Congratulations, YOU now own Freddie and Fannie

[jimbojr]

Jake...didn't miss your insight. I understand the consequences of NOT bailing out Fannie/Freddie. I'm just saying when are we going to take back control of our financial destines--both nationally and individually. Could we let the whole works melt down and recover? ABSOLUTELY. We have historical precedent. Anyone recall the event that turned around the disaster of the Great Depression? WWII! I'll leave global military conflict as the ultimate reset button for global markets for another discussion. Oh geez, we're already picking fights around the world (as are the Russians with Georgia). Could any of these, perhaps, erupt into the next global conflict?

Look, Fannie/Freddie/Ginnie are just massive clearing houses for GLOBAL financial fraud and money laundering. The amounts are staggering, and unfathomable. Most people can't get their heads around a billion dollars. How can they envision how big a Trillion dollars is? Now, we own an additional debt of $5.3 TRILLION, on top of the $9.5 Trillion we already have on the "official" books.

Gas and oil prices are nothing compared to what's going on here. At least with oil, there's an actual market for real goods and services. Sure there's manipulation of those markets (With OPEC being the biggest commodity price fixers on the planet), but oil and gas is real. Asset values on the books of Fannie/Freddie are pure fantasy. Let's just hope Canada stays on our side, being that they are the largest exporters of Oil (not the Saudi's) to the U.S.

So we have $1.6 to $5.3 trillion of contingent liability that the Govt. will absorb in some fashion. We are talking about an *order of magnitude* beyond anything the Govt. has ever had to deal with in a single event in our history as a county. Who can formulate a plan to deal with such a huge number?

Just to put this number in perspective, at the low end ($1.6 Trillion in obligations to be paid by the Feds), the US GOVT COULD PURCHASE ENOUGH OIL AT CURRENT DEMAND (9.6 million barrels a day) AT CURRENT MARKET PRICES ($103/barrel) TO SUPPLY AMERICA FOR FOUR YEARS!!!

So, we've let the global crooks steal enough American wealth and productivity to provide 4 years of crude oil for every American vehicle--from Prius to Hummer.  Oil is not the problem. GLOBAL RAPING OF THE UNITED STATES THROUGH STEALING OUR FUTURE WEALTH AND PRODUCTIVITY is the real problem. b

Now, how do we ultimately deal with this? I'll tell you the final solution.

WAR

Just think about all the crazy economics that work during times of war. Consider the extreme things people are willing to give up and do under the premises of patriotism and for the sake of the "cause". Look at the powers that Federal Govt. has grabbed in the name of protecting the US people after 9/11 and the need to prosecute the wars around the world.

I'm willing to listen to anyone who has solutions to this problem. I think we've had enough preaching to the choir.

Jimbo

[Roger J]

Wow.  Now we're saying we have to go to war to solve this mess?  Oh wait, we've been at war for awhile now.  How's that working?

You're talking about a global war of course.  It's not worth getting into an intelligent discussion about that because it's not intelligent thinking.  A global war MAY reset the markets, but it would also cost millions of lives, Billions of dollars, cause the collapse of several countries and possibly totally ruin the earth as a viable planet.  Not exactly a solution, in my opinion.

Mike and the money out of thin air again!

Where, or what exactly should they be basing it off of, putting us back on the gold standard perhaps?

Do you recall WHY Nixon took us off of the gold standard?  Because foreign investors (that doesn't include the American people) held more dollars than the USA had in gold reserve.

Now if the dollar was backed by gold (or any other precious metal) and we didn't have enough of it, what do you believe that the outcome of that limitation would be?  Besides runaway inflation, people couldn't get paid for services (in cash anyway) because there wouldn't be more dollars available for print.  Kind of makes it hard to live.

The dollar IS the backing for the dollar.  As long as the dollar remains the currency for the world (and I don't think that is changing anytime soon), it will remain viable.  In short, they can print as much as they need as long as the demand for the dollar continues.

