NIGHTMARE ON WALL STREET Pt. #2: Fundamentals Sound?

  • HndsmKansan

    Posts: 16311

    Sep 17, 2008 11:15 PM GMT
    I had hoped things would calm down a bit after the bailout of AIG by the Fed
    yesterday. Had hoped interest rates would have been lowered by a quarter of a point, but the Fed apparently has inflation worries.....

    And today oil jumed again and the price of gold had its largest singe day jump on record... and now Washington Mutual may have to be bailed out.

    "Our fundamentals are strong" he says.....

    And when I sit down with clients like today for reviews... your 401K or 403(b) is now worth... um...


  • Koaa2

    Posts: 1556

    Sep 17, 2008 11:19 PM GMT
    And the Repugs want another 8 years of McSame!
  • jaded57

    Posts: 85

    Sep 18, 2008 5:22 AM GMT
    Um when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them.

    1. I recently opened a money market account, its thru capitol one and has a 3.55 interest rate. I only put $5,000.00 initially. Should I leave it there? Or I dunno take it out and bury it in a jar outback next to my magnolia tree.

    2. What is a money market account? I was told by a friend it was the way to go. So I opened it online. However Im having second thoughts. I mean free money is to good to be true. And I work hard for my money so I dont want to lose it.

    3. I was going to open a 401k thru my job that pays 4% of what I pay into it each month. I figure I could put 300'-500 a month into it with smart budgeting. Should I hold off on that?

    4. I was recently invited to join a investment club that a group of friends is starting up. Nothing major just $100.00 initiation fee and $50.00 a month. I can afford this and all. But I wanna know is now a good time to do something like this? Its mostly a social thing, but should we wait to see what the markets do before we start investing?

    Dunno if anyone has the answers, but any feedback is appreciated. I keep trying to get thru to Suzy Orman but that hasnt happened yet.
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    Sep 18, 2008 10:18 AM GMT
    I fortunately have a defined benefit pension plan so I don't have to rely on my private savings to retire on. If I did I think I would have to work to 65, which is a very depressing thought after this week (busy and irritating, the worse kind of work week).

    I can't imagine WaMu being bailed out by the Feds, I think they have been tapped out. But who knows how many more derivative skeletons are hanging in these companies closets? It takes months sometimes for these things to become unravelled and more variable rate mortgages are coming due next year so defaults on mortgage payments could continue. I heard last night that Wachovia might have to find a merger partner, and the US govts. Triple A bond rating may be reviewed. This whole mess should make the next President's first budget an interesting one. icon_eek.gif
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    Sep 18, 2008 10:35 AM GMT
    That because when McCrazy says "fundamentals", he means his bank account.
  • GQjock

    Posts: 11649

    Sep 18, 2008 10:59 AM GMT
    This is all the republican ideals on the economy coming home to roost
    You think we woulda learned from the Savings and Loan fiasco
    but that was just the opening salvo
    Now we got this to pay for
    The Iraq war
    and the problems with Social Security
    Not because of what THEY say but because they've been using the Social Security Fund like some leaky Piggy Bank for years
  • Koaa2

    Posts: 1556

    Sep 18, 2008 11:13 AM GMT
    I sometimes wonder if the Repugs have created this financial mess to happen right before the election. Not sure of the advantages of that, but just a thought.
  • Posted by a hidden member.
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    Sep 18, 2008 11:20 AM GMT
    Where's all the wealth that those Bush tax cuts for businesses and the wealthy supposed to create?

    How come getting Washington out of the way so business could do its thing has come to this?

    And how come people are running away from Repubs? (....I was gonna say :"prolly cuz this is still viewed as somone else's problem and hasnt really hit home to the avg. Republ." But then I remembered how dumb Republicans are....and I am not just saying that in an insulting way....those repub delegates at the convention were really, really mentally deficient. And also, I have seen right here on RJ how republicans can hold their beliefs in the face of demonstrable empirical evidence showing the contrary.......and this revelation was, frankly, astonishing to me!)
  • Posted by a hidden member.
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    Sep 18, 2008 11:55 AM GMT
    The repugs take their cues from the Nazis.

