One of Largest Financial Players devalued in a day - what is going on?

Discussion in 'IntroSpectrum' started by McGirth, Mar 17, 2008.

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  1. McGirth

    McGirth New Member

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    We've all seen what has been happening in the market recently with the mortgage crisis and now this massive devaluation/sale of Bear Sterns.
    This, to me, is astonishing. That a company that is so entrenched in the economy can lose 97% of its value in a few hours.

    I ask, what is going on with the market? Why is this happening? Why now?
    [any Economists on this board?]

    Some may argue that the War in Iraq is to blame, or other political decisions. This is certainly a politically expedient assessment, though im not sure its correct.

    I think there may be something more going on at a more fundamental level, in terms of the redifinition of basic concepts of property/economy and consequences we are just starting to see now, starting from the 1980s/1990s onwards and the shifts in our production that we have made as a result. This is just an initial impression though.


    Or maybe its just a blip on the radar and things will soon return to normal.

    Your take?
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  2. McGirth

    McGirth New Member

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    This guy suggests lack of regulation is to blame (i.e. more of a move to free market) and removing depression era protections.

    http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B1F0148F8%2D3066%2D4582%2DB344%2DF731E3244989%7D&scid=2&dist=partner

    NEW YORK (MarketWatch) -- Remember the good old days when Wall Street's biggest "problem" was too much regulation?

    Those federal watchdogs Wall Street told us were doing everything possible to drive away business are now nursing an industry in critical condition.
    Without the Federal Reserve's blank check backing the big investment banks, the financial wheels would be grinding to a halt today, and Bear Stearns Cos.


    would be the first in a long line of brokerages at bankruptcy court.
    Who knows? It still could happen, even with the Fed's help.... (see link)
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  3. Ask the right question to get the right answer. Ask the question you are prompted to ask and get the answer you are prompted to get.

    THINGS TO TAKE NOTE OF:

    1.) American workers demand crazy benefits and packages plus salary and vacation while expecting sustainability and job security. Outsourced workers are grateful for anything. (Marry the spoiled, high maintenance bitch or the fresh-off-the-boat opportunist?)

    2.) Environmental laws are only getting stricter in America, driving taxes and operational costs up, while they are essentially unenforceable elsewhere.

    3.) Whenever an 'evil' American corporation or personality (a la Haliburton/Micheal Jackson) gets protested too much, they say "Fine, you don't like us, we don't need you" and are more than happy to setup shop in a country where they will be gratefully received and taxed less (See Dubai). Chase out all the rich according to some hippy mantra, and who will be left to slap that ungodly 50+% tax on?

    These three factors are significant enough (widely dismissed and not addressed by the Emocrats) to have a considerable impact on our economy. Therefore, the markets must correct themselves to remain competitive. Unions MUST die to stay on par with the majority of world labor. The value of the dollar MUST go down to remain competitive against the Euro. Federalized monetary institutions (the gateway to reliable American stability) MUST cut rates to entice people to invest in our infrastructure. Otherwise, your peddling a product (American stability) that no one wants (the world) for too high a price.

    Our prime product for investment vehicles is our stability in a world that is rapidly destabilizing. We must react to the global market to maintain this product, but undoing decades of Socialist morality about extremist rights and equality will be impossible.

    Unless a Democrat does it.

    Unless a minority Democrat does it.

    Unless a minority Democrat does it after a wildly unpopular president and interfaces it to the public as "rollback".

    See where I'm going with this?
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  4. BlackSoultan Ad Infinitum

    BlackSoultan Ad Infinitum aka Billy Shoreview

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    greaattt....more fascist drivel at the expense of a real answer...
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  5. Yes, Globalism is evil and fascist.

    Thank you, token emotional negro.
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  6. McGirth

    McGirth New Member

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    Ghet, the factors you mentioned may or may not go to the question of why the economy is crashing in the broader sense, but fail to explain the 2 examples presented in mortage crisis/financial sector collapse. Whats your take on these two issues specifically?

    The financial industry have their investments throughout the world - including in Chinesse Sweat shops producing things with lax environmental laws without protestor - so domestic labour and environmental law don't really apply to effecting Bears/Financial companies bottom lines to explain massive drops. i.e. factors your mentioned cannot determinative.


    Mortgages precisely rely on steady repayment, if anything a lack of unions leads to the lack of a steady wage, which in turn leads to the loans being insecure. These loans are then bundled up and traded as security, which are then devalued when a bunch of people default.
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  7. It's a matter of inner connectivity.

