Comments on: The BailOut Question That Must Be Asked Before Passage http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/ the mark cuban weblog Fri, 19 Mar 2010 19:59:58 +0000 http://wordpress.com/ hourly 1 By: TomH http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-51337 TomH Thu, 09 Oct 2008 21:19:13 +0000 http://blogmaverick.wordpress.com/?p=766#comment-51337 Today's market plunge is exactly what happens when you let fear set in. Our elected officials are not supposed to understand everything that we face as constituents. They are supposed to defer to people who know more about the situation than they do. This is not the same thing as being ignorant of the subject matter. Hank Paulson/Ben Bernanke are not geniuses, but they do know more about the financial industry and its inner workings than all the members of both sides Congress combined. The plan they initially presented was not perfect, but Congress should have set some spending limits and a real oversight board then passed it. Instead they allowed fear get into the world economy and now the train has come off the rails. As a person, Congressman, President, CEO; you should always be on the lookout for people who are not just “smarter” than you, but smarter than you are in other subjects. Michael Jordan was an expert at playing the game of basketball; that did not mean that he would be an expert as a GM, owner or coach. The problem with this is that the media/employees/American public/etc, look down on people in power who don’t have a good grasp of all situations. So what you get is many people pretending to be knowledgeable of things in which they are not. This is a very dangerous foundation on which to build a society. I respect a man more if he tells me, “I don’t know, but I’ll find out who does;” than if he makes something up because it sounds good. We are not going to get out of this financial mess until honest people (public and private) stand up and tell the truth about their strengths and what they can do to help rebuild the country. As long as Candidates continue to pose for photo ops in the White House and trade partisan barbs at each other during campaign speeches, there will be no real change. This goes for Democrats and Republicans. I am not exposed to the risk of a falling Dow, so it does not matter to me(financially) if it drops to 5000. What I am exposed to is the disparaged emotional conscience of the people I talk to and how many stay on the verge of tears(or a ledge) whenever the subject of the economy comes up. All I can say is that I still believe in this country and its people so I think we have enough in us to pull out of this nightmare. Just don’t give up! {Side note: For all of you that do not have at least $1mm in expendable cash to burn, DO NOT buy stocks at this time. Although it might look attractive, it is still too soon to gauge the impact of: 1)$700B BailOut, 2)Election, and 3)Impact of short sellers entering back into the market(today was the first day for some stocks) If you are like most people, you 401k has gone to shit and it does not make sense to gamble with your life savings just because Jim Cramer or some other talking head likes a particular stock.} Today’s market plunge is exactly what happens when you let fear set in. Our elected officials are not supposed to understand everything that we face as constituents. They are supposed to defer to people who know more about the situation than they do. This is not the same thing as being ignorant of the subject matter. Hank Paulson/Ben Bernanke are not geniuses, but they do know more about the financial industry and its inner workings than all the members of both sides Congress combined. The plan they initially presented was not perfect, but Congress should have set some spending limits and a real oversight board then passed it. Instead they allowed fear get into the world economy and now the train has come off the rails. As a person, Congressman, President, CEO; you should always be on the lookout for people who are not just “smarter” than you, but smarter than you are in other subjects. Michael Jordan was an expert at playing the game of basketball; that did not mean that he would be an expert as a GM, owner or coach.

The problem with this is that the media/employees/American public/etc, look down on people in power who don’t have a good grasp of all situations. So what you get is many people pretending to be knowledgeable of things in which they are not. This is a very dangerous foundation on which to build a society. I respect a man more if he tells me, “I don’t know, but I’ll find out who does;” than if he makes something up because it sounds good.

We are not going to get out of this financial mess until honest people (public and private) stand up and tell the truth about their strengths and what they can do to help rebuild the country. As long as Candidates continue to pose for photo ops in the White House and trade partisan barbs at each other during campaign speeches, there will be no real change. This goes for Democrats and Republicans.

I am not exposed to the risk of a falling Dow, so it does not matter to me(financially) if it drops to 5000. What I am exposed to is the disparaged emotional conscience of the people I talk to and how many stay on the verge of tears(or a ledge) whenever the subject of the economy comes up. All I can say is that I still believe in this country and its people so I think we have enough in us to pull out of this nightmare. Just don’t give up!

