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Even before the opening bell, Monday looked ugly. (http://www.nytimes.com/2008/09/30/business/30markets.html?hp)

http://www.cleanmpg.com/photos/data/501/NYSE_Trading_Floor.jpgVikas Bajaj and Michael Grynbaum – NY Times – Sept. 30, 2008

Busy day on the floor of the NYSE.

Silver lining? The DJIA is up justa little over 15% over the past 5 years including the obligatory 2 + % dividend yield. A much better return the than the house most live in today? -- Ed.

But by the time that bell sounded again on the New York Stock Exchange, seven and a half frantic hours later, $1.2 trillion had vanished from the United States stock market.

What had started 24 hours earlier, with a modest sell-off in stock markets in Asia, had turned into Wall Street’s blackest day since the 1987 crash. The broad market, as measured by the Standard & Poor’s 500-stock index, plunged almost 9 percent, its third-biggest decline since World War II. The Dow Jones industrial average fell nearly 778 points, or 6.98 percent, to 10,365.45.

Across Wall Street, no one could quite believe what was happening on the floor — the floor of the House of Representatives, not the New York Exchange.

As lawmakers began to vote on a $700 billion rescue for financial institutions, the Voyageur Asset Management trading desk in Chicago went silent. Money managers gaped at a television screen carrying news that seemed unthinkable: the bill was not going to pass. Shortly after 1:30 p.m., the rescue was rejected… http://www.nytimes.com/2008/09/30/business/30markets.html?hp

I admit to not understanding the finer points of economic mechanisms, but there's a lot here that seems like it was a self-fulfilling prophecy. People warned that we have to have this bill or else the Great Depression II will happen. Then, after the bill didn't pass, you had fear and panic leading to a lot of instability. Fun...

NEW YORK - A private research group says Americans' confidence in the economy unexpectedly improved in September.

The reading still hovers near an historic 16-year low and does not fully reflect the financial meltdown that has rocked both Wall Street and Main Street in recent days, however.

The Conference Board said Tuesday its Consumer Confidence Index is at 59.8, up from a revised 58.5 in August. Economists surveyed by Thomson/IFR expected a reading of 55.5. The level remains about half of what it was a year ago and near the lowest since the index registered 54.6 in October 1992 when the economy was coming out of a recession.

Has ANYONE had trouble getting a loan, like the "experts" say is happening:

"In a good case scenario, the economy is slow. In a bad case scenario, there are massive bankruptcies," said Axel Merk, portfolio manager at Merk Funds.

"The problem is, the general public doesn't understand this. Maybe we need to see a few payrolls fail at a few companies before they realize," he said. "This has a very direct impact on Main Street."


I just got an automobile loan 9/27/2008 at 4.99% fixed for 48 months on a USED CAR.

All the talk about not being able to get loans is B.S.

Before you try to say that it may not be hard now, but in the future it will be hard...the market is FULL of LIQUIDITY right now. Banks are not using it. Getting a loan is not a problem. I'm tired of Washington and Wall Street telling us "Main Street doesn't understand."

Anyone else want to dispel the fear mongering?

My credit couldn't be much better, I will have no problem getting a loan if I choose.

However there will be lots with mediocre to average credit scores that won't like what they hear next time they go for a loan.

This sounds like a bank robbery and Wall Street has a gun to the head of the tax payers demanding the $700 Billion dollars or the 401-K gets it.

Well, C.R.A.P!

Our 401k plan is rolling into a new one, since we were acquired by another company a while back. The old plan is liquidated, cash held for a month, then transferred into the new plan. Liquidation date for the old plan? Close of trading, September 29th.

Now it gets to sit in a money market account for a month while the market is recovering.

Update: confirmed. The sale of the old plan's assets happened according to plan, at yesterday's close.

Has ANYONE had trouble getting a loan, like the "experts" say is happening

My credit couldn't be much better, I will have no problem getting a loan if I choose.Problem isn't with small micro-loans, but with the larger loans fo 100k+. Most of the time Main Street doesn't see the credit crunch until it's time to buy a house. Mortgage loans have been hit... big time. To a degree, good credit will help, but in certain cases there is just no helping it. For example, it used to be possible to get a say 2mil commercial property loan with 5-10% down. Now the creditors are requiring 20% down to even consider the loan. Now raising 40k to put 20% down on a small house is understandable, but raising 400k to start construction on a new business is next to impossible for most small business entrepreneurs. Credit score doesn't matter, if you don't have half a mill in cash, your not credit worthy.