    I was 15 when I met my first six-figure venture capitalist who wanted to invest in China. I remember the video he watched while I fixed his computer. It highlighted exactly the reasons back then that are now the cause of economic issues today. No environmentalism, no asinine worker wages, and no personnel management. Throw in money, get money back. The track record was proven. It was impossible to pass up.

    You cannot negate worker fees and environmental laws when they are the PRIME REASON globalism was made popular by American investors and companies. It's like ignoring everything from 1930-1980 and saying the Post-Industrial Reformation of America didn't happen. Economics don't work that way. This entire problem is stigmergic.

    The dollar has been on the decline for the aforementioned reasons since that time. It's value was artificially maintained up by a continuing policy of maintaining federal interest cuts since Clinton. (Not starting with or by Clinton, per say, but sort of the bandaid applied during Clinton's time) By cutting interest rates, people borrow from the US more willingly. Again, this was the temporary solution to solve the declining dollar in the face of rapid globalism. The problem has long since BEEN known by Greenspan. The solutions have just been to hope they go away because everyone in the upper echelons of financial politics knew that to really cure this problem, you have to rollback certain parts of very powerful political infrastructure to pre-1930 times. (unions, worker's rights, New Deal policies, financial laws, etc.) No one wants to do that. It would be political suicide.

    Mortgage problems comes from banks treating property like credit cards instead of the traditional, stable slow-growth market that many, many, many international mutual funds and federal funds are completely dependent on. Problems on this core market were the grain of sand that caused the avalanche on all problems below it.

    So, instead, we watch our dollar decline, watch unions decline to global competition, import cheap labor ourselves, and hope that other nations start up businesses here with our extremely low interest rates, cheap non-unionized workers, and beneficial (to them) exchange rates. The only problem with that equation is our God awful (and soon to get worse) environmental laws.

    Stoop to conquer, sadly :(

    It's not irreparable. It's just going to be culturally uncomfortable. I don't care, however way it goes. Post-1960s culture was synthetic to begin with after the federal government 'earned the right' (See: forced) to legislate morality.
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  8. Radium

    Radium f k

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    Ghet your explanation seems reasonable though I'm not an expert on economics. It sounds like you're saying that outsourcing was not only bad for the economy but devastating. Thats honestly news to me because whenever outsourcing is brought up its regarded as a minor problem not nail in the coffin material. But what your saying seems to make sense. With that many potential jobs completely removed from the populace less money is spread around that otherwise would have been affecting every single business in sight. Those businesses make less money and must find ways to remove cost to compensate for the loss, resulting in less jobs, compounding the problem.


    Ultimately everybody loses in the long run. So if that scenario is true (I don't know) then yes it would seem that outsourcing is a very lethal thing. Definite nail in the coffin material.

    McGirth what are you seeing?
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  9. Well that's not what I was aiming at.

    Most things I go for are not directly relational. Any animal can see whats coming from 20 miles away. It's about predicting what comes after that.

    Outsourcing jobs is not the enemy here lol

    It's the Unions and Socialist morality about worker's rights. No one wants to give it up. No one wants to be the one to say "This shit is expensive."

    Here, let's pretend your a shop owner.

    You can either pay me $80K a year plus benefits (An additional $20k a year) with paid vacation to program you a script.

    Or you can go to India and pay $30k a year for the same person.

    ...........................................................


    ...............................................................


    Let me break it down:

    You can pay $2,000 for designer sunglasses

    Or $20 for a knock-off that's just as good.

    The culprit is -NOT- outsourcing. The question is why the fuck are we demanding so much money when the rest of the world is not?!
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  10. Radium

    Radium f k

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    Thats interesting. I guess the reason we're demanding so much money (and benefits) for jobs is because the cost of living here is so high. I don't think people are going to begin working for lower wages unless the economy completely tanks and people get desperate for work.

    This seems fundamentally linked to the nature of a person that lives in a country where the cost of living is this high. What I mean is, its unavoidable.

    A high cost of living is a good thing. Its a sign that the country is operating at a fairly good standard of luxury. Naturally, the people are going to be "demanding so much money" for their work in order to live in and maintain these luxuries.

    Its not liberal emotional policy that causes that effect its a result of the very nature of things.