Raj

[fdjake]

The answer to this question is simple....

The majority holders of U.S. dollars are the following countries..

CHINA
U.K.
JAPAN
Oil exporting countries
All others (31%)

YOU pick which one throws in the towel????

But....remember....they throw in that towel, and it's OVER for them.  THEY KNOW IT, and the MARKETS know it.  LOOK at what's happening.....The U'S. dollar is the ONLY currency rallying!!  Once again....you play the hand you are DEALT...Not the hand YOU WANT!!

I wonder how GREAT the Chinese economy would be doing IF their BIGGEST customer (the USA) STOPPED buying all that crap they make over there??  They bail out of our currency, they CUT THEIR OWN THROATS!  Very simple.  China dumps the U.S. dollar and it's OVER for our economy....But...it's also OVER for theirs!!!

How do you think JAPAN would do if THEY blew out of all that American debt???  Can you say bye bye Toyota and Honda.  Japan is the second largest buyer of U.S. debt.  They bail, they kill our economy, and THEIRS!

Lastly we have the OIL EXPORTING COUNTRIES....funny scenerio here...OIL is TRADED in U.S. dollars!!!!  Want to buy some???  Well step up here and convert those dracmas to Uncle Sam's and they'll sell you all you want.  I doubt their looking to dump the ole greenback and screw themselves when the money is literally POURING in!!!

Here's the real scenerio......The U.S. goes down.....THEY ALL GO DOWN WITH US!!  It's all interwoven.  We're ALL going to pay for this mess.
Watch what happens to interst rates when they down size Freddie and Fannie.

Either way....Real Estate is going to continue to take a BEATING UNTIL we work through this crisis.  As I said 3 years ago here.....you CAN NOT have a price appreciation curve that goes STRAIGHT UP....with out having a BUST that goes STRAIGHT DOWN.  Next up....REGION BANK FAILURES BY THE DOZENS. It's ALREADY happening.....a LOT of people are going to get hurt.  A LOT of people will make a TON of money.  You have to decide WHICH one you want to be.....It's a whole new world gentleman.....

Change or die boy's.....CHANGE OR DIE!!!

[fdjake]

3 minutes ago off Bloomberg........

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKVz2a3g_boE&refer=home

PLAY THE HAND YOUR DEALT!!  YOUR GOVERMENT is the dealer, he just handed these guy's a FULL HOUSE!!!   Tough to go out of business when Washington is bank rolling you!!

Again....I could care less about the arguements here...this is a HUGE opportunity, you can participate, or you can watch it go by.  I've seen this movie before.....believe me you'll LOVE the ending. 

[allagash]

Good observations fdjake.....

Why be bellyaching when with all this volatility there's plenty of opportunity to capture gains from it.

Heck....I made some good money just off the T. Boone Pickens TV campaign......(CLNE and KDN).

My strategy is a bit different...I prefer to limit my time exposure to the market.

Ideally I'm trying to limit exposure to 45 minutes to maybe 24 hours.

This may seem like chump change to you....but I find that developing different actionable trade modules limits my risk exposure that would be inherent with longer holding periods.

One type module is Buyback Announcements.  When a few months ago Western Union announced a $1 Billion Buyback program along with their solid earnings in this climate, (probably a lot of collect calls being placed these days), it was a no brainer to me that the stock would bounce well.

Would I prefer a 130% or 300%, (F going from $5 to $15), return?

Absolutely!

My approach isn't for everyone.....it requires real-time candlestick charting....which translates into having the ability to have ample time and attention during actual market hours.

But thanks to NYCRookie and another mentor I follow....it works for me.

I test extensively before implementing a plan, (module).

Back to Propertymanager's comments....if you really think about the longer term inflationary potential that our policies are creating.....it only makes sense to focus hard at developing a means of income that has the potential for exponential monetary growth.

Inch by inch, it's a cinch.

