Month: August 2007

Has anyone else seen the video of that nut job Cramer losing it? Basically he wants a rate cut and thinks that the Fed should bail out the banks who dolled out sub-prime mortgages at teaser rates. On the other hand, if the Fed does cut rates, the US dollar will collapse even further, and lead to higher inflation for everyone. Essentially, imposing a “hidden tax” on the American people in order to bail out some banks. Well, that’s how I understand it anyways, after doing a little reading about from various for and against sources.

The Fed cannot be absolved of all blame of course, they dropped the rates hard and fast in the first place, which got the US into this mess. Here’s what some other people over at digg.com had to say:

Instead of immediately absolving home-buyers of blame, remember that a lot of these assholes WAY OVERPAID for their homes, failing utterly to demand value for their money or use sound judgment. As a result, prices exploded to obscene levels and now many many people can’t even consider buying a home.

It’s hard to feel too sorry for people who screwed over a great many others by falling all over themselves to bid MORE THAN ASKING PRICE for mediocre homes. Had they stood up for themselves and for value, we wouldn’t be in this shitty situation.

This was just another symptom of the plummeting standards and intelligence of our society. You want to talk about “values”? How about starting with the value of a goddamned dollar?

I can’t help agreeing with that, seems like common sense. Here’s another:

I remember two years ago when everyone was going crazy in the market and people thought I was crazy for renting. I still rent today, I like having the space, the lower monthly payment, and generally a nicer place than I could afford to buy. People would ask me, “how much does this condo costs??” I would say, it’s not a condo, it’s an apartment, and they would give me that smug look and a snicker and say “Ohhh, you still rent??”, like I was too stupid or too poor to buy a house. Now all those people have those half a million dollar “investment properties” they can’t sell because they bought in an over-saturated, over-valued market. And to add insult to injury they also have a million dollar condo on a variable interest rate loan… me? I pay they same rent I did four years ago, who’s laughing now?

Sounds like he’s in the same boat as us. Happy to be renting, and annoyed when people give you that “ohh, you still rent??” deal. There was a reply to that comment:

And you have accumulated _NO_CAPITAL_ in the time you’ve been renting. This “renting is a better financial option” talk always burns me, go back to “sound financial planning 101” and you’ll know that 99.99% of-the-time, paying your own mortgage is better than paying one for your landlord.

“Who’ll be laughing” is me in 15 years. When my house is payed for, and Ive got a $250,000 asset and youve got zilch. In fact, Ive currently got a renter in my first (fully paid-for) home, paid $150k and now making $12,000 PA in rent — a Dead-Solid secure investment making ~7% income PA.

You enjoy your “extra space”, and when home _BUYERS_ are enjoing their lifetime of sound financial planning (read: Houseboat on Lake Tahoe/Cottage in Muskoka/Porsche) you can tell us all how rent was such a wise investment…

This is totally flawed reasoning. The renter in all likelihood accumulated capital as well, through investments, if he is as smart as he thinks he is. This is one of the biggest myths about real estate: that all renters accumulate no capital, which is utterly false. It is true that some renters accumulate no capital but it is also true that some renters accumulate lots of capital. Many people who buy a home especially when they are young (as many did in this market) cannot afford to make other investments (besides their home), so they tend to forget that other investment options (stock market, bond market inside or outside of an RRSP) even exist. Of course there are renters that blow their extra cash on beer and popcorn and a home makes a great forced savings plan. Oh, and here’s a real life example for you in case you still are not convinced: for the past year my wife and I were paying $1050 in rent and putting $1750 into our RRSPs per month. Our financial situation has changed a bit now, our rent is higher at our new place and RRSPs haven’t gone up much yet but we are actually still putting in more in our RRSPs than our rent. Ok, back to more comments:

If Bernanke cuts rates, China et al will have less incentive to continue to buy up treasuries at lower interest rates, and that’s presently the only thing keeping the dollar from falling through the floor. Therefore, Cramer is asking Bernanke to save his buddies’ asses at the expense of the $ itself (ie, at the expense of EVERYONE). My guess is Bernanke will stand pat, since it’s easier to deal with one Cramer than 300 million.

As for Cramer, he himself predicted the hedge fund implosion in this more sane commentary:
http://www.thestreet.com/pf/markets/activetraderupdate/10372191.html
…so for him to scream that the sky is falling is flip-flopping of epic proportions. If Googling “failure” brings up links to Bush, then I’d say Cramer should be near the top of the search results for “douchebag”.

The article above is somewhat interesting and explains some of what is going on but I have to a admit I don’t quite understand all of it. Here’s another comment:

It’s funny how the “free market economy” should apply to all the companies out there, until the banks are in trouble. Then the government should step in to bail them out. Hundreds of thousands of jobs have been axed because of leveraged buyouts and takeovers in the last decade while the brokers and bankers made fortunes. Now we’re supposed to take it up the rear again just because they made some bad bets? Screw that.

iTulip made a great video calling Cramer for what he is, go check it out: http://www.youtube.com/watch?v=Pd5zAbDKZEg

I’m not shilling for iTulip, I just think they can see through Cramer’s bullshit better than most.

Check out the iTulip video. And another:

This happens every time banks get into trouble (and they always eventually get into trouble). Banks lend out money. If lending standards are slackened, like they have been for a while, banks lend money to anyone, with little oversight. Eventually those loans turn sour, like they are doing in the subprime mortgage business. The banks are then caught short and don’t have the money to continue operating. In the Bear Stearns case we’re talking about two hedge funds that they’ve had to close, which is in turn affecting the parent company. So after a bank is facing a run on what little it has in deposits by creditors they’ll turn to the Federal Reserve, which is itself a cartel of banks. At the Fed a bank can be lent money to stay in operation. Also if Congress gets involved through pity they can authorize the Fed to give that other bank money interest free. The problem with this is that the Fed creates money out of nothing and in so doing they dilute the total pool of dollars in circulation which causes our dollars in our pockets to be worth less and less, this is known as inflation: the value of money goes down in relation to other commodities. So don’t believe people like Cramer or your Congressman or the Fed who will say that Government needs to bail these banks out. It’s a lie. They want to saddle the American people with a hidden tax (inflation) to solve their ill-conceived business practices.

Finally, does he really need to scream his point like that? I mean who can take that seriously?