    The real enemy then seems not to be the mentality that causes workers to demand more pay than third world labor (as this a natural occurrence) but the businesses that outsource away the jobs in the first place.
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  11. An egg in 1920 Germany was several thousand Deutschmarks. That doesn't mean that egg was luxurious in any sense of the word. It means money was being printed off/issued faster than it was being reinvested. A high cost of living means that the dollar is rapidly available. A dollar that is rapidly available is done so by one of two modern methods:

    1.) federal intervention (unions)
    2.) excessive credit extension (money for everyone... except no one wants our labor or productivity any more... in fact, not even WE want our labor or productivity anymore ERGO mexicans.)
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  12. Radium

    Radium f k

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    Uh I don't see how that relates to what I'm saying. I'm not talking about the phenomena of inflation when I use the term "high cost of living" I only use that to describe the standard of luxury we currently enjoy in this country opposed to say the standard of "luxury" endured in the third world countries we outsource to.

    Just to demonstrate that its only natural for people to "demand so much money" in a country like this and so therefore its not this mentality thats causing the problem: its the businesses that outsource to make a bigger buck at the expense of everyone here!

    You can't blame the mentality of the worker. If anything its the unnecessary greed of the businesses.
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  13. ...

    You are skipping steps and merging objects. Dangerous. That's like taking the creationist's route instead of understanding the long, complex, interdependent history of evolution. Your mind is not prepared for economics. If it was, then you can answer this question:

    How does a "high cost of living" come to be? Magic?
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  14. Radium

    Radium f k

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    Well its one thing to completely derail an argument but when have no points to support how or why you only make yourself look stupid. this isn't You vs Me its us trying to understand something together. Its a give and take. Your last two posts demonstrate that you discourse like an amateur. An extension of your disconnection from other people in general.


    lets stay in the lane this time.

    How does a "high cost of living" come to be? Magic?


    Well I'm not sure. As I see, lets see a fairly luxurious standard of living (relative to those found in third world nations) comes about from people having jobs readily available to them. With a good number of the populace working for businesses they in turn take this money and funnel into back into other businesses. Basically they make money from a business so they can spend money to other businesses. This causes a healthy circulation of money and much consumerism. hence, a higher cost of living in order for a person in this society to partake in the joys of consumerism.

    But again I'm not seeing where you're taking this. You failed to address my other point that its the greed of businesses (removing jobs from the economy) thats causing the problem.

    I dont know maybe you're going somewhere with this.
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  15. And according to everyone else who is an economist, the "luxurious" economy is a fad of reckless spending brought on by morons who can't figure out debt management, but are issued access to quick money.

    http://news.yahoo.com/s/nm/20080318/us_nm/usa_housing_consumers_dc;_ylt=Ao76hjnTyPEdi4uQcZUBLxms0NUE

    Don't tell me I don't have evidence when if I even displayed the evidence, most people here wouldn't even know how to interpret it.

    Excessive personal debt, brought on the shoulders of an institutional level, isn't problem. When those hordes of people refuse to payback their promises/debts, the institutions cannot convince their investors to remain on board. Value of a dollar goes down. People look to Unions to redistribute. Unions disappear due to globalism. People become fucked. No one invests. Value goes down more. Feds cut rates to make investors happy. No one startups companies because trees are apparently more important. Fed rates are counterbalanced by lack of confidence. Then everyone becomes fucked fucked fucked fucked all because they thought balling out of control was a top priority.

    Bush goes to war to tie American economy to oil production for India and China consumption in a desperate ditch to get some easy income to sustain our "high cost of living". People piss and moan and chase away a heavily taxed multinational corporation to Dubai. Multinational American Financial Institutions consolidate into Middle East sultanates. Bush is on his hands and knees begging for that China contract. All to maintain that "high cost of living" that mysteriously seems to pop out of nowhere.

    People become fucked.

    People become fucked.

    People become fucked because they can't control their impulses.

    People become fucked.

    If no one person is to blame for something, then it is the people's fault and they will bring burden for not being prepared.
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  16. Radium

    Radium f k

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    It seems that you're trying to say people in this society are spending beyond their means as thats what the article was about.

    with (I guess) the implication that people in general expect to have too much or too high a standard of living. This causes them to expect to be paid more for their labor and by your reasoning "forcing" businesses to outsource.

    Is that what you're saying?

    ---

    alright thanks for editing and explaining why what you posted relates to a sink in the economy

    mainly this part


    Excessive personal debt, brought on the shoulders of an institutional level, isn't problem. When those hordes of people refuse to payback their promises/debts, the institutions cannot convince their investors to remain on board. Value of a dollar goes down. People look to Unions to redistribute. Unions disappear due to globalism. People become fucked. No one invests. Value goes down more. Feds cut rates to make investors happy. No one startups companies because trees are apparently more important. Fed rates are counterbalanced by lack of confidence. Then everyone becomes fucked fucked fucked fucked all because they thought balling out of control was a top priority.

    honestly thats beyond my scope and I cant verify or disprove any of that

    But so far it sounds like your saying that the sink in the economy is a result of two things

    1. the need to outsource (which you still haven't addressed my point on yet) *

    and what you just introduced

    2. people spending too much and getting into debt which somehow initiates an international scale meltdown. I dont fully understand how this works. Can you go into more depth?


