patrick.net

NoVaRenter says:
I have zero doubt that if it were not for frozen interbank lending and complete loss of confidence which is now inherent in all transactions he would be more than happy to be an inflation fighter, hold interest rates high, and let the housing market fester.

I sure would love to believe that too, but it requires a degree of faith in his intentions, while ignoring observable actions that are consistently contrary to that intent.

The reality is it’s the too big to fail problem. The key question to ask is what happens if the banksters do fail?

It isn't quite such a black-and-white case. If the goal is only to prevent catastrophic failure of the banking system, why are all the actions aimed at maintaining inflated asset prices and socialize risk by pawning off crap to the government?

@NoVaRenter, agree with the rest of what you said, re the incumbent power structures ... dispossessing the masses of wealth ... great credit contraction unwind in any event, etc.

Speaking of banksters....

I still have quite a few 1099-INT and -DIV which haven't arrived. Generally by the end of Jan most years have seen the whole stack already in hand. I wonder whether this reflects the turmoil in the bankster world.

I repeat my former comment from UBS....
[P]lease be advised that our Firm will request an extension from the IRS to delay the mailing of 2007 Forms 1099 for targetted accounts until late fegruary or early March. Clients who will experience a delay in the mailing are those with accounts that held the following products during tax-year 2007:
* Mutual funds
* Real estate investment trusts (REITs)
* Unit investment trusts (UITs)
* Certain structured products

I wonder what the heck is up at UBS?

I forgot to mention that quote came from a mailing from UBS (enclosed with my statement) last December.

Anyone else notice any 1099 hanky-panky?

DinOR

I’d like to get a safe for my office in which I can place valued items like Jack, Johnny and Jim (if ya’ get my meaning)

I have such a safe. I call it my drawer.

DinOR,
By the way, is that Dan Wesson one of those kits with swappable barrel lengths?

If the goal is only to prevent catastrophic failure of the banking system, why are all the actions aimed at maintaining inflated asset prices and socialize risk by pawning off crap to the government?

It's an interesting question, as to inflated asset prices I'd say that his interest is maintaining them to avoid a mass walkaway and subsequent collaspse. I'm not sure how much of the socialization of risk might be attributed to Fed action or BB, and I think we are on the same page in level of disgust at this. His actions to stablize and create velocity in bond markets by government guarantee (thumbs up to GSE limit increase) are aimed 1st @ stemming catastrophic system failure and an unfortunate downside is the socialization of risk. A choice made with a downside, no? The banking system and currency are organized with the government as backstop, not sure BB can take blame. It's a shit sandwich for the masses, no doubt. For an elite few, well it's simply good to be the king isn't it. :-)

I sure would love to believe that too, but it requires a degree of faith in his intentions, while ignoring observable actions that are consistently contrary to that intent.

Not to be argumentative as I'll concede you this point with the caveat that we don't know what information exactly his actions have been based upon...it simply might just look bad. But I don't know for sure, maybe I have too much faith in someone trying to do the right thing. With so much power riding on this institution, I'd hate to think it was controlled by a special interest. I understand that nearly all our government is controlled by these specials, but the fed has to be independent. Maybe I'm naive.

Where you are absolutely correct is PR disaster. If I had a wish it would be for the Fed to reveal the truth of their understanding and analysis, and let the chips fall where they may. Maybe nobody is handle the truth, however. Classic US government (and quasi gov), not trusting it's own citizens with knowledge.

On topic

Jack Johnny and Jim makes for an interesting store of wealth, similiar to gold, no? Inflation hedge, easy to trade, maybe improves with a little age, and with the added benefit of actually being able to drink it. Is one better off buying and laying down cases of the three B's expensive quality (Blantons, Basil Hayden, & Bookers) or a larger quantity of the rotgut like Evan Williams stuff?

Countrywide Financial Corp. sent letters to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. ... The move by Countrywide ... is part of a pullback by lenders nationwide on home equity loans ... with new evidence of sinking home values, many lenders are requiring that homeowners maintain a much larger percentage of equity in their homes as a cushion against financial problems.

I'm admittedly not a connoisseur of quality rotgut. I just rely upon others to point me towards fine bourbons.

I have heard a reasonable set of arguments that wine, if properly cellared, is a far better store of value than gold. It has global appeal, definitely improves with age (assuming you are storing the appropriate sorts), and is of course consumable at any point. Wine also has timeless appeal -- it is a fixture throughout western cultures down through history.

Hmmm, maybe I'll start the US Wine Depository Corp. and get myself a CNBC infomercial slot.

Hmmm, maybe I’ll start the US Wine Depository Corp. and get myself a CNBC infomercial slot.

Perhaps something like shares of fine wine stored in a Zurich vaultcellar? Just in case the government decides to confiscate alcoholic beverages. :)

FYI - if you want to do some troll bashing it seems there is one on Patrick's forum.

"Which brokerages are seen as the safest? I also wonder if SPIC has ever been stress-tested like FDIC."

The SIPC is a private insurer. It's woefully undercapitalised. I don't think we've ever tested the system with a large failure. All that said, unless your broker has committed outright fraud, in theory you will still get your assets returned to you (and your account moved to another broker). However, given that there may be short sales and clearing failures "in flight" when a failure occurs, it's possibly there won't be enough of whatever you think you own if held in street name, and that is where the SIPC is supposed to step in. As for which brokers are the safest, that is hard to say. Schwab appears to have avoided the sub-prime mess, whereas Merrill, Citi, and UBS are neck deep in it. When in doubt, you can just check the stock price chart for a financial institution - it tells you what the market knows about its solvency.

"It should go without saying but paying off debt at this point makes the most sense to me."

Call me crazy but I am doing the opposite. I'm refi-ing my house at 4.75% fixed rate.

How many people here are talking about the fed printing money, runaway commodity prices, massive inflation, yada yada yada? Well, what effect do you think all that will have on long-dated fixed-rate debt instruments? If it comes to pass, it will not be good news for the "lender" side of those instruments.

Of course there is the opposite argument, we are in for massive deflation, the price of everything is going down led by house prices, interest rates are going to zero, US = Japan circa 1990, 1930s all over again, cash is king, yada yada yada. Well if that happens, long-dated fixed-rate debt instruments will rise, at least to a point. (The situation is asymmetric - there is a limit to how low interest rates can go, whereas there's no limit to how high they can go.) And there's the kicker: a US-style mortgage gives you a call option to pay off the debt any time you like, so if we head down the deflation path you can pay off the debt rather than accept zero return on your cash.

"Reuven is the only real victim here. Reuven did what he thought responsible Americans should do: save money. Reuven’s losing money left and right. He can’t barely keep ahead with inflation with CDs, and has to worry about banks going bust."

If you are doing better than just living paycheck to paycheck while hopelessly in debt for useless bling, you are one of the "rich" who is not paying his fair share. Don't expect any sympathy from the proles or their media shills.

"CD rates are shitty low once again. 3.5% average per bankrate ZIRP is killing me, bring back Volcker is he still alive?"

Volcker is very much alive and a strong critic of what's been going on. (Note to self - smoke more cigars.) I am still stinging from the last time rates were driven below inflation, and I'll be damned if I let myself be screwed again. I guess this is the point - money will be driven out of investments that yield a negative real return and into something else. Last time it was houses, and to a lesser extent stocks. This time it could be commodities, or (just a guess) real assets that can produce exportable commodities (farmland, timberland, coal mines).