Comments on: February 2009 Market Review

By: LD

LD — Sun, 01 Mar 2009 21:48:12 +0000

The government owns 80% of this institution already. AIG has attempted to sell divisions to repay some govt loans with no success.

AIG in many regards is the center of our financial problems as it wrote the CDS contracts (insurance) that many banks and money managers used to hedge their holdings. If AIG went down, that would create a massive domino effect. That is the definition of systemic risk!!

By: LD

LD — Sun, 01 Mar 2009 21:45:03 +0000

He makes a few decent points but honestly he strikes me as overly simplistic and fearmongering.

The 12trillion number is not a fair number to use. A large percentage of those funds are used to backstop the short term sectors of the bond market. The government is not at risk on that money. Those funds merely facilitate the trading that is going on in those sectors.

Additionally to say that bondholders represent the wealthist 1% of people is just plain wrong. A LOT of the debt of these institutions is tied up in mutual funds and individual customers. Heck, my mother-in-law holds some of it as well.

I understand his frustration, but given that I viewed him as factually incorrect on those two points, I stopped watching.

By: LD

LD — Sun, 01 Mar 2009 21:35:20 +0000

Thanks. Happy to help.

By: LD

LD — Sun, 01 Mar 2009 21:34:15 +0000

Sassy…ultimately you can only control what is in your control. Personal fiscal discipline is not only prudent now but also a good practice as a way of life.

I monitor the markets very closely and have for a long time so this chart is virtually automated.

By: LD

LD — Sun, 01 Mar 2009 21:31:30 +0000

I totally agree with you that there will be a rebound in stocks but only after a period of at least a few years of sideways to perhaps even lower prices.

Patience is a virtue but hard to practice.

By: LD

LD — Sun, 01 Mar 2009 21:29:18 +0000

No this crowding out effect will not cause hyperinflation. The hyperinflation would occur when and if the massive printing of money is so overwhelming and multiplies thus driving the value of the money down. That would happen when and if the economy starts to gain a little traction.

By: CG

CG — Sun, 01 Mar 2009 19:28:36 +0000

AIG to get up to $30 billion in additional TARP funds according to WSJ… Is this what we should be doing?

By: CG

CG — Sun, 01 Mar 2009 17:44:50 +0000

LD, what are your thoughts regarding this point of view? http://www.youtube.com/watch?v=ik2uVt5zvNg Thanks

By: basil

basil — Sun, 01 Mar 2009 16:58:10 +0000

Larry,

you are a saint for posting here for the economically challenged like me!

I just checked your excellent site and will be visiting often.

By: basil

basil — Sun, 01 Mar 2009 16:56:57 +0000

Larry,

You are a saint to be posting here for people like me who are economically challenged!

I just checked your site.

Excellent.

I will be a regular visitor.

By: Sassy

Sassy — Sun, 01 Mar 2009 14:57:36 +0000

LD, you must certainly be bleary-eyed from following all this data.
While I don’t understand a lot of the terminology, I have been reading a great deal as well.
The banks and financial institutions are lobbying heavily, and acknowledging they will not succeed. However, they are planning higher fees and interest rates for their benefit.
We are reviewing all our discretionary spending, with a goal of reducing it 25%.

By: Linda C.

Linda C. — Sun, 01 Mar 2009 14:31:25 +0000

Interesting piece Larry. It is somewhat of an irony that money is flowing into the dollar because of the “government” policies of not letting the banks fail” versus in the same breathe the same such policies are being criticized for being “non-growth”. It would seem that the investors want things “both ways”, which is entirely impossible. I personally would rather see a government intervention that saves or re-creates the banking system instead of “savings banks”.

In my partner’s government pension fund I looked at the past 10 years return. If one had parked all of their money in common stock they would have lost almost 2 percent of their investment over the past ten years. Small cap investments only yielded a just above 1 percent return and international investing would have yielded a less than one percent return. The conservative fund or “G fund” bonds and treasuries gave about a 4 percent return over the past 10 years.

This somewhat breaks the myth that stocks will always outperform bonds. It also breaks the mythical thinking of privatizing social security as somehow giving people a better return on their dollar. It just really depends where one is at any given time within the business cycle.

The other unfortunate part is most people don’t keep up with their pension investments. Therefore those who initially set up in stocks lost money. Those in the G Fund made money, but not enough to keep up with inflation. (Real inflation, not the made up new fangled inflation numbers they have now) However, those execs who managed all of these funds regardless of where they are made lots of money I would venture to guess.

We have another 10 years until retirement. Just trying to look into the mess and figure out where to put the money. I do believe that in 10 years stocks will come back. The trick is to stay above water for at least the next 2 years.

By: maq

maq — Sun, 01 Mar 2009 14:01:07 +0000

“”The enormous government supply along with the wea kness in stocks did put a dent in the credit sensitive sectors of the bond market this month. The “crowding out” effect (government financing needs crowd out the availability of capital to flow to private enterprise) will continue to be a major problem.”"

Words sure can sugar coat the ‘Obama reality’ : diluting the value of existing stock shares with his trillion(s) dollar deficit. Watering down the US dollar.

I keep reading about hyper inflation—is or are these indicaters of this situation.

I keep read