    “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

    Joseph Goebbels (was a German politician and Reich Minister of Public Enlightenment and Propaganda in Nazi Germany from 1933 to 1945.)
  • HndsmKansan

    Posts: 16311

    Sep 18, 2008 12:08 PM GMT
    jaded57 saidUm when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them.

    1. I recently opened a money market account, its thru capitol one and has a 3.55 interest rate. I only put $5,000.00 initially. Should I leave it there? Or I dunno take it out and bury it in a jar outback next to my magnolia tree.

    2. What is a money market account? I was told by a friend it was the way to go. So I opened it online. However Im having second thoughts. I mean free money is to good to be true. And I work hard for my money so I dont want to lose it.

    3. I was going to open a 401k thru my job that pays 4% of what I pay into it each month. I figure I could put 300'-500 a month into it with smart budgeting. Should I hold off on that?

    4. I was recently invited to join a investment club that a group of friends is starting up. Nothing major just $100.00 initiation fee and $50.00 a month. I can afford this and all. But I wanna know is now a good time to do something like this? Its mostly a social thing, but should we wait to see what the markets do before we start investing?

    Well let me say first, I can't address any personal investment issues may have, but I can give some generic information. Your money market account
    is fine, don't change anything. Its liquid, available....but may not be guaranteed. Depends on the kind of account you have.
    A money market account is a liquid account. The investments are typically invested in short term Treasury bills, typically backed by the US government. However the account itself is typically not guaranteed.

    DO NOT hold off on investing because of the latest financial turmoil. You must assess your own situation in light of your personal finances. You must also be comfortable. I'd ask questions of your 401K vendor and your company. Make sure to have a prospectus and make decisions accordingly.


    Your investment club is a different thing. I'd suggest you NOT participate at this time. Get more information, do some background and know that the broker involved is experienced and the group has some history. Don't do as a startup..
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    Sep 18, 2008 12:17 PM GMT
    This is all Bill Clinton's fault. Everyone knows that he was in league with the Trilateral Commission to plant the seeds that would bring down the economy in time for Hillary's bid for the nomination. Don't be fooled. The Republicans and their laissez-faire economics had nothing to do with this. You can also blame the Democrats. They've been in control of Congress the last two years. They just reinstituted all the failed policies of Bill Clinton.
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    Sep 18, 2008 12:36 PM GMT
    Caslon7000 saidWhere's all the wealth that those Bush tax cuts for businesses and the wealthy supposed to create?
    Mine went into a now collapsed 401k with merill lynchicon_eek.gificon_lol.gificon_lol.gif

    Actually ironically yesterday at work we went over our new 401k plan .. we are switching to merill lynch!icon_lol.gificon_lol.gif
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    Sep 18, 2008 1:17 PM GMT
    jaded57 saidUm when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them.

    1. I recently opened a money market account, its thru capitol one and has a 3.55 interest rate. I only put $5,000.00 initially. Should I leave it there? Or I dunno take it out and bury it in a jar outback next to my magnolia tree.

    2. What is a money market account? I was told by a friend it was the way to go. So I opened it online. However Im having second thoughts. I mean free money is to good to be true. And I work hard for my money so I dont want to lose it.


    Well if you're interested in your financial security, then the best investment is in education first. There are lots of web sites to get up to speed on financial literacy.