Now to some degree the same has happened in the non commercial market too. If you have "perfect" credit getting a 80/10 loan was fairly strait forward. An 80/10 gives you a 80% mortgage and another home-equity type loan for 10% so you only have to put 10% down on the house. Now agreed, most people with "perfect" credit got that score because they don't do screwball stuff like that. But now days, if you don't have 20% to put down, you don't get a house (which is actually a good thing). You can get into the designer loans but with unbelievable fees attached.

From more personal experience working real estate. In the upper-middle class home market in Texas, most buyers (about 75%) would qualify for a loan on the houses they looked at, now that has pretty much inverted. Most (about 75%) of the clients that work with my real estate broker fail to pre-qualify for a home loan on the scale they want. This is a good thing for the most part, but real sour grapes for people building or selling houses. So sub-"perfect" credit becomes real difficult to take to a bank now days which is why housing is in decline. People want to buy, they just can't any more because they can't raise 20% or their credit needs to be repaired for 4-5 years before they can qualify.

From a sound-financial-advice standpoint this is a good thing. People should need perfect credit to buy a house, the bank is really sticking it's neck on the block for a home loan especially in a declining market (assets devalue faster than interest accrues). It just means people have to plan to buy a house 4-5 years in advance if they don't have the down payment and credit score required.

Now another group really hit are those trying to move from areas with low home values to areas with high home values. Where I live, median home prices are about $140k. The national average is closer to $270k. This means that most people in my town will need at least 40% equity in their home before they are likely to be able to move far outside of this region. At 40% they net 56k from the sale of their 140k house. That gives them the 54k needed to buy a 270k house. It does take a while to build 40% equity into most homes in this market.

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From a sound-financial-advice standpoint this is a good thing. People should need perfect credit to buy a house, the bank is really sticking it's neck on the block for a home loan especially in a declining market (assets devalue faster than interest accrues). It just means people have to plan to buy a house 4-5 years in advance if they don't have the down payment and credit score required.
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Exactly. I don't care if low income people can't afford to buy a house. I don't care if people with excellent credit can't buy a house because they don't have 20% down payment. I don't care if people can't afford a house that would put their debt/income level over 36%.

Breaking from the above FUNDAMENTALS is what caused ALL of this mess. Going back to these fundamentals will fix this mess. It's just going to take time, not $700 billion.


I refuse to agree that I should pay higher taxes for bailing out Paulson's investment bank buddies. Blah!

Oh yeah, nobody has posted a problem yet ;)


I posed this same question on the other sites I frequent also. Not a single person has responded with a problem. If this was so wide spread, where ARE all of these people?


Ghosts!

Hi Dan:

___Andy is speaking about good old solid and reasonable fundamentals. I am no expert by any stretch but this is exactly where we need to go imho. If it ties up/forces more capital up front to purchase an income property, business or spec home or have cash on hand for short term obligations than it should. If we do not have the 10 to 20% down for the speculative venture, maybe we shouldn’t be speculating with the banks money to begin with? Our country grew for a century with reasonably solid banking practices but as soon as this no money down, interest only and no-credit check sub-prime loan non-sense created the speculation, it was only a matter of time before we were tripped up.

___This is hindsight of course but the more I read, the more pissed off I get. I purchased my first house with 25% down and paid the damn thing off in < 3 years. Second home, paid off within 5. The third is my present and I only owe 15% of its market value. I had to place 50% down 10 years ago to make that happen however! If the rest of society was doing the same, would there be a $10 to $12,000 Bailout coming out of your pocket to pay for this Bailout this week and I say that meaning this week?

___And the supply of foreclosures on the market right now? That supply because of the loose and speculative credit practice caused all of this in the first place. Until that back log of foreclosed or soon to be foreclosed upon homes have been reduced drastically (something like 2,000,000 homes now???), what is giving 700 Billion to Wall Street Bankers going to do? Allow more speculative lending to people that should not be purchasing a home with 5% down o rless and barely the income quals to own it in the first place?

___Am I concerned with my stock market holdings? Unless we head into a depression (some individuals have of course), I suspect the stock market will to continue to climb over the longer term. The difference between the depression of 29 and today is the Feds are printing money so fast they themselves do not know how much it will effect the future economy. One thing is for sure, the 500 companies making up the S&P 500 will be increasing the price you pay for their goods and services just as fast or faster than the money supply has grown and thus earnings will keep pace with if not outrun that same money supply as has been the case for the last 70 years. With so much fear and blood in the streets, this decline appears to me to be an excellent buying opportunity with a nice 30% ROI in the plain Jane S&P over the next 24 months.