{Side note: For all of you that do not have at least $1mm in expendable cash to burn, DO NOT buy stocks at this time. Although it might look attractive, it is still too soon to gauge the impact of: 1)$700B BailOut, 2)Election, and 3)Impact of short sellers entering back into the market(today was the first day for some stocks) If you are like most people, you 401k has gone to shit and it does not make sense to gamble with your life savings just because Jim Cramer or some other talking head likes a particular stock.}

]]> By: The Economy, The Election, and Entrepreneurship - Adam McFarland http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50860 The Economy, The Election, and Entrepreneurship - Adam McFarland Fri, 03 Oct 2008 23:43:56 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50860 [...] billionaire.  Not for everyone, but I certainly enjoy it.   One interesting point he made in a post the other day: Sec Paulson has asked for authority to spend what he needs to save our financial, [...] [...] billionaire.  Not for everyone, but I certainly enjoy it.   One interesting point he made in a post the other day: Sec Paulson has asked for authority to spend what he needs to save our financial, [...]

]]> By: Dave Rickey http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50809 Dave Rickey Thu, 02 Oct 2008 21:39:30 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50809 Mark, for a guy that sees through so much of the bullshit that defines the public (and financial community) perception of how the market works, you seem to still accept that "$1.2 trillion loss" at face value. What was *actually* lost? A pittance from people who bought at a higher price than they sold, and a paper value. Most of that paper value in institutional portfolios. What's more disturbing is that a decline in the stock market triggered a decline in bonds and commodities. That's a classic sign of a deflationary spiral from deleveraging, ala the 1930's. Every time there's a decline, everyone goes over their debt limits, forcing them to sell to raise capital to cover the shortfall, and that drives down the rest of the markets. Normally they go up as the money is diverted to them, but with everything dropping, cash in the mattress is effectively the highest return available, it will buy more later than it will now. Of course, with everyone sitting on their cash, there's less money to buy these distress sales, and therefore the whole process feeds on itself. We're repeating 1929-1933 at digital speeds. The root of the problem isn't that there was a housing bubble, or a credit bubble, or any particular bubble, it's that it's all a hyper-leveraged bubble built up over 30 years of loose credit and delusional investing principles, and housing is just where the imaginary money first contacted the real world and burst. Last time it was crop failures, but exactly what set off the chain reaction of deleveraging is irrelevant, the conditions were ripe and if it hadn't been housing it would have been something else. In the 70's there was a surplus of idle capital and under-performing companies, but in creating the conditions to rectify that (cheap credit to fuel the leveraged takeovers of the 80's), Reagan and Greenspan created a monster that is about to swallow the entire financial structure whole, and has stripped nearly every bit of real capital from the system and scattered the remainder randomly. Nobody knows what the real value of anything is anymore. Companies are hollow shells wrapped around a brand and a tangle of interlocking holding companies and service contracts. Bonds are rubber-stamped scraps of paper that signify ownership of debt, but so far removed from both lender and debtor that nobody knows if either is a trustworthy risk, the audit firms that were supposed to assess that were useless shills and the underwriters that were supposed to guarantee it hopelessly overexposed. Derivatives are a nightmarish muddle of computer-generated side-bets that Nobel Prize winners look at and throw up their hands in despair. Kicking the can down the road by injecting ever more fiat money (based on yet more debt) to maintain liquidity in a system that *needs* to reset just increases the pain. To simplify: It's not just that everyone is way too deep in debt. It's that deflation as the leveraging unwinds is effectively increasing that debt, at the same time that inflation at the consumer level puts the squeeze on the earned income that represents the foundation of the whole system. Paulson and Bernanke are trying to use a Monetarist liquidity injection to defy gravity and keep the bubbles inflating. Even if it restores stability temporarily, it worsens the base conditions and the magnitude of the next crisis, putting us in a constantly narrowing passage between deflationary depression as we pay for the prosperity for Wall Street we've been borrowing (because it's certainly not trickling into actual earned income, which has remained stagnant at best), and hyperinflation that erases the debts and capital simulataneously. --Dave Mark, for a guy that sees through so much of the bullshit that defines the public (and financial community) perception of how the market works, you seem to still accept that “$1.2 trillion loss” at face value. What was *actually* lost? A pittance from people who bought at a higher price than they sold, and a paper value. Most of that paper value in institutional portfolios. What’s more disturbing is that a decline in the stock market triggered a decline in bonds and commodities. That’s a classic sign of a deflationary spiral from deleveraging, ala the 1930’s. Every time there’s a decline, everyone goes over their debt limits, forcing them to sell to raise capital to cover the shortfall, and that drives down the rest of the markets. Normally they go up as the money is diverted to them, but with everything dropping, cash in the mattress is effectively the highest return available, it will buy more later than it will now.