    A fundamental you should know about money is that its value decays over time due to inflation. For example, if you had $10 and it can afford you a cheezburger and the price of cheezburgers increased to $11 after one year, it means that the $10 you kept under your magnolia tree is not worth the $10 originally. Its purchasing power has diminished by 10% (ie. if you wanted that cheezburger badly enough, you need to find that extra $1 from somewhere). I'm not sure what the US inflation rate is at the moment, but at the absolute minimum, if you have nothing better to do with the money, it is best to keep it in an account which pays higher than the inflation rate. Typically most major banks would offer a deposit account with a rate higher than the inflation rate so your money should not devalue over time compared to being under the tree ;-) Where the banks are advertising rates significantly higher than the normal rates, it does get riskier as the banks are chasing higher returns for you with less of a guarantee/safety on your money.

    Keep your $5000 in a safe bank account paying typical interest rates whilst you explore your financial options. I can' t comment on Capital One and whether the rates are competitive or typical for US banks since I'm not local. However I do encourage you explore the investment world and be fully responsible for your decisions. Getting involved with friends without knowing what they are using your money for can break friendships when things don't turn out right. I find The Motley Fools (http://www.fool.com/) a good site for US based tips on shares and you can subscribe for free to their newsletter.

    Ultimately though, with any investments, the higher the risk, the more luck you really need.

    Good luck! ;-)


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    Sep 18, 2008 4:04 PM GMT
    Sometimes it's awful boring but, I watch the House and Senate on C-Span.
    Yesterday the Senate Democrats were going on a tirade calling John McCain another Herbert Hoover. Actually, Herbert Hoover was a good president. He served Woodrow Wilson (Democrat) very well as Sec. of State. It was the Congressional Republicans who screwed up with the "Smoot Hawley Tariff act of 1930". But, yesterday, no one was being FDR like with the "We have nothing to fear but fear itself" line. Senator Dodd looked like he is in a panic. The thing is, Senator McCain is not the president yet.



  • HndsmKansan

    Posts: 16311

    Sep 18, 2008 4:09 PM GMT
    John43620 saidSometimes it's awful boring but, I watch the House and Senate on C-Span.
    Yesterday the Senate Democrats were going on a tirade calling John McCain another Herbert Hoover. Actually, Herbert Hoover was a good president. He served Woodrow Wilson (Democrat) very well as Sec. of State.

    The thing is, Senator McCain is not the president yet.





    Well John, if one of the high points you can muster about Hoover (1929-1933) is he was Woodrow Wilson's Secretary of State... I think that says something..

    And thank god McCain isn't president "yet" or hopefully ever....
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    Sep 18, 2008 5:10 PM GMT
    jaded57 saidUm when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them......"


    Continuing in the vein of finance/insurance questions...

    Could someone elaborate on the properties/function of the SIPC [Security Investors Protection (something)]? My understanding is that it provides insurance similar to the FDIC, but for securities rather than cash. In particular, that it is applicable to insured money market accounts?

    What is the approximate current ratio of SIPC reserves relative to the value of the insured items?

    Am I also correct in understanding that the limit of the insurance is $500,000? (inclusive of $100,000 in cash)? ...and what does the "$100,000 in cash" mean (since I understand that a money market account is treated as a security rather than cash)? ...is that cash that otherwise would not be FDIC insured, or what?

    By way of an example, suppose one has $110,000 in a money market account, and another $110,000 in securities, both with a brokerage that fails. In addition, one has another $110,000 in an FDIC insured bank, etc. which also fails. Would the owner be insured for a total of $320,000 ($220,000 via the brokerage/SIPC and $100,000 via the bank/FDIC)?...or what?

    Thanks.


  • Koaa2

    Posts: 1556

    Sep 18, 2008 5:21 PM GMT
    obscenewish saidThis is all Bill Clinton's fault. Everyone knows that he was in league with the Trilateral Commission to plant the seeds that would bring down the economy in time for Hillary's bid for the nomination. Don't be fooled. The Republicans and their laissez-faire economics had nothing to do with this. You can also blame the Democrats. They've been in control of Congress the last two years. They just reinstituted all the failed policies of Bill Clinton.


    You must be fucking kidding! 8 years in the White House, 6 in control of congress and you people are still blaming the Clintons. Please pull your head out before it rots!

