January 20, 2008

Jim Cramer calls for the nationalization of the toxic insurers, or else the banks will fail and the Dow will crash. Buckle up, away we go...

Yup, it's really hitting the fan now.

Here's the video

We're just getting started HP'ers. The real fight will be on soon - HP vs. the government and hedge fund managers like Cramer.

Will the taxpayers be called on to bail out the banks for their corruption and terrible decisions? Will trillions (yes, trillions, not $250 billion as Cramer says) of your kids' money be used to avoid the downfall of Merrill, Citi, JP Morgan, Fannie and Countrywide (moral hazard anyone? dollar destruction anyone?)

Or will Mr. Market do its thing, wiping out the idiot insurers and the banks, and then everyone grabs a shovel and digs out of the rubble?

You won't believe what you're about to see HP'ers. If you can, I recommend taking the rest of 2008 off, get your assets into the safest non-dollar investments you can find, stock up on popcorn, and wait out this financial typhoon.

Feds Need to Buy Mortgage Insurers

U.S. banks are taking a beating in the market because of the billions of dollars in subprime mortgages they have on their books. And with the insurers who backed the loans in danger of going belly up, there doesn’t seem to be a bottom for these stocks. If that ever happened, Cramer said, the entire system would collapse dominoes style.

It’s his ultimate doomsday scenario, and he fully believes it could happen if the government doesn’t act quickly.


Anonymous said...

F*@k Jim Cramer, line him up with the rest of the best and brightest in our financial markets and exterminate with extreme prejudice.

Or maybe do the lawyers first and the rest will fall in line.

alanj878 said...

yup crammer is off his rocker . I have article of what i think recession of what i think of recessions
Lively Money Recession Secret Riches

Mark in San Diego said...

For a change, I think the feds should do this instead of the stupid $500 rebate Walmart check. . .it really won't make much of a difference on housing prices, but it would keep the world financial system working. . .we do ned our real ATM's working, don't we?

Anonymous said...

Hell yes, give them money. No wait, scratch that, let them fail. Arg! I'm so conflicted. I know, give them all big bonuses and send me the bill. That's the ticket.

sandman said...

Cramer's plan may save the banks, but will not stop a recession.

Play out the scenario. Let's just say Cramer is right (I know suspend disbeleif on the numbers for a second). The government pays the lenders for their bad loans via "insurance". The banks are still in business (at least most of them). However, the people who actually took those loans out will still have their credit ruined and be broke.

The economy - driven by consumer spending - will still be in the toliet becuase these folks won't spend anymore.

I think the plan is to try and stop a depression like bank faiure - while bailing out Cramer's buddies - rather than a plan to stop recession.


Anonymous said...

this aint nothing Keith. Wait for Alt A to hit!

you know nothing said...

let the bastards drown in their own urine.I will Greedy pricks.

Anonymous said...

I think Cramer forgets how many American families out there don't own stocks or care about Wall Street's fate...

Some of you will immediately say that is shortsighted because of all the folks that will get hurt with their 401k plans etc. Hey, they chose to gamble with that money too...

As for the rest of us poor folks, we'll gladly take our $1,600 checks from the government, that Cramer would rather see go to his banker buddies, and watch the market claim the fools - as it should...

Warren Buffett can sort out the wreckage and make it whole again...

Take a hike Jim! You're buddies are going down if we have our way...

Paul E. Math said...

From an ideological perspective, this bailout goes against everything I believe in. But the consequences of monoline failure is so dire that it is worth being pragmatic about it - Jim Cramer has a point.

However, as Keith said, a bailout means we are passing the cost of this on to our children and grandchildren, so this becomes not just an immediate financial issue but also a moral one.

We need to take our lumps. We binged on credit and engaged in high-risk behaviour and now we need to purge and get an aids test. This system has aids and we're going to pass it on to the innocent if we don't start taking our meds and using protection.

No, this won't be fun. Yes, it will get nasty out there. But we need to be adults about this and take responsibility for our actions.

MBIA and Ambac must be allowed to fail.

Anonymous said...

This is a terrible idea. Banks and insurance companies need to go bankrupt. Former employees need to take jobs at McDonalds and Wal-Mart to learn the value of the dollar.

I want to see The orange dude in a Ronald McDonald suit selling Happy Meals!

desert rat said...

Why do we have to choose between helicopter checks and a bailout of Wall Street? It's an election year -- we can do both!

Anonymous said...

"Privatize the Profits, Socialize the losses!

Hypercapitalists of the world, unite, you have nothing to gain but your hypocrisy, deeper exploitation of the people, and Billions upon Billions of Ben Bernanke's Money!!!"

I wouldn't mind bailing out the insurers---if every financial firm faced a special 20% extra tax for the next 10 years.