-Mike

[fdjake]

GREAT JOB MIKE!!!!

You get it, always did!!!

It's about LEARNING something!!  You spent the time to develope a STYLE of trading that works with your personality.  This is the single most important thing you can do.  FIND A METHOD THAT WORKS FOR YOUR SITUATION and get really good at it!!

With Rookie coaching you, your definitley listening to a great mentor.
This guy's calls (like  the U.S. dollar) have been, and STILL are money makers!!!

Keep up the good work Mike, it's about LEARNING how to CREATE WEALTH.  Personally, I have found NOTHING that even comes close to the bang you get for your buck with this type of investing. 

[jimbojr]

What opportunity again? Throw down you chips on the table and hope the Feds deals a fair hand?

Puts on failing bank and financial stocks--who wants that risk? Jake's own analysis of the Feds dealing the deck is spot-on. Not only do the Fed's deal the deck, they deal from the bottom. Sounds like pure gambling to me. Of course, plenty of people hit Vegas daily for the opportunity. At least in Vegas you get quoted the odds. 

If the Feds are dealing from the bottom of the deck, then it reasons that they'll deal the good and bad hands when *they* decide. Just like Pitt says to Clooney in Ocean's Eleven...

"Cause the house always wins. Play long enough, you never change the stakes. The house takes you. Unless, when that perfect hand comes along, you bet and you bet big, then you take the house."

So, to make money, you'll have to be "in" at the right time or be in with the dealer (i.e. the billionaire boys club of the Fed Govt). Hey, if you've got the money you can make a few hundred million like Paulson & Co. (not the Fed's Paulson) and his gang. Notice how close his fund was to the source of the problem (former Bear Sterns investment banker), and consequently the inside info.

http://www.businessweek.com/investor/content/mar2007/pi20070308_900631.htm

I can't say I have that kind of inside track to make smart short plays on stock puts. Good luck to any who are going to go for it.

AS FOR WAR
---------------
I'm really not just talking out of my a** here. Read a couple of articles from former Chancellor Helmet Kohl when confronted with having to reconcile the the economic problems of Germany in the mid 90's....

Kohl warns of war if European Union fails | Independent, The (London)
http://findarticles.com/p/articles/mi_qn4158/is_19960203/ai_n14026648&tag=rel.res3?tag=col1;fa_related_widget

Kohl Casts Europe's Economic Union as War and Peace Issue, The new York Times
http://query.nytimes.com/gst/fullpage.html?res=9A0CE5D81039F934A25753C1A963958260

Kohl was sharply criticized for even suggesting the "W" word back then. He let it slip then when Germany was being pressed by the fledgling EU back then. It's a possibility that world leaders have entertained. What would happened if world leaders were really backed into a corner economically? It wouldn't take a superpower spark to ignite a powder keg.

Just more food for thought.

Jimbo

[jemadelic]

How will this affect real estate??

[propertymanager]

The loss of jobs; the huge debt; the extreme heating costs; the runaway inflation, etc all will increase the downward pressure on real estate prices and increase the number of houses in inventory.  The insanity in the government also increases the risk in the rental property business.  My belief is that there will be a LOT of non-paying tenants this winter as they simply can not afford to put gas in the car; pay the utility bills; and pay the rent.  If this attracts public attention, who knows what the idiots in the government will do?  Will they declare a moratorium on evictions?  (Hillary wanted a 90 day moratorium on foreclosures).  Will they simply say that no-one can be evicted during the winter months (Ohio declared a gas-shutoff moratorium last winter)?  Will the government some day wake up and stop all these silly entitlements, including Section 8?  While that would be the right thing to do, it would also cause a temporary shock to the rental property business as these people would probably need to be evicted before they woke up and finally got a job.  These government interferences could be disasterous for the rental property business. 

It will also be a disaster for the real estate business when our country finally collapses.  The US is BROKE!  Very few people will be buying houses, cars, or anything else in the middle of a depression.