    Please tell me your joking!
  • GQjock

    Posts: 11649

    Sep 18, 2008 11:49 PM GMT
    Grampy was talking to Auto Workers at a GM plant yeaterday

    LOL... and a bunch of them were wearing Obama shirts and chanting
    OBAMA IN '08! OBAMA IN '08!!

    So now from now on all Grampy's talks will be town hall meetings where you have to get tickets at the GOP offices

    I loves when Grampy gets pissed icon_wink.gif
  • styrgan

    Posts: 2017

    Sep 19, 2008 12:14 AM GMT
    John43620 saidSometimes it's awful boring but, I watch the House and Senate on C-Span.
    Yesterday the Senate Democrats were going on a tirade calling John McCain another Herbert Hoover. Actually, Herbert Hoover was a good president. He served Woodrow Wilson (Democrat) very well as Sec. of State. It was the Congressional Republicans who screwed up with the "Smoot Hawley Tariff act of 1930". But, yesterday, no one was being FDR like with the "We have nothing to fear but fear itself" line. Senator Dodd looked like he is in a panic. The thing is, Senator McCain is not the president yet.





    Actually, John. Comparing the Republicans to Herbert Hoover is a dead-on analogy. Hoover did not cause the Great Depression, nor does history really blame him for it. His main problem was inaction while people were losing their homes and living in shanties. He stood up again and again, and spewed off positive, yet empty phrases.

    Stuff like, "The fundamentals of the economy are strong."
  • styrgan

    Posts: 2017

    Sep 19, 2008 12:52 AM GMT
    jaded57 saidUm when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them.

    1. I recently opened a money market account, its thru capitol one and has a 3.55 interest rate. I only put $5,000.00 initially. Should I leave it there? Or I dunno take it out and bury it in a jar outback next to my magnolia tree.

    2. What is a money market account? I was told by a friend it was the way to go. So I opened it online. However Im having second thoughts. I mean free money is to good to be true. And I work hard for my money so I dont want to lose it.

    3. I was going to open a 401k thru my job that pays 4% of what I pay into it each month. I figure I could put 300'-500 a month into it with smart budgeting. Should I hold off on that?

    4. I was recently invited to join a investment club that a group of friends is starting up. Nothing major just $100.00 initiation fee and $50.00 a month. I can afford this and all. But I wanna know is now a good time to do something like this? Its mostly a social thing, but should we wait to see what the markets do before we start investing?

    Dunno if anyone has the answers, but any feedback is appreciated. I keep trying to get thru to Suzy Orman but that hasnt happened yet.


    A money market is a more liquid version of a CD. Generally, higher rates are paid because a client puts in higher balances. It sounds like you got a pretty good rate, and even if something were to happen with Capital One (which there's no sign of on the immeadiate time horizon), it's FDIC insured.

    Rayne mentioned inflation. But also consider that interest income is reportable on your tax returns. Therefore, if your tax rate (federal, state, and local) is 33%, youre actually only making 2.35% or so on your money. If inflation this year is 2% (and if you include food and energy prices, it's likely to be more), then you've made virtually nothing. As with most savings accounts and CDs, the idea is more so to preserve capital value.

    Investing in the stock market is about navigating a business cycle for a paticular industry. The time to buy a certain stock depends on when the business cycle for that industry reaches its low. For example, if you think the financial sector is only going to get better form this point on out, now is the time to buy financials. If you think oil is going to keep getting lower, maybe buy stock in an airline. If you think we're all heading to the bread lines soon (kidding), I suggest Kraft and Philip Morris. People are still going to be addicted to cigarettes, right?

    Whatever stocks you invest in, you should research them thoroughly. Check their P/E ratio, their balance sheets (make sure they don't have large amounts of debt), and analyst opinions. Many sites may even place price targets on stocks. Yahoo! Finance is really good, or if you join an online brokerage like Scottrade, they would probably have that information.

