Thread: Recession
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Old 10-30-2009, 12:58 PM
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Originally Posted by MADDOG View Post
"Economic turn around" my sweet ass. We haven't caught up to where we were when things went sour. More and more people I know are getting laid off, local businesses are running shorter hours, manufacturing is still down, a 3.5% GDP rise was based on a prior quarter and wasn't in comparison to the GDP at the time of the recession and all this "We are making changes and have seen significant gains in the economy." talk is plain B.S.
Preachin to the choir brotha!

We may have seen the bottom of this "downturn" (why pull punches? It's a freakin' recession!) with the housing market starting to stabilize but we won't see a return to a prosperous economy for some time.
4-5 years is a guess I hear punted around quite a bit.

Now who should be shot, hung, drawn & quartered for this? Well, we have "toxic assets" created by the banks and sleazy fly by night lending institutions who gave anyone any amount they needed to buy a house they couldn't afford. We have off the books "derivatives" which weren't regulated and were the key element to the crash.
We gotta give credit where it's due. It's our Reps, Sens, and former Pres who thought buying a house should be as easy as buying a car.

If you aren't familiar with "derivatives", basically derivatives are financial securities whose value is derived from another "underlying" financial security. Options, futures, swaps, swaptions, structured notes are all examples of derivative securities. Derivatives can be used hedging, protecting against financial risk, or can be used to speculate on the movement of commodity or security prices, interest rates or the levels of financial indices. The valuation of derivatives makes use of the statistical mathematics of uncertainty, which is very complex.

So, these financial wizards were basically speculating and hedging on projected values of someone else's derivatives, whose derivatives were based on projected values of someone else's derivatives whose derivatives were....bleah...bleah...bleah...
Options have been around a while, it's not like options and swaps are a new game. We were trading Options in the 90s boom.....and we're trading them in the 00's bust. It's just that so much of that stuff was a deck of cards built on CMOs (Collateral Mortgage Securities) REITS (Real Estate Investment Trusts). CMOs and REITs only function correctly when the vast majority of everyone pays their rent and mortages. CMOs were considered ALMOST as safe as a CD until the house of cards came down last year.

There's a book I'm reading right now by Nick Murray called the Excellent Investment Advisor. He makes a VERY valid point that you must have a price correction every so often...BUT it's what you do at that time that matters most. Right now you should look at the whole country like it's on sale and buy up as many equities as possible, except in GM of course! Because the market WILL go up as long as there are still people breathing.

They got creative. They got greedy. We got screwed.
We all got greedy, and we're all reaping what we sew.

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