Of course, with everyone sitting on their cash, there’s less money to buy these distress sales, and therefore the whole process feeds on itself. We’re repeating 1929-1933 at digital speeds.

The root of the problem isn’t that there was a housing bubble, or a credit bubble, or any particular bubble, it’s that it’s all a hyper-leveraged bubble built up over 30 years of loose credit and delusional investing principles, and housing is just where the imaginary money first contacted the real world and burst. Last time it was crop failures, but exactly what set off the chain reaction of deleveraging is irrelevant, the conditions were ripe and if it hadn’t been housing it would have been something else.

In the 70’s there was a surplus of idle capital and under-performing companies, but in creating the conditions to rectify that (cheap credit to fuel the leveraged takeovers of the 80’s), Reagan and Greenspan created a monster that is about to swallow the entire financial structure whole, and has stripped nearly every bit of real capital from the system and scattered the remainder randomly.

Nobody knows what the real value of anything is anymore. Companies are hollow shells wrapped around a brand and a tangle of interlocking holding companies and service contracts. Bonds are rubber-stamped scraps of paper that signify ownership of debt, but so far removed from both lender and debtor that nobody knows if either is a trustworthy risk, the audit firms that were supposed to assess that were useless shills and the underwriters that were supposed to guarantee it hopelessly overexposed. Derivatives are a nightmarish muddle of computer-generated side-bets that Nobel Prize winners look at and throw up their hands in despair.

Kicking the can down the road by injecting ever more fiat money (based on yet more debt) to maintain liquidity in a system that *needs* to reset just increases the pain.

To simplify: It’s not just that everyone is way too deep in debt. It’s that deflation as the leveraging unwinds is effectively increasing that debt, at the same time that inflation at the consumer level puts the squeeze on the earned income that represents the foundation of the whole system. Paulson and Bernanke are trying to use a Monetarist liquidity injection to defy gravity and keep the bubbles inflating. Even if it restores stability temporarily, it worsens the base conditions and the magnitude of the next crisis, putting us in a constantly narrowing passage between deflationary depression as we pay for the prosperity for Wall Street we’ve been borrowing (because it’s certainly not trickling into actual earned income, which has remained stagnant at best), and hyperinflation that erases the debts and capital simulataneously.

–Dave

]]> By: Deregulated Democrat http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50734 Deregulated Democrat Wed, 01 Oct 2008 18:31:29 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50734 For those of you making the following assertion: “All of this happened under the watchful eye of Republicans, so I would say the only thing scarier is Republicans staying in control.” Why don’t you do us all a favor and look up when Fannie Mae and Freddie Mac went private? Gee… when did the provisions in the Glass-Steagall Act prohibiting a bank holding company from owning other financial companies get repealed? Ohh that’s right 1999! As a matter of fact why don’t you do all of us a favor and read this! “..in fact, there was a number of deregulatory acts that happened in the Clinton Administration. There was deregulation of the industries, energy and telecom, which produced Enron and Worldcomm. And there was the deregulation of the financial markets, which was a bipartisan deregulation, which happened under the Clinton administration.” I am a registered independent, but you Democrats sure have made yourselves look like idiots in these last couple of weeks! You deregulated the freakin’ markets! Quit blaming everyone else! For those of you making the following assertion: “All of this
happened under the watchful eye of Republicans, so I would say the
only thing scarier is Republicans staying in control.” Why don’t you
do us all a favor and look up when Fannie Mae and Freddie Mac went
private? Gee… when did the provisions in the Glass-Steagall Act
prohibiting a bank holding company from owning other financial
companies get repealed? Ohh that’s right 1999! As a matter of fact
why don’t you do all of us a favor and read this!
“..in fact, there was a number of deregulatory acts that happened
in the Clinton Administration. There was deregulation of the
industries, energy and telecom, which produced Enron and Worldcomm.
And there was the deregulation of the financial markets, which was
a bipartisan deregulation, which happened under the Clinton
administration.”
I am a registered independent, but you Democrats sure have made
yourselves look like idiots in these last couple of weeks! You
deregulated the freakin’ markets! Quit blaming everyone else!