    Contributing to a 401k up to the point your employer matches your contributions is always worthwhile. It's important to remember that many 401ks can use funds that are heavily weighted in the financial sector. You should always get a prospectus for funds before you invest and make sure the fund is well-diversified.
  • Koaa2

    Posts: 1556

    Sep 19, 2008 1:05 AM GMT
    GQjock saidGrampy was talking to Auto Workers at a GM plant yeaterday

    LOL... and a bunch of them were wearing Obama shirts and chanting
    OBAMA IN '08! OBAMA IN '08!!

    So now from now on all Grampy's talks will be town hall meetings where you have to get tickets at the GOP offices

    I loves when Grampy gets pissed icon_wink.gif


    I love it to. Why do you think McSames wife is always at his side? To save him and whisper in his ear, like Nancy Reagan had to do with Ronnie so many times.
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    Sep 19, 2008 12:29 PM GMT
    John43620 saidSometimes it's awful boring but, I watch the House and Senate on C-Span.
    Yesterday the Senate Democrats were going on a tirade calling John McCain another Herbert Hoover. Actually, Herbert Hoover was a good president. He served Woodrow Wilson (Democrat) very well as Sec. of State. It was the Congressional Republicans who screwed up with the "Smoot Hawley Tariff act of 1930". But, yesterday, no one was being FDR like with the "We have nothing to fear but fear itself" line. Senator Dodd looked like he is in a panic. The thing is, Senator McCain is not the president yet.





    To compare John McCain's statement with Herbert Hoover's is pretty silly. When President Hoover said "the fundamentals are sound" the unemployment rate was already north of 20%, the Dow Jones Industrial average had dropped over 70% and the rest of the world was in the grips of the Great Depression. The "Smoot-Hawley" Act of 1930 was one of the main contributors of turning the stock market crash of 1929 into the Great Depression of 1932.

    Today, unemployment is still quite low, the US GDP is still growing, and more importantly many parts of the world are still growing, some parts of thw world are growing robustly.

    Herbert Hoover did not get good advice from his Treasury Secretary (Mellon I believe) and he had the mindset common at the time of Government not running deficits in bad times, and being very cautious in his response to an unprecedented crisis. FDR was much more willing to take risks, and he was a very charismatic leader.

    There are very significant risks in the world economy right now, but it is ludicrous to compare it to what happened in the early 1930s.
  • styrgan

    Posts: 2017

    Sep 19, 2008 2:47 PM GMT
    SurrealLife said
    John43620 said


    Herbert Hoover did not get good advice from his Treasury Secretary (Mellon I believe) and he had the mindset common at the time of Government not running deficits in bad times, and being very cautious in his response to an unprecedented crisis. FDR was much more willing to take risks, and he was a very charismatic leader.

    There are very significant risks in the world economy right now, but it is ludicrous to compare it to what happened in the early 1930s.




    Generally, I agree with you about the scope of the economic situation.

    But do you honestly believe that Paulson (or Bush) was proactive or aggressive enough about responding to this crisis?
  • CuriousJockAZ

    Posts: 19129

    Sep 19, 2008 3:00 PM GMT
    If you caught President Bush's speech this morning he reminded us that our economy has faced "recession" since 2001 and yet, with all that our country has had to endure since then -- 9/11, natural disasters, War on Terror, mortgage meltdowns and other major corporate debacles, etc -- our economy has still managed to grow, unemployment remained relatively low, etc -- so even with all that is going on right now "The basic fundamentals of our economy" remain sound. Measures taken today should, hopefully, keep it that way. Of course, the dems want us all to believe that the world is going to hell in a handbasket. The "Politics of Fear"?
  • Posted by a hidden member.
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    Sep 19, 2008 3:10 PM GMT
    Where do you all imagine all the money for this rescue is coming from? Clue: It ain't george bush.