[Rhodes22-list] Dow Jones.....I hate to say it.....

[Rik Sandberg]

Dave

Oh yeah, I've been watching. Just because you seem to have an over 
abundance of words doesn't mean that the rest of us can't see. What I 
wrote would seem to show that I see what could be a very serious problem 
for the US if not the global economy.

One didn't have to be a rocket scientist to look at the real estate 
market going up 10 to 25 percent per year and see who is buying 
3-400,000 dollar plus houses with no down payment, arm mortgages to 
figure out, this ain't gonna' last long. I started talking to people 
about avoiding this situation a couple years ago. Many of them thought I 
was nuts. They're not laughing so loud now. Yeah, I was early, but I'd 
rather be early than late.

If this plays out the way I think it will, yes, a lot of trusting, 
honest investors are gonna' lose a lot of money. Thats what they get for 
being so trusting. The stock, commodity and especially the derivatives 
markets have always been risky. People seem to need to be reminded of 
that every so often and this would be one of those wake up calls. So, 
let's leave the blame with the investor, where it should be. If 
something looks too good to be true ....it usually is. It may not bite 
you right this minute, but it will eventually. Those that aren't willing 
to recognize that, get what they deserve.

Rik

DCLewis1 at aol.com wrote:
> Rik, 
>  
> Re your comment that you can’t make loans to people that can’t repay them -  
> I don’t think you’ve been following the mortgage debacle story.  Not  only 
> can you make those loans, you can make a lot of money making those  loans.  The 
> real estate salesmen that sold the houses made fine commissions  - and they’
> ve  banked or spent the money.  The home builders that  built the homes have 
> made a lot of money - and banked it or spent it. The  mortgage brokers that 
> originated the loans made out very well - and they’ve  banked or spent their fees. 
>  The people who securitized the loans made out  very well with their fees - 
> and they’ve banked or spent the money.  The  rating companies that rated the 
> debts AAA, and collected their fees, made out  very well and have banked or 
> spent their money.  The people that finally  wound up with these debts are the 
> conservative people who relied on the  competence and integrity of the rating 
> companies - they’re screwed.  This  mortgage debacle is just another 
> manifestation of that great American business  model called “take the money and run”.
>  
> I think the real story is not people making loans to people that can't  
> afford them, the real story is conservative people and organizations buying AAA  
> rated debt securities - the highest commercial ratings possible, only topped by  
> Treasuries - who then find out their securities are literally junk or at 
> severe  risk of impairment.  Worse, once they find out they've bought junk they  
> can't sell it in any functioning market because no one will touch the  entire 
> class of security with a 10' pole.  These people appear to have  to take a 
> complete loss on their AAA securities, and there are more than $1T of  the 
> securities issued.
>
>
> In my opinion, from a debt owner perspective the real swindle here is the  
> failure of the debt rating agencies, Moodys, Fitch, and S&P, to properly  rate 
> the risk of owning CDOs.  They get paid to do that and the entire debt  
> securities market relies on them to do it properly for nearly all debt  securities.  
> A whole class of AAA rated debt securities is at severe risk  of impairment - 
> it just shouldn’t happen.  They failed.
>
>  
> And because Moodys, Fitch, and S&P are gate keepers for the securitized  debt 
> market, if they’re broke the  debt and securities markets could come  down - 
> that’s the contagion risk.  If the stock market fails, there are  almost 
> always buyers and sellers, things might work out.  But debt has  a finite term and 
> always has to be re-issued or paid; if people and  organizations stop loaning 
> money, companies can't roll over or increase their  debt, they fail and the 
> economy fails.  I think that’s why you saw  governments commit more $120B in 
> less than 8 hrs to address the issue, the  risk is real.
>  
> My guess, and hope, is that the central banks will get on top of this issue  
> but we're all are being burned and are going to be burned further regarding  
> it. I bet every person on this list that owns any stocks or bonds is  feeling a 
> keen sense of loss and some anxiety as to how it's all going to  work out.  
> It's a serious, painful, and risky situation.  I agree with Wally.
>  
> Dave
>
>
>
>
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