Friday, September 26

Bye, Bye WaMu

With banks loaning money willy-nilly for over a decade, it's no wonder we (U.S. market) is in a crisis right now. You haven't heard me say much about the stock market ever since I bought put options on Garmin and it went to the moon. I lost over $2000 which represents about two months of my allowance for living expenses. It was a huge blow to me and I tucked tail and went off to the corner to watch the market. I learned never short a stock you love. Garmin did eventually start going down and when I thought there was an adequate correction and it was trading at a fair value, I bought stocks in Garmin. The stock price has been slashed in half since I purchased those stocks. That's how it's been going... not good to worse.

My little petty stock losses are nothing compared to the millions of people losing their homes, businesses, and their retirement funds. It was announced today that JP Morgan Chase has swooped in and bought out Washington Mutual ("the largest banking failure in U.S. banking history") at a bargain basement price. I used to have a home loan with WaMu. Now, I'm debt free and have no bills except for the monthly stuff like electric, telephone, water and cable. (That spells 'FREEDOM' to me).

When the PRESIDENT OF THE UNITED STATES keeps making televised statements about the financial crisis, you know the problem has reached the red alert level. It's serious but no one listened to Jim Cramer 15 months ago when he was ranting and raving on CNBC (the clip is on YouTube) about the impending fall-out ("THEY KNOW NOTHING" - JC). Cramer saw it coming.

The domino effect could happen if something is not done fast. I'm too young to remember the 1929 rush on the banks and the banks closing their doors. Now, we have laws and FDIC insurance to help people sleep better at night but could it happen again?
Is this just a new form of terrorism? Bailout or bottom out? or both.


wolfie_cr said...

if terrorism=studipidity then for sure this terrorism

I watch A LOT of US TV, a LOT, in fact I watch our tico news may be once every 2 months when my wife goes on business travel

Common thing among all those 'housing porn' shows is they always see an improvement in the houses as an 'investment' , 'how much is my house worth and can I finance it through an equity loan?'

It took me a bit to understand that is common up there (or was when there were home equity loans)

I always thought that if you wanted to improve your house it was because YOU wanted something else , not because it would 'increase your home value in 10%' etc, whenever the house>>>investment idea went into the mindset of Americans.....I would imagine that is when the problem started. To me a house is a place to live, sure, you might be able to get a big profit when you sell it, but its not my primary motivation to get a house

There is a blog called, they were ahead of Cramer by about 2 full years

I found it when I was trying to figure out how was it possible to get a no money down/ cashback on closing!!!! loan......sounded crazy....and now I know it IS crazy

wolfie_cr said...

btw I ran out of my 'going broke companies' list

I knew that when the credit swaps were in trouble..the insurers were also screwed (AIG), and WaMu was very involved in housing bubble markets so I knew they were history

About the FDIC....well there is a limit to how much they can cover, I remember hearing their current fund is about 58 billion. and anyway.....we know that they can print ANY amount of money they want to cove any big failures

the question get your savings back...but what will be the 'purchasing power' of those $ when you get them (after they print 1 trillion or more to cover bank failures and other bailouts)

TICA MACHA said...

All good points Wolfie.
I am suspicious when foreign investors prop up our economy.
They could take there money and go home and where would that leave the U.S.?
Being from Florida and being in real estate, I've watched MANY buy properties solely with the intent to flip. Looks like the same has been going on here in CR/Jaco.
I bought my home as a place to live and all improvements were for my benefit. I learned fast when my home for 10 years in Naples was purchased by developers and they quickly leveled it to the ground (along with my neighbors homes) to build multi-million dollar homes on the over-sized lots.
What will we learn from all of this will tell how we go forward.

wolfie_cr said...

I am glad we have the Chinese (yeah I know they are communists etc but we need a new partner over here now that the $ is having issues up North)

I am not sure what is going to happen with this plan, watching Crammer right now

they want to pour this trillion so that the 'credit marker goes back to life'

well even if they give all this $ its not going to be 'business as usual' because banks now are in freak mode and want the verify the income and pay capacity of the people they are going to lend $ to

we will see I guess. as my boss always says "interesting times"

TICA MACHA said...

About China,,, just because they have money, doesn't mean we need to get in bed with them.
I still contend -
"Boycott China".

Raising the FDIC insured money level would ease this panic overnight. Somewhere along the line, bankers totally disregarded the "good lending practices" in the rush to get rich. A correction has been long overdue.

My fear now is this country (CR) will fall into the credit trap. I see Ticos buying cigarettes and beer with credit cards. Cars being sold before the Marchama car tax is due because they can't pay it. Lord help them if the credit companies give out cash advances!

Saratica said...

Teri, you are right about the ticos and credit cards. They are looking to get themselves in the same trouble.

I used to feel the same way about the Chinese as you. But the U.S. government is no better: we're not shooting students in Tiananmen Square. Yet. But we torture prisoners, forcefully arrest peaceful demonstrators at rallies, have jailed 1 in 100 adults for drugs - some for life! Our government can now spy on us anyway and anytime they want. The only way we are different from China is that they produce things and we don't.

Also, China will not take its money and go home. They will take those dollars that no one else wants and come to the states. Right now, with the money we owe them, they could buy the state of CA. They could buy every fortune 500 company. Since at some point in the not too distant future, no one else will want those worthless bills, China will have to buy those things because it will be the only things they can buy.

A bail-out won't fix this. It's too big and too far gone. And a bail out is more of the same: this disaster was caused by the U.S. gov borrowing money into existence. Borrowing $700,000,000,000 will only add to the almost $70trillion we now owe, counting all the promises we've made to SS, pensions, insurance funds (like the FDIC) and foreign governments.

The only fix is to allow the inevitable to happen right away: a crash. It will happen no matter what the gov does to soften it. If they'd stand back, this would happen and be over with in a year and we would be on the road to recovery.

If they keep stepping in and bailing out, it will be a long slow slide to the bottom. Like Japan's.

wolfie_cr said...

a crash....not going to happen , at least not before the elections ;)

about CR credit cards, I heard that the amount owed is in the ball park of 350000 million colones so 625 million dollars

of course that there are cash advances and also you can take a credit line at 0% interes to buy 'stuff'

interest rates were very low for a while and banks were desperate to issue credit (sounds like some other country I know who got in trouble with that......ummm)

as usual the people with money wont get in trouble as they should (I hope) not keep large balances that they cant pay...its always the poor that manage to get poorer...with the help of the banks of course

in the last couple of months the interest rates have skyrocketed and of course now people struggle to pay ......

Silvia Maduro said...

THe financial problem in USA is not something that happened overnight. I'm a costarican that has been here (Tulsa, Oklahoma) for the past 18 years. I have seen a lot of people with beautiful new houses, cars, huge plasma t.v., boats, etc...and I always wonder how they can get all those things when I can't. Well, now we know...they are loosing their homes and everything alse because they live from the credit cards, loans etc and now they can pay.
My mom always thought us that if you don't have the money to buy something...wait!!! Save the money and THEN buy it.
But the problem is that the american society put value in material things, how much you own.
I feel that the problem just started...and I feel terrible because I love this country (USA, but I think is time to go back home.