]]> By: Loss or Correction? http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50733 Loss or Correction? Wed, 01 Oct 2008 18:29:28 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50733 I just noticed another person mentioning the trillions we lost in the market because the government didn't act! Have you considered that maybe... just maybe, we're in for a loss?!? Do an exponential regression of the Dow Jones since it opened (I have personally done this!), and you'll notice that even for an exponential regression (which has an R^2 of .926210249277159) the Dow should be somewhere around... ohh lets just say 9,376.083 points. Go ahead... do the regression, you'll get the following formula if you go by days instead of dates: y=72.9562843374901*(e)^(.000241740600681561*x) Input the 20,088 day of the Dow, and you'll see what I mean. Don't take my word for it. You can get all of the historical data from Yahoo Finance for free, and do it yourself! By the by... housing prices are still about 29% over-priced according to historical trends but that's a different story, because the rules have changed. Bigger houses cost more basically... We need the bail-out to preserve infrastructure. In other words, we shouldn't let GOOD businesses fail. However, we need to let those who made poor choices fail. In other words we should be forcing write downs, and injecting $700 billion in liquidity to the market. Those that are over-exposed will fail, and shareholders will get hosed, but the credit markets will keep on churning, because the government will still be lending. What we don't need is an artificially inflated stock exchange. This accomplishes the exact same thing as the proposed bail-out, but costs tax payers less, because it screws shareholders of BAD companies only. If your 401(k) keeps falling after that bailout, you just bought shares of the wrong freakin' company, and don't lay your poor choices on MY tax bill. I don't spend 4+ hours a day in excel to pay for your mistakes. I just noticed another person mentioning the trillions we lost in
the market because the government didn’t act! Have you considered
that maybe… just maybe, we’re in for a loss?!? Do an exponential
regression of the Dow Jones since it opened (I have personally done
this!), and you’ll notice that even for an exponential regression
(which has an R^2 of .926210249277159) the Dow should be somewhere
around… ohh lets just say 9,376.083 points. Go ahead… do the
regression, you’ll get the following formula if you go by days
instead of dates:
y=72.9562843374901*(e)^(.000241740600681561*x)

Input the 20,088 day of the Dow, and you’ll see what I mean. Don’t
take my word for it. You can get all of the historical data from
Yahoo Finance for free, and do it yourself! By the by… housing
prices are still about 29% over-priced according to historical trends
but that’s a different story, because the rules have changed. Bigger
houses cost more basically… We need the bail-out to preserve
infrastructure. In other words, we shouldn’t let GOOD businesses fail.
However, we need to let those who made poor choices fail. In other
words we should be forcing write downs, and injecting $700 billion in
liquidity to the market. Those that are over-exposed will fail, and
shareholders will get hosed, but the credit markets will keep on
churning, because the government will still be lending. What we don’t
need is an artificially inflated stock exchange. This accomplishes
the exact same thing as the proposed bail-out, but costs tax payers
less, because it screws shareholders of BAD companies only. If your
401(k) keeps falling after that bailout, you just bought shares of
the wrong freakin’ company, and don’t lay your poor choices on MY
tax bill. I don’t spend 4+ hours a day in excel to pay for your
mistakes.

