patrick.net

I use Schwab and Scottrade, and I am afraid neither of them may qualify to be "too large to fail". I have very little cash at any bank, only enough to cover monthly expenditure.

Ah, it's wonderful to come back just as I am seeing the predictions that most people here have been making for the past couple of years.

Despite what my neighbors and a couple of Realtor friends are saying I predict that people who can't afford houses without 20% down payments won't be able to buy them, which will substantially release the nutty upward pressure that we have seen on prices, even in, gasp- prime areas of San Francisco.

I also noticed the oddity of people putting 10% down on a $2.45 million house. There's no tax advantage to be gained from the large mortgage. Perhaps they have cash tied up in investments that are doing better than the lower rate, but not as well as the 8% on the new mortgage?
I'm guessing that's not what was going on, but that the people merely appeared to be rich and are simply leveraged. Had they really liked the house and had the cash they would have just upped the downpayment to keep the lower rate. Once the leveraged-living people are out of the game they high middle/lower upper houses will have far fewer people lined up to buy the houses and the prices will decline.

SFWoman!

Good to hear from you! And yes, I think you've summed that little scenario up quite nicely.

@Malcom,

I'm pretty sure you mean "statements" *not "certificates"? I don't know a lot of people that use certificates any more? If you had the physical stock certificate, likely as not you're the type that keeps them in a safe deposit box. Keep an eye on those bearer bonds! (just kidding)

Remember, NAAVLP stands for National Association for the Advancement of Very Leveraged People. Perhaps we can get a grant for the government to "reach out" to those poor souls. :lol:

I move for secondary useage in the glossary!

SFWoman

Back from your long holiday I see. I'll assume you were in France. Anyway, good to have you back. It's Schadenfreude time!

I primarily use (gasp) E-Trade. I know all the problems with it, but it gives me access to everything I want with reasonable fees for occasional activity. I move earnings out of E-Trade into Vanguard a few times a year. As a rule I never move money into E-Trade, only out of. Also E-Trade is where my wife's company puts her options and espp, and is where my past options all went. So it's kind of path of least resistance.

Anyway, E-Trade accounts are in the category of "someone will buy them" if they fail. Probably Scottrade. I just don't want to see him fly over in that damned helicopter when that happens.

Actually DinOR, I think it is the actual certificates that are needed to move your holdings. Not just a statement probably because that is just a snapshot in time. Like I said, I'm not positive how it works, but I got the impression that you literally have to get the certificates from your broker. I know in current times it is all tracked electronically but I suspect that you have a right to actually obtain a physical certificate from the corporation on demand.

In small non traded corporations, I've seen principals receive physical stock certificates. Randy probably can help confirm this, I suspect his startup is this type of firm.

LOL about the safe deposit box, I'd take it a step further and hide them in my walls, that type of person is probably suspicious of banks as well. :)

I second DinOR's motion.

Actually for Scottrade you fill out an application and send the most current statement. I suspect that it is verified, with the original brokerage, and some official movement occurs. Gotta love technology.

Funny about bearer bonds-

We had a client at work send in 40 year, zero coupon, CA water authority bonds from the late 60's signed by governor Ronald Regan.

http://atlanta.bizjournals.com/atlanta/stories/2003/03/17/focus3.html?page=1

This is from 2003, but it describes how some people insisted on having certificates in case their brokerage goes bankrupt.

I have a drawer full of quite impressive looking stock certificates from companies I've started or had founders shares in. The one from the dot-com I worked for back in the bubble has many many zeros in the number of shares. The most important zero, however, is the one you multiply those shares by.

I know that sometimes CU’s can offer higher yields (generally) but mmkt yields don’t have as big a difference a Dennis implied.

DinOr,

Beats me, but my TD Ameritrade account pays only 1.66% on the MM account whereas my newly-opened Banner Bank 13 month CD is paying 5.4% (5.55% apy) and my Zion's Bank MM account is paying 5.1%. When I want to buy something on DT A, I have to first move some money into the MM account and then place the order. NOT very user-friendly.

