Don't Read This If You're Easily Freaked

dont read this if youre easily freaked

The Financial Times has some scary ass shit to share re: the American mortgage meltdown. Scribe Nouriel Roubini reckons there will be another wave of bad news, as the so-called “shadow banking system” unravels. (And that’s no Bolero.) We’re talking broker-dealers, hedge funds, private equity groups, structured investment vehicles and conduits, money market funds and non-bank mortgage lenders. These guys face the final stage of collapse: “a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds can redeem their investments on a quarterly basis; thus a bank-like run on hedge funds is highly possible. Hundreds of smaller, younger funds that have taken excessive risks with high leverage and are poorly managed may collapse. A massive shake-out of the bloated hedge fund industry is likely in the next two years.” And then… “The private equity bubble led to more than $1,000bn of LBOs [Leveraged Buy Outs] that should never have occurred. The run on these LBOs is slowed by the existence of ‘convenant-lite’ clauses, which do not include traditional default triggers, and ‘payment-in-kind toggles’, which allow borrowers to defer cash interest payments and accrue more debt, but these only delay the eventual refinancing crisis and will make uglier the bankruptcy that will follow. Even the largest LBOs, such as GMAC and Chrysler, are now at risk.” Bottom line for the U.S.: recession. Bottom line for GMAC (and thus GM) and Chrysler? C11.

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  • Eyeonthetarget Eyeonthetarget on Sep 23, 2008

    Heaven forfend! The thought of well-heeled speculators who can no longer afford leveraged buy-outs is absolutely mortifying. How long can our economy remain intact if it's not fueled by the ever-present spectre of savvy investors swooping in and picking the meat off the bones of a perenially solvent enterprise? Glad we've dispensed with the old, traditional, out-dated notions that good product, good service, innovation, and reasonable prices are the foundation of a healthy company & pillars of a robust economy! What in the world were we thinking???

  • GEMorris GEMorris on Sep 24, 2008

    "paulson’s plan is socialistic, in the extreme - it privatizes the profits and socializes the costs." Sorry, Paulson's plan is fascist, not socialist. Even the European socialist parties are deriding the bailout plan.

  • TexasAg03 TexasAg03 on Sep 24, 2008
    Why these institutions and loose money lending / laundering, / hedging / etc. practices were allowed in the first place is quite the ‘Merican way . They were not only allowed, but encouraged (if not forced) to make risky loans in the name of diversity and equality. You can thank the "Community Reinvestment Act" passed in 1977. In 1995, that act was strengthened. It's not the entire reason for the problem, but we probably wouldn't be where we are today if not for that act.

  • Philipwitak Philipwitak on Sep 24, 2008

    "Sorry, Paulson's plan is fascist, not socialist. Even the European socialist parties are deriding the bailout plan." GEMorris / September 24th, 2008 at 12:33 pm i do value and strive for accuracy, especially regarding my own statements. and i do honor your effort at correction and/or clarification, however, in Marxist theory, socialism is... "the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles." Unabridged (v 1.1) socialism "was first applied...The word, however, is used with a great variety of meaning...even by economists and learned critics. The general tendency is to regard as socialistic any interference undertaken by society on behalf of the poor... radical social reform which disturbs the present system of private property...The tendency of the present socialism is more and more to ally itself with the most advanced democracy." Encyclopedia Brittanica "...As a rule, fascist governments are dominated by a dictator, who usually possesses a magnetic personality, wears a showy uniform, and rallies his followers by mass parades; appeals to strident nationalism; and promotes suspicion or hatred of both foreigners and 'impure' people within his own nation...Although both communism and fascism are forms of totalitarianism, fascism does not demand state ownership of the means of production...In theory, communism opposes the identification of government with a single charismatic leader...which is the cornerstone of fascism...Today, the term fascist is used loosely to refer to military dictatorships, as well as governments or individuals that profess racism and that act in an arbitrary, high-handed manner." American Heritage New Dictionary of Cultural Literacy, Third Edition