An e-mail to my representative inre the bailout bill

[szh]

I just sent this e-mail to my congressperson, Zoe Lofgren, even though I doubt that she will listen ... misguided as she is, IMHO!

Dear Ms. Lofgren.

I am STRONGLY and fundamentally OPPOSED to the $700 billion Bailout bill that attempted to pass on Monday. As an individual who has taken great care to manage my personal finances and my mortgage (to the point where I now have significant equity in my home), I REJECT the idea that my tax dollars should be used to bail-out (a) individuals who got in over their heads with unwise financial decisions and (b) unethical corporations and financiers who led these individuals astray.

I am also opposed to deficit spending. In real life, when a company gets in over their head, they cannot spend what they do not have. The US government needs to do the same, else we will hand over a crushing debt to future generations. My ten year old son, who will grow up to inherit that legacy, does NOT deserve this.

As my representative, I STRONGLY require you to reconsider your YES vote on Monday and, if the occasion arises again in the coming weeks, to vote NO on any (similar or revamped) bailout bill. It is an unacceptable use of tax dollars. Wall Street will survive without this unwarranted and unwise plan. It is throwing good money after bad, and the plan will not end at $700 billion ... the tab will simply grow higher if not checked at this point.

If the government feels that $700 billion needs to be used to help people, then feel free to start and pass a bill that returns my portion of those funds directly to me and my wife to make the financial decisions that WE deem appropriate.

Thank you for listening!

I urge all of you to write to your representatives and state senators too ...

Z

[Jesda]

You mind if I copy/paste that letter?

[szh]

You mind if I copy/paste that letter?

Please feel free to use it in any way!

Z

[szh]

I decided to send it (slight variant, since she is not my representative) to Pelosi as well ... I think I am going to send it to CA senators and others too.

Z

[HashiriyaS14]

Have fun with your 401k and other investment values if there's no bailout.

A 700 point drop was the market's reaction to the chance of a bailout being *slightly* lessened, NOT the response to there being NO BAILOUT. The response to NO bailout would be literally in the thousands of points and would destroy far more in $700 billion of US Shareholder value, not to mention the real estate impact.

It doesn't matter if you showed personal fiscal discipline, you ARE tied, financially speaking, to the fates of those that did not. You DO have to pay for their shortcomings, and you WILL, one way or another. You will either pay via the bailout or via the massive drop in asset values that would follow a complete failure to act.

There's no such thing as "isolationist finance", it doesn't work that way, not unless you just sit on tons of gold all the time.

I would write my rep (Van Hollen), but he's already doing the right thing and next time I see him in person at a party event or fundraiser, I'll tell him so.

[Encryptshun]

I'm proud of the reps from my state. My district rep, a Republican, voted "No" and almost 1/2 of the Dem reps also voted no. this may be the one time in my entire life when I agree with Jesse Jackson, Jr.

[szh]

Hash, I have watched the economy and the stock market carefully over the last few months and made it a point of converting my funds and my investments assets to cash in a timely manner ... including predicting this Monday stock drop and not being affected by it now! The only thing I left in stock was my son's educational fund, since that has another 8 years to go before it matters, and the gains till then (I am about to put more cash into it right now as a matter of fact) will be fine.

It was not tough to predict the future and it is not tough right now either.

On Monday, I almost made a real killing on the stock market, but ran out of time. I was fairly confident that the bail would fail and was planning to sell many stocks short in the morning (should have done it Friday!), almost knowing that I would be able to cover those sales with purchases near the end of the day.

But, I let myself be talked out of doing this, unfortunately, plus the three hour time difference got me started too late on Monday morning. Yeah, I would have made many millions of dollars by the end of the day Monday ... and could have retired today. Oh, well.

So, once again, I remain opposed to the bailout bill. It is still an unwarranted use of my tax dollars. I am doing a better job of managing my finances that the so-called financiers and advisors on Wall Street, and still resent my tax dollars being used for the wrong reasons.

Z

[HashiriyaS14]

Hash, I have watched the economy and the stock market carefully over the last few months and made it a point of converting my funds and my investments assets to cash in a timely manner ...

And what, pray tell, was the capital gains hit you took on converting so many investments to cash when you otherwise wouldn't have been doing so? (obviously not applicable to certain types of retirement accounts)

What is the opportunity cost you are being hit with by having all that wealth tied up in cash instead of in the market earning returns?

What impact do you think a massive drop in equities would have on the real value of those dollars that you now hold?

The bottom line is that, one way or another, a market collapse is going to affect you. Sure, you might get lucky here and there, but there's NO WAY that it just isn't going to affect you at all. Furthermore, let's say that you had $50 million in gold sitting around and you really ARE immune, just hypothetically. Why, then, are so many people who are quite obviously NOT immune still advocating against the bailout? It's because they don't understand the situation. You may be *largely* insulated, but there's no way that the 50+% of the population railing against the bailout is in the same situation. They just don't get it, they don't understand what the private alternative to a bailout would entail.

The bottom line is that the market is in the crapper and SOMETHING has to happen. That "something" can either be a 3,500 point self-correction or a $700 billion bailout package. In the end, the bailout will, in effect, cost the people of the United States less than the self-correction would. It is, in effect, a good deal for nearly all of us (except, perhaps, the guy sitting on all that gold).

[szh]

And what, pray tell, was the capital gains hit you took on converting so many investments to cash when you otherwise wouldn't have been doing so? (obviously not applicable to certain types of retirement accounts)

Believe me, I have thought this through.

1. The capital gains tax would have happened one way or another - just delayed a bit if I waited for more years.

2. If Obama makes it into the Presidency and we have a Democrat controlled Senate and Congress, I believe that the upper capitals gains bracket will be increased significantly - the old "Tax the Rich mentality" that Democrats have. I'd rather take the lower rate hit now.

3. If I were to jump back in the market today, I would make an estimated 25% to 30% effectively (because the stock market is lower by that much). That effectively paid for all the taxes (and more since the tax is only on the gains) anyway! No cash loss for me.

What is the opportunity cost you are being hit with by having all that wealth tied up in cash instead of in the market earning returns?

No opportunity cost. Remember that the market is tanking right now and will continue to do so for a while ... I am doing way better by collecting the nominal interest at ingDirect! I'll get back in when it starts on its way back up and do just fine too.

What impact do you think a massive drop in equities would have on the real value of those dollars that you now hold?

Too disconnected to have any real impact. The equity drop is good ... when I think it has bottomed, then I will get back in at much better prices and the gains from that point on will be high enough to be meaningful.

The bottom line is that the market is in the crapper and SOMETHING has to happen. That "something" can either be a 3,500 point self-correction or a $700 billion bailout package. In the end, the bailout will, in effect, cost the people of the United States less than the self-correction would. It is, in effect, a good deal for nearly all of us (except, perhaps, the guy sitting on all that gold).

My problem is that I DO NOT believe that the 700 billion dollars will prove to be enough. It could end up being a proverbial ice-berg and the Democrats will continue to throw more good money at it.

And, yes, I'd much rather capitalize on the 3500 point correction (and it may be more than that in the next few days) since that is a better way to do the fix. Take the hit and live with it, not drag it out in a slow death.

Z

[96Qowner]

I remember the crash of 1987, when the Dow dropped 22% one day. That's the equivalent of 2400 points from from the open of 11000 Monday.

Wiki:

http://en.wikipedia.org/wiki/Black_Monday_(1987)

The world did not come to an end. The Dow is up 333 today,as of 1:47 EDT. Big deal.

The problem is the valuation of real estate. Since there is far more real estate for sale that anyone could possibly buy, there is no true valuation, right now. Since so many people were granted loans based on inflated valuations, those loans are upside down, and since people were granted loans they couldn't pay back without flipping the properties, the payments cannot be made. Valuations must be reset. The real estate was never worth what people paid for it. Nobody has lost any money - it was never there in the first place. Banks who made the loans, and banks who bought the packages of loans made very bad decisions. That's what causes businesses to fail. They should fail. Other businesses will replace them. The government should not be artificially inflating the value of real estate. That's the principle. People have been calling their Congressmen 98:1 against the bailout because no one has yet been able to explain why those businesses should not fail. No one has been able to claim that the $700 Billion they plan to charge our future generations will be put to good use. People don't like the idea that it's perfectly alright for those men and women who ran these companies into the ground to take 10s of millions of dollars with them when the company fails.

I want to know exactly whats wrong with letting real estate values be reset to a fair market price. There will be pain, yes, but an immediate "investment" of $8000 for each family of four is rather painful in itself, and since government RARELY EVER "invests" our money wisely, it just looks like a stupendously BAD idea.

[Encryptshun]

One of the exciting repercussions of this is that, during the bubble, a great many corporations shifted their strategy from income to growth. Investment strategies followed suit.

What we'll see now is that the conservative corps will have the cash reserves to slog through the recession, they won't have to rely so much on commercial paper, and they will shift back to being an income-based performer. If that happens, we'll see a return in long-term investing, a departure away from day-trading, and a rise in corporate re-vestiture and stock splits. Hopefully, that will act as a keel to the economy and provide some mitigation to intra-day volatility.

[marlin29311]

it is in depressing times that we need some comic relief....

check this out : http://www.techcrunch.com/2008...dness/

for those not interested in clicking - think final four...

[Encryptshun]

That is...awesome.

[szh]

That is...awesome.

Indeed!!!

Z

[szh]

I just received an e-mail response from the office of my representative. FWIW, I still disagree with her response.

Plus, it was a "form letter" which pretty much implies she did not really take the time to read my e-mail ... see the "Email.beginhide.merge" field below in the text? The "signature" was wrong too ... what does "f" mean?

Sigh ... I am not being represented the way I want. I have never been happy with her.

Z

Dear Mr. Hosain:

Thank you for contacting me about the current financial situation and legislative efforts to address it. I appreciate that you took the time to share your thoughts with me.

Over the past few weeks, I have received more than a thousand letters, emails and phone calls from constituents about the state of our economy and Congress' response to it. Although this high volume of correspondence precludes me from replying individually to each person I heard from, I did carefully read each and every email, letter and phone message comment. These letters and calls varied; many people supported an economic recovery package, while just as many opposed one. Most people were angry at the situation we find ourselves confronting. I feel the same way.

More than a few constituents suggested that this effort was pushed for by lobbyists. I want everyone to know that no lobbyist spoke with me about this bill. Further, Speaker Nancy Pelosi and the Democratic leadership recognized that this was to be a vote of conscience and that Members of Congress needed to vote as they saw fit. Nobody in House Leadership tried to pressure me to vote one way or another.

Ultimately, I voted for the Emergency Economic Stabilization Act (H.R. 1424) because I thought it was in the best interest of our country. At the core, the legislation is a beginning effort to unfreeze the credit markets. In the current economic environment, financial institutions are unwilling to loan money, even for traditionally safe investments. This credit crunch has the ability to affect everyone - employers are unable to get loans to pay their employees, students are unable to get student loans to pay for college, and consumers are unable to get credit to purchase goods and services. The Federal Reserve has announced a plan to purchase short-term debt of companies in order for them to fund their day-to-day operations, such as payroll and inventory, which will further help ease this credit problem. For California, the credit freeze means that the state may be unable to secure financing to meet its short-term cash flow needs, which is used to pay for critical services, including such things as salaries for teachers and law enforcement and payments to nursing homes. If you would like to see my statement on the House floor regarding the credit crunch and California, please visit:

http://www.house.gov/apps/list....html.

Although not a perfect piece of legislation, this bill was a vast improvement over the proposal submitted to Congress by Treasury Secretary Henry Paulson. In addition to allowing the Treasury to buy troubled assets with a goal to free up liquidity in the credit markets, the legislation adds much needed oversight to the asset purchasing program and seeks to further confidence in bank deposits by increasing the federal deposit insurance from $100,000 to $250,000. Troubled assets may be purchased for warrants or equity in a company to better protect the investment made by government. Direct capitalization of banks is also permitted. Further, the Emergency Economic Stabilization Act limits executive compensation and golden parachutes for companies that have assets purchased by the Treasury. The legislation was passed by the House by a bipartisan vote of 263-171 and was signed into law by the President on October 3rd.

I would also like to note that this legislation is not the end of the debate on the global financial crisis. It is clear that the industry needs to be reformed. Over the next few weeks, several House committees will hold hearings on our current economic situation. The hearings will include examining comprehensive regulatory restructuring and investigating the role of hedge funds, credit rating agencies, and federal regulators in the financial markets. Further, strong efforts to stabilize the housing market must be undertaken if we are to achieve stability in financial markets overall. Please know that I have been actively engaged in the Congressional debate and will continue to do so as it unfolds.

Again, thanks for being in touch. Please contact me again in the future whenever you feel I should know what's on your mind or if I may be of assistance to you or your family. Email.beginhide.merge

Sincerely,

f

Zoe Lofgren

[telcoman]

Believe me, I have thought this through. Z

I think you made have made a bad mistake?

Buy low

Sell high

Take a look at a graph of the Dow average from 1900 to the present

Where do you think the market will be in ten years?

Probably a lot higher than it is today?

http://www.nytimes.com/2008/10...print

Telcoman
Modified by telcoman at 6:16 AM 10/17/2008

[szh]

I think you made have made a bad mistake?

Buy low

Sell high

Ummm ... did you not read or understand my posts? Or did you not bother to do so before posting? That is exactly what I am doing.

I sold high - before the recent crashes that I felt were going to happen - and am waiting to get it low enough to buy back in. Will do that sometime when it makes sense ...

Separately, do you understand what the phrase "sell short when the market is likely to go down" means? That is the "sell high, buy low afterwards" approach.

I did not do that on various days last few weeks ... when I should have trusted my instincts. I would have cleaned up totally!

Z

[themadscientist]

I am thinking of investing in 240SX futures and JDM derivatives.

[ishkabibble]

Z, what do you think will signal a market bottom?

I'm looking for an overall market P/E of < 8 or some indictments being handed out to financial industry execs.

[szh]

The bottom is not in sight yet, unfortunately, except for some very select situations (few and far between, of course). Unless, you can take the stomach-churning roller-coaster of playing stock-market puts and calls, I would avoid getting into the market just yet. My instinct was right about the market a number of times over the past few weeks, but even I chickened out of actually doing short sells when I wanted to.

The fact is that we are in for a prolonged economic downturn, because everybody is still scared to provide credit. That means that the cost of capital is high for all businesses ... and this is a positive feedback problem. The rapid media attention (using typical scare tactics that they do not realize have such major consequence - journalists are not economists) and the wide-spread attention causes people to pull back even when they do not need to. Then, the ripple effect through the economy has enormous consequences at each and every level!

Plus, some of the acquisitions that are occurring will also have a serious impact on this economic outlook. The reason GM is buying Chrysler and the reason that BofA is buying Merrill is simple: they want to improve profitability by reducing cost overlaps after the purchases are done. The result is an simple "addition of revenues" (more or less) and then a reduction of expenses - of the combined entity post acquisition.

Cutting costs, in most cases, usually mean cutting labor costs. Unions in the auto world not-withstanding. This means that unemployment in this country (and the world) is going to soar pretty damn high over the next few quarters. Don't be thinking of changing jobs right now, folks! Minimize your personal exposure.

As a partial result of unemployment being high (or even the threat of it), means that consumer retailers in this country are going to hurt this next 6 to 8 weeks - which is traditionally their best time of the year to sell. Because people are scared about their jobs, their savings, etc. This means that their retail inventory (which they have already acquired - remember!) will sit there like a ton of bricks through the first quarter of next year at least. Means they will not buy more products during this time - so the product manufacturers will hurt next year!

Ripple effects ...

Even production-oriented China will not be immune ...

Etc., etc., etc.

One cause for all this in the US? Not the Bush Administration actually - they are just the recipients of an effort started earlier (not surprisingly, economic policy changes are slow and take time to happen). Albeit, the last three to six weeks of turmoil belie my words a tiny bit - but this is more due to panic than not.

One of the underlying causes of the problem stems from the Socialist economic policies of the 8 years of the Clinton Admin and Congress during those times (as well as the Congress efforts in the early years of the Bush Admin), where the "low-cost housing for all" social engineering effort resulted in lending practices that were uncontrolled by the Bush Admin (due to their "let the free-market decide" policies).

Basically, a misguided effort by the Clinton Admin and Congress, that became unmonitored as a result of the policies of the Bush Admin, has rippled enormously through other economic sectors. Politicians should damn well learn not to dabble in economics!

That, in a nutshell, is it.

Anyway, this has caused about 10 to 12% of the mortgages in this country to be in default, or close to it if more people lose their jobs. The people already affected by this, or likely to be affected soon, are cutting and going to cut their spending (due to house loss, job loss, etc.) and this has the resulting effect on the economy, that we are seeing right now.

Is it all doom and gloom? No, but the effects are going to be far-reaching. Way beyond what you might expect.

Z, what do you think will signal a market bottom?

The signs for a turn-around will be mixed and confusing. MY OPINION: It will take a few large financial entities (around the world) offering credit for businesses again. The money for credit is definitely still there (look at the size of the inter-bank lending reserve as an example) - it is just a question of getting the lenders to go ahead, take the risk and make the credit available again.

And, the people who still have the money are going to want to see that happen after a few quarters (at least). Otherwise, inflation reduces their value by more than the risk factor (bad debts, etc.) of lending the money.

Note, of course, that the world governments are now printing more cash and currency to bail out bad situations. This will create an inflationary problem in the macro-scale within a year or two! Too quick and heavy-handed a reaction.

In the meantime, while I am not anybody's personal financial advisor, I would strongly recommend that people get and keep their personal financial situation as squeaky clean as possible. Don't spend on what you don't have to.

Right now, I have absolutely no credit card debt, no car payments, etc. ... quite literally, the only regular monthly payment I have to make is my monthly mortgage payment. That is the way I plan to keep it for the next few years!

Z

[szh]

By the way, in case I have not been clear, I was opposed to the $700 billion bail-out. Not because I was opposed to the idea that Government intervention is not needed here in some form or fashion.

But because, the bail-out was being proposed to be given to the wrong people (and overseen by the wrong people ... Barney Frank? Give me a break! He was one of the causes of the underlying low-cost mortgage, social-engineering effort, problem!).

More recently, Paulson's comments about where those $700 billion should be put - to affect the credit markets - leads me to be more hopeful that the effect will be felt. As always, it will take time. Needless to say, the next Admin will get the damn credit for it - if it works.

My personal fear is just that the price tag will be a LOT higher. I think it will be in the 3 to 4 trillion dollar range, and that will lead to an inflation the likes of which we have not seen in most of our lifetimes - certainly for the NICO young'uns that are here .

Z

[Jacko3]

A foreclosure bail out bil that fails to address the concerns of those who are actually paying their mortgage bill, may create more problems than it is going to solve.

[audtatious]

Yep. It stimulates a lack of confidence in the system as it punishes those who did the right thing and continue to do so.

[Jacko3]

Actually, it creates what we call, a Moral Hazard---a situation where bad behavior is rewarded. Those paying their mortgages should have been re-warded with much larger tax rebates in their 2008 or 2009 tax file. Simply leaving them without any incentive to maintain their good behavior, I am afraid, will conditon them to some sort of bad behavior, albiet the small size or effect of such a behavior.