]]> By: Deregulated Democrat http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50730 Deregulated Democrat Wed, 01 Oct 2008 18:02:37 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50730 For those of you making the following assertion: "All of this happened under the watchful eye of Republicans, so I would say the only thing scarier is Republicans staying in control." Why don't you do us all a favor and look up when Fannie Mae and Freddie Mac went private? Gee... when did the provisions in the Glass-Steagall Act prohibiting a bank holding company from owning other financial companies get repealed? Ohh that's right 1999! As a matter of fact why don't you do all of us a favor and read this! "..in fact, there was a number of deregulatory acts that happened in the Clinton Administration. There was deregulation of the industries, energy and telecom, which produced Enron and Worldcomm. And there was the deregulation of the financial markets, which was a bipartisan deregulation, which happened under the Clinton administration." I am a registered independent, but you Democrats sure have made yourselves look like idiots in these last couple of weeks! You deregulated the freakin' markets! Quit blaming everyone else! For those of you making the following assertion: “All of this
happened under the watchful eye of Republicans, so I would say the
only thing scarier is Republicans staying in control.” Why don’t you
do us all a favor and look up when Fannie Mae and Freddie Mac went
private? Gee… when did the provisions in the Glass-Steagall Act
prohibiting a bank holding company from owning other financial
companies get repealed? Ohh that’s right 1999! As a matter of fact
why don’t you do all of us a favor and read this!

“..in fact, there was a number of deregulatory acts that happened
in the Clinton Administration. There was deregulation of the
industries, energy and telecom, which produced Enron and Worldcomm.
And there was the deregulation of the financial markets, which was
a bipartisan deregulation, which happened under the Clinton
administration.”

I am a registered independent, but you Democrats sure have made
yourselves look like idiots in these last couple of weeks! You
deregulated the freakin’ markets! Quit blaming everyone else!

]]> By: paul scholar http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50707 paul scholar Wed, 01 Oct 2008 13:29:13 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50707 good luck on your wacovia stock purchase i lost every at ten bucks on fridays close and i to wanted a good luck on your wacovia stock purchase i lost every at ten bucks on fridays close and i to wanted a

]]> By: Nate Zimmerman http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50605 Nate Zimmerman Tue, 30 Sep 2008 20:02:24 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50605 Mark, You're quite a bright man. I honestly disliked you based on the team you work for. I changed my opinion as of reading your blog. I am a die- hard Phoenix Suns fan, but you have shown thawanted to say i am sorry I misjudged you. You're an incredibly talented and msart man. Nate Mark,
You’re quite a bright man. I honestly disliked you based on the team you work for. I changed my opinion as of reading your blog. I am a die- hard Phoenix Suns fan, but you have shown thawanted to say i am sorry I misjudged you. You’re an incredibly talented and msart man.
Nate

]]> By: Chuck http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50599 Chuck Tue, 30 Sep 2008 19:41:51 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50599 I do not believe the bailout is a good idea no matter what they call it! This morning we have no plan, it was rejected yesterday by the house. I have heard that the market is recovering/ rebounding and that the dollar is actually up. It seems in college I remember learning that the economy has cycles, that it is almost a living thing, it self corrects, adjusts, etc… If we try to manipulate the market with this 700 billion dollar crap shoot are we just deceiving ourselves and possibly making things worse? I have investments, am a small business owner, and am suffering along with everyone, but this plan worries me. There are no guarantees and in fact it may make matters worse. I do not believe the bailout is a good idea no matter what they call it! This morning we have no plan, it was rejected yesterday by the house. I have heard that the market is recovering/ rebounding and that the dollar is actually up. It seems in college I remember learning that the economy has cycles, that it is almost a living thing, it self corrects, adjusts, etc… If we try to manipulate the market with this 700 billion dollar crap shoot are we just deceiving ourselves and possibly making things worse? I have investments, am a small business owner, and am suffering along with everyone, but this plan worries me. There are no guarantees and in fact it may make matters worse.

]]> By: The Bailout « Politically Speaking http://blogmaverick.com/2008/09/29/the-bailout-question-that-must-be-asked-before-passage/#comment-50597 The Bailout « Politically Speaking Tue, 30 Sep 2008 19:08:24 +0000 http://blogmaverick.wordpress.com/?p=766#comment-50597 [...] is one of the reasons that Bush is opting for the bailout even though the House had rejected the $700 billion that had been negotiated by Senate leaders of both [...] [...] is one of the reasons that Bush is opting for the bailout even though the House had rejected the $700 billion that had been negotiated by Senate leaders of both [...]

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