years. Why? In large part, because the U.S. consumer has cut back on purchasing. You can tell, because in November the U.S. trade deficit experienced the steepest decline in the last 12 years; much of that was attributable to falling oil prices, but a portion was attributable to declining demand for consumer goods. (I'd link to the Wall Street Journal articles where this is reported, but it's a pay site. The same information is probably reported at Yahoo Finance, if you want to look.)

This meltdown has many causes. This has been discussed earlier in this thread, and we're not going there again, because there's too much risk of the conversation turning political.

Re: Are you changing your behavior in response to current events?

Most everyone has, one way or another and on some level.

Rather than an impulse purchase, it becomes, "Do I really need this?"

My gut feeling is things will continue to get worse.

Congress, in their not-so-infinate wisdom, asks, "Whose to blame?" They should look in mirror.

To solve this crisis, we have to take the necessary step of actually going back to our Constitution and see what we, the taxpayer, should actually pay for.

First and foremost Congress needs to provide for the common defense. Everything else is just gravy.

There is only one thing I can think of that Congress has done right. That is funding the military. IMO, everything other than that they have managed to screw up and screwed us, the taxpayers and citizens of the U.S., in the process.

It would do us all good to get back to the Constitution. Sadly, it seems that path was left during the bailouts.

All I can think to do now is try and get as debt free as possible, even if may be a difficult thing to do.

Re: Are you changing your behavior in response to current events?

Let's nip this in the bud.

The above is a political discussion in the most basic sense. Aside from being unresponsive to the question asked in the thread title, it also addresses the causes of this meltdown at the governmental level, which were specifically indicated as inappropriate for further discussion here.

I don't want to close DaveF's thead if I don't have to; so let me make it explicit, in official moderator-ese: The next such post to appear will be deleted, and possibly the poster as well. There will be no further warnings.

Well, to that end, I can report that my two relatives who work in retail (neither of them in NYCity) saw huge fall-offs in sales during this last holiday season. Both work in high-end department stores, one in cosmetics and the other in shoes. FWIW.

Re: Are you changing your behavior in response to current events?

Everytime, lately, when I go shopping for essential items, I'm sort of astounded by the lack of hustle-bustle in the stores and the amount of shoppers in general is pretty low compared to my recollection of last year's general shopping experiences at the start of the 2008.

Re: Are you changing your behavior in response to current events?

Last year we had 20+ days off work due to lack of sales that we wouldn't normally have off. Including vacation time and holidays, I had 60 paid days off. This week the hourly folks are laid-off again. All salary are coming in to do busy work. Management is tiring of paying us to sit home and watch movies. This is at a factory that ran 24/7 shutting down only 2 weeks a year, the past 7 years. Now we are running 24/5 and shutting down one week per month. Despite our best efforts we lost close to $1million in December. People are definitely buying less cars. That is no secret though.

Re: Are you changing your behavior in response to current events?

Michael, you bring up that China has had a steep drop in exports. Dont you think we could put some of the blame on the cost cutting on China's part? You know, the lead in toys being the big one i can think of, off the top of my head. Lots of things that came from China, seemed to have been sent back in the last year. People were looking where a product was made for a while.

Re: Are you changing your behavior in response to current events?

Which, as I also noted, correlated with a steep drop in our imports. Yes, there have been some intensely reported stories about problems with certain products from China, but in the overall scheme of things, these account for a small fraction of U.S. consumption. The real story on the Chinese economy, which doesn't make for a good headline on the nightly news, is that it's slowed dramatically due to declining U.S. consumption. The flipside of their holding so much of our debt is that the U.S. consumer has driven much of their economic expansion.