Maybe that's another reason to dump TD Ameritrade for Scottrade.

My primary reason is that TD Waterhouse / Ameritrade closed all their B&M offices within 500 miles of Boise. Heck the reason I went with them when I lived in SJ was that they had an office in the building across from Intel headquarters when I was working there. When I first got to Boise they did have an office but closed it soon thereafter. Scottrade, Schwab, et al. do retain offices in Boise.

Although I also have a UBS and Fidelity account. UBS is where Intel puts shares purchased through the ESPP and Fidelity is where Intel and BSTZ put their 401(k) accounts.

Welcome back SFWoman.

My Fidelity _municipal_ MM fund is yielding 3.23%. You should be able to get more with a fully-taxable fund.

The most important zero, however, is the one you multiply those shares by.

More importantly, the number of persons that will buy the shares from you. :)

If anyone sees what I don’t, I would appreciate feedback.

Paul,

There is a general "flight to quality" going on right now. So even though there is no specific sub-prime exposure, people are demanding more risk premium for holding junk bonds. And HIX is 78% junk, according to ETFConnect.com.

I have to say, I am impressed with collective acumen of this crowd. I poo-poo'd all of your concerns about me holding my dry powder in OPCAX, a hi-yield CA Muni bond fund. Sure enough, it has gone down 5% in the last week or so. I personally think it is a buying opportunity.

I am still 100% in the market, though my stops got hit on a bunch of big banks. I am stilling holding Citibank. I immediately took the cash and bought some IBM, which I have been wanting to hold for a long time. I think there are tons of buying opportunities in todays market and wish I had more money to take advantage of them. I am not about to dip into my 10% down payment fund (for the next house) though. In fact, it looks like I am going to have to fill it back up.

The one thing that has surprised me is that foreign stocks got hit harder than US stocks in the last couple of weeks. This is the opposite of what I expected and just proves that the international financial markets still think of America as a safe haven. What do you know.

The one thing that has surprised me is that foreign stocks got hit harder than US stocks in the last couple of weeks. This is the opposite of what I expected and just proves that the international financial markets still think of America as a safe haven. What do you know.

The black helicopters of other countries do not fly as fast, so their plunge protection team does not work as well. :)

US-Style Democratic Market Capitalism is a terrible system. Messy, dismal, unfair, and inefficient. It just happens to be a whole lot better than all the other systems in use today.

I am not at all surprised vis-a-vis foreign stocks. In fact, the Europeans are effectively trading euros for dollars right now at a discount to the exchange rate. Fancy that. If the EU can't kick the dollar habit how in the hell do the doomsayers think China is going to?

I am still 100% in the market

Sorry, I guess that is not really true. I still have a six month emergency reserve in CDs at WFC, as well as a tiny gold holding (about 1% of net worth) and my "next house down payment fund" which is about 10% of net worth, sitting in Muni bonds and bond funds of various sorts, mostly OPCAX. The Muni bonds I hold have not moved much at all, either up or down.

Other than that I am fully invested in the market and wishing I could buy more.

I still think that someday we will have to pay the piper for all of our deficit spending and all of our enormous and unsustainable trade deficit.

It doesn't look like that is going to happen this year though.

I still think that someday we will have to pay the piper for all of our deficit spending and all of our enormous and unsustainable trade deficit.

We will just pay the piper with newly printed American Peso.

US-Style Democratic Market Capitalism is a terrible system.

The market cannot be overly democratic. Do you really want capitalism to turn into NIMBYism? :)

All is good in the world again - SFWoman is back posting on Patrick.net. And I thought she had fallen to the darkside.

Great to see daily coverage in the Chronicle about the credit crunch / mortgage crisis / and now even "the rich" feeling the pinch.

Now, if we can get the tech industry to take a bit of a downturn not even the fortress with be able to hold off significant price declines. Hopefully, AMAT's disappointing earnings are a sign of things to come.

