Strategy's Business Thread

[Balloon guy 158]

In the revolution, the bankers will be against the wall.

[LongLiveYorke 38]

In the revolution, the bankers will be against the wall.

With their opinion which is of no consequence at all.

[El Guapo 8]

yeah but I mean there's NO WAY housing prices are ever going to get lower again I mean it's a sure bet amirite?

In the short term it could drop a bit more. Banks won't allow it to go down much further because they will just keep holding back the inventory. We just won't see 20-40% returns year over year in Real Estate.Right now in most places you can buy a house cheaper than it is to build, and in some places significantly cheaper.Also, many homes cash flow for rental purposes without down payments, which is usually a signifier of a bottom.

[mrdannyg 274]

I know I am setting myself up here but I have a few minutes to spare and am at least...interested.My degrees are in Psychology, Culinary Arts, and Paralegal. None of which needed anything close to a finance class or even economics. So bear with me.While I agree that the lending practices helped create this mess, do they not need to lend money to stimulate the economy. Obviously don't go giving money out willy nilly to any dead beat with a 500 credit score, but they were I thought given money so that they could start lending money out to low risk people. Seems to me the problem was giving loans out to the wrong type of people.

there's some humor in the discussion of banks not lending enough. they got tons of public scorn over their self-destructive lending pre-meltdown and now we're screaming at them to loosen their standards again in the hopes that it will jump-start the economy. to me, that attitude would suggest that we didn't learn from the experience.

Banks are profiteers, like everyone else. They took the government's money and will only increase lending as much as it is profitable for them to do so. The only real way to increase lending is to remove regulation like capital requirements, which will increase the bank's profits, and people will scream about the billions they make and 8-digit salaries.I'd say the system is broken, but that's an oversimplication, since it is not likely it could be significantly improved except maybe in the very long-run.p.s. Culinary Arts? Awesome. If I'm ever rich, I want a ginger chef. You and your 9 cats (and wife, I guess) are invited.

[El Guapo 8]

Banks have no real reason to lend right now. Mortgage rates are high 3's to low 4's. Borrowing for the banks is virtually at zero, or barely over. They can buy 10yr treasuries at 2.5% and 30yr at 3.5%. Why take a mortgage risk when you can have risk free money for just slightly less.The average risk adjusted spread is 2% off the lending rate, for high quality loans. At 4.5% mortgage rate, that puts you at treasury levels. Banks can borrow money from us for free and buy treasuries and make as much or more than they do on lending. And, they aren't worried about the US governement not paying them back.

[Balloon guy 158]

Banks have no real reason to lend right now. Mortgage rates are high 3's to low 4's. Borrowing for the banks is virtually at zero, or barely over. They can buy 10yr treasuries at 2.5% and 30yr at 3.5%. Why take a mortgage risk when you can have risk free money for just slightly less.The average risk adjusted spread is 2% off the lending rate, for high quality loans. At 4.5% mortgage rate, that puts you at treasury levels. Banks can borrow money from us for free and buy treasuries and make as much or more than they do on lending. And, they aren't worried about the US governement not paying them back.

So the question is: How can I get some of that zero percent money if I promise to buy treasuries with it?Like a lot of treasuries.I'll be voting democrats for all offices so the spending goes crazy and I will borrow more zero money to buy more treasuries.I will promise to be Uncle Sam's best customer.

[Tiltinagain 973]

This is incorrect. It clearly had a positive effect in the short term. Whether it was worth it in the long term based on what it added to the defect is a different question.This too is incorrect. Businesses aren't investing in growth because they don't have enough income to grow. They don't have enough income because people aren't spending as much money as they once were. They aren't spending as much money because trillions of dollars of wealth were lost almost overnight when the housing market collapsed.If businesses really were itching to hire a lot of new people but were afraid of potential government overhead costs (such as taxes and healthcare), then one would expect that the hours worked by the people currently employed by those businesses would increase. Businesses would choose to work current employees more than hire new ones. But this isn't the case. Even though many jobs were lost, the hours worked by people on average is lower than before the housing crisis and isn't rising at a rate consistent with the reluctant-to-hire theory. This indicates instead that businesses simply don't have the revenue to hire new people, not that they're afraid. The jobs that were lost simply don't exist anymore.

This is incorrect.Please provide details to back your claim that the stimulus plan had any positive affect, much less "clearly" having a positive affect.http://www.heritage.org/research/reports/2...ing-the-critics

[brvheart 1,752]

In the short term it could drop a bit more. Banks won't allow it to go down much further because they will just keep holding back the inventory. We just won't see 20-40% returns year over year in Real Estate.Right now in most places you can buy a house cheaper than it is to build, and in some places significantly cheaper.Also, many homes cash flow for rental purposes without down payments, which is usually a signifier of a bottom.

3.0% flat is the new low that I've heard. It was a 20 year fixed.

[ShakeZuma 585]

3.0% flat is the new low that I've heard. It was a 20 year fixed.

that with 20% down or what?

[brvheart 1,752]

that with 20% down or what?

I'm not sure about that, but if I had to guess I would say it was a re-fi 80% LTV, so... yes.

[ShakeZuma 585]

I'm not sure about that, but if I had to guess I would say it was a re-fi 80% LTV, so... yes.

oh ok. you got 40k I can have?

[leftygolfer 7]

I saw Sheila Bair speak at KU sometime in 2007. It was mostly "herp derp subprime?" questions from the audience in the Q&A.

worked as a bank teller for a brief period

We never do.

Amen

While I agree that the lending practices helped create this mess, do they not need to lend money to stimulate the economy. Obviously don't go giving money out willy nilly to any dead beat with a 500 credit score, but they were I thought given money so that they could start lending money out to low risk people. Seems to me the problem was giving loans out to the wrong type of people.

It was because they were willing to make such boneheaded loans, package them and keep doing it till the market was flooded with crap, and then after making all the money on commissions, now the economy needs some infusion and they are tight as a drum, refusing to take the smallest risk without 4 different ways to be re-paid.

Little of both

So the question is: How can I get some of that zero percent money if I promise to buy treasuries with it?I will promise to be Uncle Sam's best customer.

Start/buy a bank.

[Balloon guy 158]

Start/buy a bank.

Minimum requirements?and can I use some of that zero rate money to meet these requirements?I will treat you very well as the CFO of my bank if you help me.I'm talking country club memberships across the country, forced meetings at exotic locals, complete dental, 2 hours work week, but not really rigid with which 2 hours....

[ShakeZuma 585]

hey strat! get in here!

[Balloon guy 158]

hey strat! get in here!

Not sure I am hiring anymore, I got a CFO, and a CEO...but we are accepting resumes.

[strategy 4]

worked as a bank teller for a brief period

I don't know if I mentioned this, but I was unable to get a job as a teller--multiple ones, actually--because I have a degree. I SEE WHAT YOU ARE DOING HERE AND I ASSURE YOU I WANTED TO DO IT.

hey strat! get in here!

wait, why?

[SBriand 4]

I don't know if I mentioned this, but I was unable to get a job as a teller--multiple ones, actually--because I have a degree. I SEE WHAT YOU ARE DOING HERE AND I ASSURE YOU I WANTED TO DO IT.wait, why?

To work for BG's new bank obv.

[strategy 4]

the new 32GB iPod touch is maybe the most bang:buck you could get for $300 today if you're in the mp3 player/pda market and don't want a smartphone.

[SBriand 4]

the new 32GB iPod touch is maybe the most bang:buck you could get for $300 today if you're in the mp3 player/pda market and don't want a smartphone.

I love my touch but wish it had a camera and now they do. Bah!

[strategy 4]

I love my touch but wish it had a camera and now they do. Bah!

I feel I am too close to buying an iphone at this point.

[leftygolfer 7]

I'm talking country club memberships across the country, forced meetings at exotic locals, complete dental, 2 hours work week, but not really rigid with which 2 hours....

I already have that. How about a box of your finest cigars a month?

hey strat! get in here!

Shouldn't you be evacuating?

I don't know if I mentioned this, but I was unable to get a job as a teller--multiple ones, actually--because I have a degree. I SEE WHAT YOU ARE DOING HERE AND I ASSURE YOU I WANTED TO DO IT.

To work for BG's new bank obv.

I can see it now. Open an account and get a cigar...

[strategy 4]

I don't understand why the dog is watching so intently.

[Balloon guy 158]

I already have that. How about a box of your finest cigars a month?I can see it now. Open an account and get a cigar...

Open an account? we are going to have only one customer: The US Treasury department, paying us 2.5% on a Trillion dollars every month.Maybe we will hire Strat, just to have someone around to answer the phone and make tee times.Kidding, we will be buying a golf course, our tee times are Monday- Sunday

[Balloon guy 158]

I don't understand why the dog is watching so intently.

Like you don't watch when they take a dump...

[strategy 4]

well, this thread went south in a hurry.