    * This one

    You can't blame the mentality of the worker. If anything its the unnecessary greed of the businesses.
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  17. Offbeat

    Offbeat New Member

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    they basically didnt diversify and had themselves exposed to too much sub-prime lending

    of course they didnt expect this to happen but any investor knows it is possible, they were extremely highly leveraged

    heres some quick income-debt figures of some financial institutions ive been researching

    jp morgan chase: -430.49 billion
    bank of america: -595.95 billion
    american express: -69 billion

    usually this isnt bad, its leverage, its how financials make their money, by taking on debt

    but usually the risk is spread out between mortgages, common stock, muni bonds, corporate bonds, foreign debt, personal debt, us government bonds, etc

    sub-prime was extremely risky and they took too much on, and eventually didnt have the liquidity to give people their money.... its a run on the bank basically

    so the stock lost most of its value since the underlying buisness was so bad

    it happens, its risk, its investing, its buisness.

    i hate when people pretend this cant happen... dumbass it does! enron, worldcom, nbci, 200 automakers, most early railroad companies, went from being powerhouses to bust.

    i dont worry about the economy, this has happened since the 1800s, usually people panic when in reality it allows you an opportunity to build wealth in the stock market

    outsourcing isnt a problem it allows buisness growth it is a problem for someone who demands much more than their true value

    25/hr for screwing in a bolt on an assembly line plus benefits.. does that sound sustanible? probably as sustainable as a stock in a dot com in 2001 trading over 200 times earnings without posting a profit in its company history...

    the key to surviving here is education, professionalism, being able to market yourself well, productivity, skills, and understanding your true value as a worker and not pushing the limit to what your worth, but rather increasing your value and working from there... and of course money management.
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  18. It isn't the need to outsource. The benefits of outsourcing is prompted only by comparison. When you compare the stuck-up hoes of America to the grateful mail-order brides of East Bumblefuck, it's easy to see who is going to get more action. You're skipping layers if you ignore this. Let me step-by-step it.

    1.) In one location, people want to be treated better at work. They want healthcare, vacations, rights, etc.

    2.) These benefits cost money to people who run the business.

    3.) Workers in the location are happy, meanwhile, people who startup the business are not since they have to pay more.

    4.) In another location, people don't care how they are treated at work. Either poor regulation or extreme regulation allows workers of the same product but at a fraction of the labor cost.

    5.) When those two locations are accessible to investors, the investors see the entire issue like this: I can startup a company in a place where workers get paid retarded amounts of money -OR- I can startup a company in a place where workers get paid shit. Both workers will give me nearly the same quality and quantity of product I want to sell. I'm going to save a buck and go to the cheap workers instead.

    If you don't want to blame people for wanting to live the way they live, then don't blame investors for wanting to save a buck. I'm sure every piece of clothing you own isn't the runway-tested high fashion version.

    Either the people must be forced to change, or the investors must be forced to change. Change the people, and holy shit, they might actually learn to be responsible and productive citizens. Change the investors, and you are going to piss off a lot of armed militaries overseas.

    Understand this first and then I will break down why personal debt affects institutional lending.
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  19. iLL Rich

    I think it's just a shifting of the market, from post-war industrialization (ancient FDR bullshit) to the information age.

    Information, that is, the management and analysis of data, is a much preferable commodity to trade as a testing ground for globalization simply because a lack of information doesn't cause shortages that render entire populations fucked. (unlike foods, textiles, and other goods that provide benefits for fundamental aspects of existance)

    These poor saps want to keep clinging onto shit from 1930 like it's still new and progressive. It's not.
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  20. Offbeat

    Offbeat New Member

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    true. i think there was a time this country needed unions... now, not so much. theres a huge market for unskilled labor, especially since india, china, poland, etc. are now actually developing.

    the market will recover and correct itself, this is america for God's sake. we have to compete, it's just the times of being middle-class from manufacturing toys is gone. now instead of $25/hr you might get $10. you'll have to be more skilled, educated, and productive to command the top dollars. japan does it, and they have higher tax rates, the population is just focused on buisness and success moreso than us so they can make the transition. i am not worried. the lazy, uneducated, and spenders should be terrified (unless they change).
    test
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