James48843
TSP Talk Royalty
- Reaction score
- 569
Guys, I got to thinking about this one on the way home tonight.
IF what we are seeing is in fact an unwinding, then we've only just begun to see some real financial bloodshed.
I mean the kind of financial bloodshed you don't see in your lifetime.
Let's look at the facts for a moment:
Current Administration is lazifare, refuses to regulate home morgtage lending. Does away with the separation of mortgage banks and investment banks. Does away with the uptick rule.
Folks- I'm telling you- the market is poised as it was in....1929.
Bear Stearns has a run, and the fed jumps in to save it. Fannie and Freddie start to unwind, and it's all over. THAT's why Paulson jumped in. But he can't stop it. Because they did away with the uptick rule.
So here goes. Big investment banks, who only began sucking up investment mortage dollars after the current admin let them a couple years ago, are the first to go down.
The books say they have lots of reserves. After all, they are holding stock in Fannie and Freddie. Oh yeh, in Merril Lynch and Bear Stearns too.
But then, one by one, the underlying assets tank. And they no longer have the reserves they thought they did. Pretty soon, they are bordering on not having reguatory reserves enough, as each of their holdings gets hit for more and more loss.
Then boom- a run on the bank, and they are in trouble.
There stock is now headed down. And, because of the removal of the uptick rule, shorts pounce on the opportunity. they see a stock in distress, and pile on the short sales.
Its the dang removal of the short-sale uptick rule. That's what is the cause of this.
As each one falls, the portfolios of all the rest of the investment banks tank. And with them, insurance companies.
One by one they go down. Until there aren't any left standing.
Friends- my friends-- We're about to see what a true fire sale looks like.
I wouldn't be a buyer tomorrow even if the VIX is up to 50-
(Is this what the beginning of a panic looks like? It feels to me a lot different than the crash of 87. I remember that one, and it wasn't like this.)
There, how's that for being optimistic?
:nuts:
