Ron Paul 2008

[SittinOnDubsWGW]

Originally Posted by f3lix

Until then, I happily purchased a couple hundred shares of AIG at the bargain swap meet today since I'm 95% sure the gov't will save their ass and make them a normal company again (jackpot for me.)

Would've been nice to have done this 3 days ago at the sub $3 mark.

[DJ FC]

Originally Posted by Ugly Bastard

Paul's idealogical stance sounds great on paper, but in practice, it would be disasterous if the government didn't intervene here. Paul basically thinks that the government should never intervene in issues relating to the free market. While he's right in suggesting that the government is involved too much, he takes it too far. In this case, two wrongs will make a right; the government will make money by purchasing these undervalued mortgages. Paul is right, government needs to control spending and reduce taxes to keep capital in the open market, but there is something to be said for having them regulate trade (ie: the uptick rule needs to be brought back... it would have limited much of this mess in the first place by not giving hedge funds a green light to crash a sector by shorting it to death).

I completely disagree.

1) The short selling rules are disasterous for the markets. The markets today are much more than the cash markets. More trading actually takes place in derivatives- futres, options, swaps, swaptions, etc. And often times a short sale of stock is a hedge against a derivative position. This shouldn't be disalowed. As much as the media loves to damn derivative instruments just because they don't understand all of them, they provide value for investers, hedgers, and stability to the economy. We need to keep the ability to short sell.

2) The government of the USA is going to run America into the ground on this one. They need to act, because voters want them to act. The dollar was at 1.78/1£ last week. Today it's above 1.85. All the debt issued by the US government will inflate the supply of dollars SO FUCKING MUCH. I expect that it will continue to fall and wouldn't be surprized to see it at 2.10/1£.

3) They say that Sarbanes-Oxley was the greatest thing the US ever did for the city of London. All the extra regulation that will come out of this will make Sarbanes-Oxley look minor. Business will leave the USA. Markets will start to trade in the Euro. The world is fucked and the US government is paying for it, which means the taxpayers are paying for it. I honestly believe this is the beginning of the end of America's end of it's era of dominance.

[Ugly Bastard]

Originally Posted by George W. Bush

We need to keep the ability to short sell.

I was never arguing otherwise. Short selling simply needs to be controlled so that it can't be practiced recklessly. Without the uptick rule, large firms can singlehandedly bankrupt a smaller company just by flooding it with short orders. Uncontrolled power like that isn't helpful for the economy.

Originally Posted by George W. Bush

Markets will start to trade in the Euro. The world is fucked and the US government is paying for it, which means the taxpayers are paying for it. I honestly believe this is the beginning of the end of America's end of it's era of dominance.

I'm calling an overreaction here. The U.S. deficit as a percentage of the GDP is actually lower than it was during the late Bush/early Clinton years. People are overreacting. I'm buying LUB, SKS, VCBI, and CAKE right now. Pessimism bubble/short-squeeze for the win!!

[DJ FC]

The uptick rule doesn't help either.

And UB, I'm not sure how our official "Deficit" counts all the billions of notes that the Treasury prints every day to get us out of this mess... the dollar is becoming a worthless thing and nobody is going to want it anymore.

[Mr. Blonde]

Originally Posted by George W. Bush

I honestly believe this is the beginning of the end of America's end of it's era of dominance.

for the record, i've had to look up like, 16 terms from this thread in the dictionary today. Fuck you guys.

[Ironic Mustache]

for the record, i've had to look up like, 16 terms from this thread in the dictionary today. Fuck you guys.

That's primarily why I chose not to interject until now.

[Ugly Bastard]

Originally Posted by George W. Bush

The uptick rule doesn't help either.

Have you ever shorted a stock before? The uptick rule is effective in preventing firms from being artifically crashed from excess short selling. What makes you think differently?

[DJ FC]

Lots of reasons UB. First of all the uptick rule is a micro solution to a macro problem. The markets can still panic and have a bank run with the uptick rule.

From a hedging perspective is what I mean where it doesn't work. My argument was that short selling is necessary for derivatives markets to function properly. An example:

Someone wants to purchase put options on a stock. They go to market makers to buy these options. Against being short puts, the market makers need to sell shares. If there was just an uptick, the first market maker to the market gets to sell, but the rest are hosed. And if it was a downtick, none of the market makers get to sell shares and they are all hosed. In any case, the incentives to provide liquidity in the options markets has just diminished because market makers risk "missing their hedge." The rule can never go in their favor, it can only go agains them. So if they can only be hurt by this activity, they will require more premium or edge to do a trade - and this is what we all know very well as market inefficiency. The equity derivatives market drys up. Loads of people use the equity derivatives market "legitimately" as a hedge and not for pure speculation. So what have you done, you've taken away people's ability to hedge in an efficient marketplace - you have made the markets as a whole less efficient. This has a contagion effect to all other markets: when one market is less efficient, other related markets become less efficient (market makers require more edge or premium to do a trade) and the inefficiency ripples out into the broader economy.

Punish those who illegally use short selling. Don't punish the market.

[Ugly Bastard]

I don't know enough about options trading to be able to apply how the uptick rule effects it, but I'll take your word on it that it leads to market inefficiencies.

Back to f3lix: if Ron Paul got his way on this bailout issue, it'd almost certainly guarantee Great Depression V2.0 for this country.

[SittinOnDubsWGW]

UB and GWB, where would you guys recommend starting to learn more about the stock market? I have a slight understanding, but I feel retarded reading this thread, and am starting to get to the point of where I want to play around a little bit more than what is going into my TSP(Govt. equivalent of 401K).


Regarding the bailout, IIRC I read recently that the huge bailout of the 1930's didn't really have that much impact on helping the government earn more money for the economy.

Also, what does this do for the housing market? Harder to get credit? Cheaper housing costs? Good/Bad time to purchase?

[f3lix]

UB, you're a fool if you believe this move is better for our country's future. This temporary solution is going to damn us all. I have a better idea... END THE FED!

[Ugly Bastard]

Let's see... guaranteed recession/depression or at worst, little more national debt, but possibly an actual surplus for investing in horribly underpriced mortgages.

Yea... I'm the fool.

Pull your head out of your ass, Dave. There's a reason no one voted for Ron Paul during the primaries. He's an idiot.

Too bad we can't send you back to the 1930s. That's the only way to teach an idiot like you a lesson.

[Mr. Blonde]

*gets mental image of f3lix throwing himself off the top of a 1930's new york skyscraper clutching his worthless AIG stocks*

[Ugly Bastard]

How'd AIG do today, Dave?

[Ugly Bastard]

Rather than take an idealist stance on this, Dave, let's just look at what's happening: financial institutions have no cash because no one will buy their mortgage backed securities. In fact, no one can buy them because no one has that much capital... except the government. They have an amazing opportunity to buy something that is way undervalued. This is good for everyone! With Ron Paul's thoughtless position, unemployment will jump to 20-30% and the wealth of America will crater. We'll be a second-rate nation all because some idiots stood blindly against allowing the government to help the people. People sure as shit won't be needing any band directors, I can tell you that.

Your position on this is irresponsible.

[Mr. Blonde]

BAHAHAHAHAHAHA

[THEINCREDIBLEdork]

Im just a little schoolboy and i don't understand how the world works so sorry for dumb question: How much debt can we take on before we are bankrupt.\? and what happens when we are bankrupt? is it possible to become bankrupt? What would it take?

[DJ FC]

Originally Posted by THEINCREDIBLEdork

Im just a little schoolboy and i don't understand how the world works so sorry for dumb question: How much debt can we take on before we are bankrupt.? and what happens when we are bankrupt? is it possible to become bankrupt? What would it take?

One school of thought, which I am more inclined to believe is that the US govt. won't and can't go bankrupt because the US govt. has it's debt in dollars and has every right to print dollars as it sees fit. This is essentially what is happening now. Everytime the FED lowers interest rates, or the treasury announces a new lending facility, or the treasury issues new treasury notes or bills, all they are doing is introducing new US dollars into the system. They can keep doing this and solve all their problems. The downside? Anyone who has US dollars gets fucked by the "inflation tax." That unseen but very real tax on holders of US debt and owners of US dollars. Inflation, once this immediate crunch is finished, should be through the roof, and the dollar should tank. I say should because anything is possible.

The other school of thought is that yes sovereign nations can default on their debt and just say "no way Jose." Like Russia did in the 90s. You say "fuck you I'm not paying, but I don't want to devalue my currency so suck my dick." The problem with this is it makes borrowing impossible forever. Nobody will lend to you if you've defaulted in the past. Right now the US govt is able to borrow short term for damn near 0% because people need these short term securities for liquidity and accounting reasons so bad, so why would the govt waste such a good opportunity. Nevertheless, there are things called Credit Default Swaps, which track an entity's ability to pay it's debt and the likelyhood that it will default, and there are CDSs on the US govt debt. And these CDSs do imply a small likelyhood that the US govt could default on it's debt. I forget what they are trading at now, but I want to say somewhere in the ballpark of .1%/year.

[Mr. Blonde]

aren't we like, 3 trillion in debt as a nation or some crazy shit? Is china the main lender? And whats going to happen if they all of a sudden decide to collect?


edit: I heard that other nations cancel out debts for, essentially, "favors". In the political sense i mean. That makes a lot of sense, like GWB is saying above.

[DJ FC]

Originally Posted by Mr. Blonde

aren't we like, 3 trillion in debt as a nation or some crazy shit? Is china the main lender? And whats going to happen if they all of a sudden decide to collect?


edit: I heard that other nations cancel out debts for, essentially, "favors". In the political sense i mean. That makes a lot of sense, like GWB is saying above.

They can't all of the sudden decide to collect. They own treasury bonds, they receive periodic coupon payments.

[Repugnant Abomination]

Originally Posted by Ugly Bastard

I don't know enough about options trading to be able to apply how the uptick rule effects it, but I'll take your word on it that it leads to market inefficiencies.

Back to f3lix: if Ron Paul got his way on this bailout issue, it'd almost certainly guarantee Great Depression V2.0 for this country.

Doesn't McCain oppose the bailout too though?

[Ugly Bastard]

McCain, like Obama and Ron Paul and a host of others, have been idiots about this whole matter. I've lost respect for him. Note that I've never truly respected McCain as a politician. You've just seen my level of respect for him shaded against Obama... which is a ton.

[Ugly Bastard]

Blonde and Co.,

The US Government isn't unlike any other business in that it's possible to carry debt and still be a sound business. Most people are used to viewing debt through the lens of their personal finances (ie: credit card debt, student loans, etc = all dreadful).

In business, debt can be a good thing. The US government gets their debt on the cheap, too. When people (or China) buys bonds, the government really isn't giving them a very good interest rate. In other words, there are plenty of better investments to make than loaning the government money via bonds. However, since people buy bonds, the government is getting into debt without it costing too much.

Put it this way, if you knew of something to invest in that you expected to have a 15-20% return, and someone was willing to loan you money at 3%... it would make sense to do it, right? So while, yes, you're "going into debt", you expect it to be a net positive in the long run.

I'm not saying the government gets that good of return on their ventures. Certainly, in the case of the Iraq war, they received a horribly negative return. But take this housing bailout... they could make a lot of money off of holding on to these undervalued mortgages and waiting for the market to regain its sanity.

I guess the moral of the story is: don't let the word "debt" be a red flag in you mind that is synonymous with "bad". Without debt (which is what Ron Paul wants the world to operate like under the gold standard), we'd basically just be back to having to barter our way through life. The world would be much less efficient and far less of an enjoyable place to live.

[Ugly Bastard]

And f3lix, I'm sorry for calling you an idiot. Your post tilted me because I know you're capable of having a more intelligent opinion on this matter than just copy-pasting Ron Paul's stance.

[f3lix]

In no way to I believe this country is "guaranteed" to go into a recession. The media and gov't blew this WAY out of proportion in order to get something passed. There is no way in hell our country and economy could just die in 2 weeks like it has been presented. People were pulling out of the market because it was the right thing to do. Why companies must be saved for over-extending themselves is repulsive in my eyes. I know we aren't in the 1930's but I still believe in Ron Paulitics and be damned sure that every problem we've had in the last 20 years was caused by something he warned about. Maybe just listen to him... one time?