___I suspect Wall Street will try and push the fear and pain back towards Main Street to teach “us” a lesson but if we push back, the bankers will lend and the stock manipulators will manipulate and the insurance companies will insure just as they have in the past. The reason why? Because they don’t make any money if they do not! I can just imagine some seasoned employees of these same defaulted banks are just itching to strike out on their own because lenders are prime to make a killing with the spreads available from small depositors to well financed borrowers right now. Just thinking about a bank that is paying 2% to its depositors and depositing its receipts into T-Bills at basically 0% is a recipe for a bankrupt bank due to its own stupidity. Banks do not have to lend a dime but if they don’t, they are no longer a thriving bank let alone an alive one in the competitive market place.

___There was $0.015 worth of wasted key board time to rant :)

___Good Luck

___Wayne

The difference between the depression of 29 and today is the Feds are printing money so fast they themselves do not know how much it will effect the future economy.

This is an important point.

As hard as it is to believe given the "keynesian consensus" that exists today..........where our central bank "takes the punch bowl away" during booms and "floods the street with money" during busts.........the fed & treasury during the Hoover administration actively worked to reduce the money supply, driving yet another cyclical downturn into the worst economic crisis ever.

"Purge the rottenness out of the system" was Treas Sec Mellon's famous phrase. It was thought that the economy was a morality play, and that by punishing excess via drastic austerity the country could return to economic (and by extension moral) health.

Of course, the economy is not a morality play. The result? The money supply declined by 1/3rd between 1929-33, and the real economy GDP suffered a similar fate. 30%! Imagine our GDP falling from $12 trillion to $8 trillion. Since then, the fed has religiously avoided a repeat of history, and you can see that same consensus yet again in the work of Paulson & Bernanke.

Long story short is that there will be liquidity. If not via a bailout, then via the Fed printing money (they've got rates as low as they can). There will not be a repeat of the Great Depression, as long as the banking establishment continues to learn the lessons of those horrible decisions back in 1929-33.

There could well be, though..........a long period of stagnation caused by energy depletion and high inflation caused by prolonged periods of lax money management in an attempt to return to the pre-energy crisis good ol' days.

Anyhoo, long story short..........what Wayne says.........watch out for double digit price rises first, double digit GDP % losses much later (if at all).

I agree with the poster who said 20% down for houses should be required. Along with the other criteria, we should also go back to 20 year mortgages.

Loans for cars should be prohibited as well as most other purchases.

We could hypocredit as well as hypermile and do the economy some good. Every dollar I don't spend in interest is a dollar I can spend on a person who is doing real work. Not pushing paper like I am. (oops.)

Its nice to see so many people of level head on this site concerning the current events.

I saw this coming ten years ago. Now its here. And 700B is not going to fix it. Over all Im glad to see folks with some common sense not panic.

I honestly think the mark to market scheme needs to go. I set with our financial person at work today. I do not have the writing skills to explain it. But its very safe to say it was a much needed tool for wall street to main street to have so we could get in all this trouble. All brought on by the .com bust Enron and a few others. The whole mess drove her out of investment banking and into our office as well as her husband. There really neat folks.

I also think the deal floating around to loan money on good bets needs to be looked at. There are some interest that need help. Be it wall street or main street. Nothing to rush into here. Get mark to market gone and then look at it. This mess needs to be untangled just a hair. Maybe as a country we need to risk a bit. Hell maybe a lot. But we need to have a grasp of the risk. And some will need to be let go,,, no help. That will also hurt.

Ive been guilty of using the system. I haven't put a dollar down on a car purchase since the late 70's or early 80's. Heck I just can't remember the last time I put money down on a car. I always pay them off early. Always writing a second principle check.

I've owned great house's to shack's. And my current house is a shack. I never want the big house ever again.

We as a country need to go back to basic's. Its been mentioned over and over again in this thread. While Im ready to go GDII, loose my job and cash / net worth. I just don't think we need to throw the baby out with the bath water. The stock market came back up some today. It didn't cover by a long shot. But at the end of the week. I bet I'm not hurt bad. I even bought a bit this am as Im sure others did. I'm not a rich man. But what the hell throw a bit on a blue chip. Its a better bet than the lottery, casino or money market. :)

My fear is____ I and the wife have no faith in how our children will handle, if it all goes bad. The story's of there grandparent's. IE the children of the GDI mean nothing to them. It's a blip in American history and carries no weight. While two of the three are grounded very good. The third is a lost cause. The wife and I decided last night. If it goes to hell in a hand sled. The kids and grandkids would be welcomed home with open arms. The shack may be full to the brim. But nobody will go it alone.

It all can be avoided if the idiots in DC pull there heads out. And the whine bags put up and shut up!