Mike

[fdjake]

Here's the effect on Real estate and WHY the stock market is so inter-related.

A few months ago the Feds told Fannie and Freddie "You better raise some capital"  So both enties went out and raised money through sale of stock.

Monday the Fed's stepped in and WIPED THOSE INVESTORS OUT!!!

Some of us my not care...but I warn you....this DID NOT go unnoticed by Wall St.  Investors are going to be VERY reluctant to pour money into anything now.  This will lead to a SHARPLY curtail mortgage market.

WATCH.......rates are going to rise dramatically and availability of credit will get even tighter than it is now.

That is the cause and effect.

We're in for some very tough times.  Anyone who thinks this is over is kidding themselves...BIG TIME!!

[71tr]

The conservatorship of Fannie and Freddie has not completely wiped out the shareholders, both stocks still trade although for less than a dollar.  As for the effect on the mortgage market and interest rates the goal was to restore confidence and liquidity to the market.  Fannie issued $7billion in new debt which will likely be used to buy mortgages and keep the market functioning while 30yr fixed rates have dropped significantly.  While I'm not a fan of govt run enterprises this takeover was preferable to allowing these two market makers to fail outright. 

[fdjake]

I agree..  Letting them fail was NOT an option.

I've heard some interesting scenerios regarding upcoming interest rate moves in the mortgage markets.  Some are not at all pleasant.

Your right I guess share holders weren't wiped out but seeing their stock go from $12/share to 80 cents IS a wipe out in almost any sense.

Anyone buy those Ford Jan. 2010 $7.50 calls yesterday at .98???

Your up 20% ONE DAY later!!!  (watch the BID)

Not bad considering how the DOW and S&P are fairing this year!!! (both down double digits)

[fdjake]

Sorry,

Make that up 28% in ONE DAY on those Ford options.

[phlemboy]

This is all interesting to watch everyone's opinions here. However, I'm noticing a difference on opinion when it comes to oil prices. I'm seeing how the price oil affects what people spend their money on. Its hard to out to dinner, buy this or that, when you have to heat your home and put food on the table. I watched an OPEC executive on CNN the other day say that if oil reaches $80 - $ 85/ barrel, they have a "contingency" in place to keep the price from going any lower. I think he meant reducing supply. Anyway, since the price of oil affects so much, can anyone tell me which direction oil prices will go and why? Its very confusing when you don't know who to listen to.. Keep up the great posts guys. I'm learning a lot.

[rookieNYC]

Ok its been a while since I last posted..My QQQQ position has gone from up nicely to close to flat again..My closed end funds the same..Oil has pulled back nicely ,not that its any reprieve at the pumps..Looks like Lehman should be bought out and if not the markets will cave in further..Fannie and Freddie?..I have seen the posts on here and I agree and disagree with many..What I think the point everyone should look at is this..We are all either real estate investors or aspiring to be real estate investors..For that to happen we need credit (Money etc)...If the Fed didn't step in and *rescue* these monsters the credit markets would take imho years longer to recover..And who would pay the price either way?..Us..Lack of funding would reach into every pocket..$ 5 Trillion in loans is *huge*...I had a conversation with fdjake privately about a few months ago and I told him that I didn't like the equity markets as much as I should..I don't know where we go from here but I can say that even the top %1 are hurting..There is no sense pointing fingers at who is to blame..We need viable tactics to repair this sinking ship because this ship can quickly get very ugly..In the event that nothing is done to stop these bank failures people will lose faith in our financial systems around the globe..And if the credit markets shut down every person will lose..401k's,equity accounts,real estate investors,car buyers,any type of credit loans,business,home,commercial etc..There was little choice to save Freddie and Fannie...This was no double edged sword..Now to make matters worse Bernanke has boxed himself into a corner..He has to raise rates and that will compound the problem..

Anyone who is against this bailout,partnership,rescue whatever you want to call it I ask you this..What is your plan?..