Now, if we can get the tech industry to take a bit of a downturn not even the fortress with be able to hold off significant price declines.

When the equity market dries up, Silly Valley will look silly again. There is no such thing as a fortress. Anything can and will break in the wake of the Market.

Randy H Says:
@SP
We should seriously consider inking a deal to do a phantom-framing strategy.

Sounds like a plan, although IMHO we should wait a few months - carborundum illegitimi, to borrow a pseudo-latin phrase.

SP

nil carborundum bastardii?

OO Says:
Oh sh*t, Yen just breached 117, yen carry trade unwinding plus subprime blowup, it is not going to be pretty tomorrow. When it rains, it pours.

Yep, 117 should slow things down, although I think it will need to go to 112 to really break the back of the carry-traders.

Also, watch the exchange rate between the Euro and the Yen - that seems to have more correlation with the S&P500 since that is usually the last conversion step before the money enters the US.

SP

With the credit collapse, I don't think you need to wish for a downturn in tech to see housing prices go down. The IPO 'instant millionaire' isn't nearly as prevelant as RE people like to claim, and even two income tech families will be making 200-300 a year max, and more like 150- 200 average, which yields top tier home prices for the upper-middle-class of 600-900k max with average upper-middle class homes in the 450-600k range, much like it was back in 1999. Yes, there will be a few areas of million dollar homes, but you won't see sunnyvale houses selling for 1.2 mill anymore. People who can drop 1.2 - 2 mil will be hitting atherton/PV/woodside and certainly not cupertino.

Different Sean Says:
nil carborundum bastardii?

I meant the opposite.
carborundum illegitimi, as in "let it grind the bastards down a little"

Both are made up terms anyway.

SP

Peter P Says:
When the equity market dries up, Silly Valley will look silly again.

True, but I don't think the grunts have quite figured it out yet. At dinner last saturday, the consensus opinion was that last week's action was just a temporary setback and stocks would start going up again any time now. I figured I would keep my mouth shut and wait a few weeks for the 2x4 for reality to hit them in the face on its own.

SP

Thanks Jimbo. As we were discussing at work today, it is no longer about valuations. When a clearing firm is at risk and a huge hedge fund has blown up, the clearing firm risk manager takes over and that job is to liquidate everything at resonable prices if possible but first and foremost to remove the risk from the clearing firm. I believe this is what is happening now on a daily basis.

Quote of the Day- "From the House's Mouth"

"If the pizza man delivers a pizza to you and you have $300,000 worth of equity in your home, but no cash, he is not going to give you your pizza. He wants cash, not equity. The same problem now faces many United States banks. – Brant McLaughlin, commenting on a series of essays on the current financial crisis, recently published by the liberal think tank Cato Institute.

Yeah, well hence the central banks pumping liquidity into the system. I have no idea why that's supposed to calm down the stock market. It makes it look like there's a serious danger of a liquidity crunch in the next couple weeks.

Today, Fed governer Poole pretty much flat-out stated the Fed will not cut the Fed rate, either on an emergency basis or at the next meeting, unless "hard economic data" suggests a slowdown.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a262SkG0p8A0&refer=home

That's nice to hear. It seems the whining from Wall Street is not as well taken by the Fed as some might hope. Some analysts suggest that historically, the Fed does not cut rates until a jobs slowdown is clearly evident.

Well, they shouldn't. Otherwise it's just a parachute for banks and hedge funds taking stupid risks in the market. It the economy isn't threatened, then it really is a justifiable correction.

skibum,

Fed is injecting liquidity directly to its pal bankers, which is almost equivalent to a rate cut. It is always the retail customers who are getting screwed left and right and 360 degrees, the buddies and insiders of Wall Street will get all the bail out they need.

As always, FBs will go to hell. But those corrupt bankers who have been making millions+ just by pushing paper will get off much more easily.