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The Bailout - EXPLAINED!

post #1 of 14
Thread Starter 
This may actually belong in the Cat Lounge:

Bailout Explained!

post #2 of 14
Well, that explains that, then, doesn't it!

Good one, Laurie!
post #3 of 14

That was great! Laurie, what do you think of the proposed car industry bailout, vs. non-bailout?
post #4 of 14
Uh oh. Tried to watch it and it said it was no longer available. There are other videos out in youtube with the same title, but I'm not sure which one you were trying to link to.
post #5 of 14
Thread Starter 
Amy, I clicked on it and it's still there for me, but try this link - it's the same video:

Tricia, I'm time-constrained right now, so I'll get back to you on that one!

post #6 of 14
Omg..That was the most entertaining 2:14 minutes of my entire day! SO FUNNY!
post #7 of 14
Abbot and Costello have a similar gimmick - with bigger numbers!
post #8 of 14
I thought that was pretty funny, Laurie, but I doubt if Hank Paulson and Ben Bernanke wouldn't think it was funny, because they wouldn't get it

Anyway, I guess it's good to find a little humor. We were talking about a GM bailout today, and this $25 billion the govt wants to loan them won't fix the problem, and will just be the tip of the iceberg, in terms of how much it's going to cost.
post #9 of 14
Thread Starter 
Originally Posted by coaster View Post
I thought that was pretty funny, Laurie, but I doubt if Hank Paulson and Ben Bernanke wouldn't think it was funny, because they wouldn't get it .....

The really sad thing is the most recent FOMC meeting notes. Four months ago they were telling us everything's fine. Now they expect a recession to last at least a year, and the unemployment to rise to 7.1% to 7.6%. Assuming they were lying then, what does this new info actually mean?

post #10 of 14
Maybe we can hope they're wrong about that, too -- erring too far on the downside?

What's the volume been doing? My guess is these huge moves are due more to lack of buyers than due to massive selling.

In any case, this could turn out to be the biggest transfer of wealth in the history of the world. And not in a favorable direction, either. As those who already have plenty of money can now buy cheap and hold forever. So once again, the rich get richer.
post #11 of 14
Thread Starter 
Tim, actually recently volume has been quite strong, and the DJIA volume yesterday was 9 billion. !!!!! (Been trading mid-3 billion - 7 billion for the most part this year. A couple of 10 and 11 billion days). But today is options expiration, so probably selling in front of that.

Goldman is finally moving closer to our numbers. They're now predicting 9% unemployment in 2009, and GDP falling 5% this Q, 3% in the 1Q09 and 1% in the 2Q09. They also reduced profit outlook to falling 25% in 2009 from 20% loss in 2009.

We believe we're in an environment were 0% rates won't do much because the issue isn't the rates, it's that people don't want to borrow as they've become very risk-adverse.

If they don't bail out the autos, everyone's going to have to revise all their numbers. I don't think they should be bailed out without a restructuring required. Especially if the yen keeps falling, our auto industry becomes less and less competitive - a real problem, particularly in this environment.

But you know what we've been saying since January. Dow 7,000. (Actually I think the 2002 bottom was somewhere around 7111 or something like that). We didn't think it'd get there this year, but early next year. It may get there this year. Depends upon the news. Problem is, Gary is now predicting a depression. Before, that was just a small probability. His metrics now point to that being the highest probability scenario.

Patterns since the financial collapse seem to be markets rally Fri and Mon -then fall apart with the bad econ or earnings news that's (often) out on Tuesdays.

post #12 of 14
If the auto companies go Chapter 11, what happens to their pension and retiree health care obligations? I ran some numbers for that scenario for Bill Sebastian earlier this week and came up with $70 billion (at least -- that's assuming 60% of the original benefit) if the PBGC has to cover the pensions and Medicare has to cover the health care. And the PBGC itself is already underfunded some several score $billions.
post #13 of 14
Laurie, just anecdotally speaking, people here are spending money like crazy. The Christmas shopping season is already well under way. Traffic this afternoon was like traffic you'd seen after Thanksgiving. The stores are jammed. One person told me that recently it took her a half hour to get from one side of the mall to the other because traffic was jam-packed on the ring road. I dunno --- I still don't see it here. Nothing is making any sense.
post #14 of 14
Thread Starter 
Tim, if they declare bankruptcy, those numbers get negotiated for a long time. Delphi (spare parts) went Chapter 11 in 2005 - they're still there. Any decisions a judge makes get appealed. It keeps the lawyers busy for a long, long time.

As to spending? I honestly don't know how WI has been affected by all of this. It's pretty dismal around here.

But here is an article on the October Retail Sales numbers: Retail Sales plunge record 2.8% in October

Originally Posted by MarketWatch
Sales excluding gas dropped 1.5%, the biggest decline in three years. Excluding both autos and gas, sales fell 0.5%.

Sales were quite weak across a broad swath of the retail sector in October, an indication that the fourth quarter could be worse than the just-completed third quarter, when inflation-adjusted consumer spending fell at the fastest pace in 28 years.
"We estimate that consumer spending is likely to fall at about a 5% annualized pace" in the fourth quarter, wrote Peter Kretzmer, economist for Bank of America. "Large declines in household net worth point to further weakness in spending in early 2009."
Retail sales account for about half of consumer spending and about one-third of domestic demand.

Retail sales are down 4.1% in the past year. Sales fell a downwardly revised 1.3% in September. Sales in August were also revised lower to a 0.7% decline.
The dismal report confirms what the business sector has been saying: Consumer spending is falling rapidly.

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