The insurers are going bankrupt not because of some temporary emotional crisis, but because the bonds are most certainly going to default. Do we want to vacuum out more Treasury money for unlimited liabilities? Hell no.

This isn't like fixing Chrysler where at least there was serious productive capacity and jobs at risk. This is subsidizing, literally, bad financial decisions made by the wealthiest financial institutions who previously benefitted enormously.

ISn't this what we criticized the Japanese for doing? Why they didn't just write off the loans instead of papering it over, rolling it over, and siphoning trillions of yen in government money for nothing, and having the banks learn real risk management?

Anonymous said...

I want to see all the financial institutions and executives who wrote these lending policies, insured these securities, traded them, put attorney's fees on top of them and then ran off to the bank pay for all of this mess.

Anonymous said...

Nothing a retroactive tax on Wall St. bonuses couldn't pay for - still interested guys???

Anonymous said...

You'd have the government bail out the wall St pigs, but won't even provide health care for your own citizens, because thats Socialism. Fucking hypocrites.
You'd rather let your citizens die, than have the Dow go back to it's 3000 level (which is where it should be anyway.)

Anonymous said...

I saw this post on another financial message board:
"I talk to debt traders everyday...they are saying that if this debacle is backstopped by the .gov, as Cramer was crying for today, the debt market will take the cost of .gov debt and therefore all debt to nosebleed levels, one fellow at lunch today said the day it passes Congress will see the 10 year at over 20%."

Can someone explain to a scared shitless noob like me what this would mean for the stock market, the dollar, gold, etc?

Anonymous said...

Cramer looks like a meth freak gone bad. Search his house. I'll bet he has 117 cats locked up in the spare bedroom shitting all over themslves...

Cramer appears to need professional psychaitric care before his brain finally short-circuits and he hurts himself or someone else...

These conditions should not preclude an invite to the World HP Summit meeting in Vegas. Throw him in a cage with Suzanne and tell them only one of them gets out alive... Let their past clients poke them with sharpened sticks. Take many wagers, get the East Coast Betting Boys involved, secret locations, closed circuit feeds, I see a revenue opportunity here. Maybe even a dunking tank for Greenspan, 1 million dollars per throw, but GS has a lead weight tied to his foot and the water goes up slightly over his head...

Imagine the Possibilities!

Pavlov's House said...

paul e.,

you're correct, they need to fail. If you privatize the gains yet then socialize the loses, the system is not capitalism, its nanny state socialism. You can not have it both ways. You can not be half-pregnant.

Besides the fact that any business that needs a AAA rating just to stay in business and without that rating the business fails, is by definition not a AAA company.

There's no there, there. They have rig their own system to blow and are now looking for help to diffuse before detonation. The only problem is that the fuse has already been lit. Remember Einstein folks, time moves in one direction folks, you can not unscamble an egg.

The Battle of Sprawlingrad is raging!

Anonymous said...

A better plan is to give everyone a check for $25,000. Taht should keep the FB's on their feet for another 3 years of shopping and paying bills.

Anonymous said...

Badly management businesses and business plans need to be allowed to fail so that newer, better businesses can replace them. We can't have these zombie companies roaming the landscape for the next 20 years. They will make the US less competitive. If anything, let the companies fail and create an entity to pick up the insurance contracts.

emmy said...

I am just a housewife, but if you insure for only 50% won't that be were the market sits? The market is definately down, but would that draw the ceiling for prices? It does not stop the impending mess, just the insurers will still recieve a paycheck, courtesy of Uncle Sam. Yeah, it is bad news when the insurers default,but they really should have been more careful.

Anonymous said...

Cramer, you vile corrupt maggot. I can not believe the American Sheople will by this crap. The end of the world. The end of your world, the end of wallstreets world, the end of the fed, the end of the globalists, the end of the world for ANYONE artificially inflating and deflating and profiting by this corrupt maipulation, buy low sell high. Hey dumbass that INCLUDES YOU. Train wreck, no shit. Bail out wall street so we can save the little guy. F*ck off! The little guy is screwed already. Mark to market, burn baby burn. Those mentioned above will fuel the fire and that includes you. God damn you sound like Donald Trump pushing realestate. The king is naked cramer, evryone sees it. Just give it a rest.

Anonymous said...

Sounds as if you need a new poll Keefer...

1. Collect $1,600 from the government.

2. Bailout Cramer's Wall Street and get nothing but more of the same.

Anonymous said...

F Cramer's plan. Why should the taxpayer (a majority of which did not benefit from the corruption of these deals) bail out the system by using public funds to back insurance?

I say let the system burn down and rebuild even it is means the DOW falls 10,000 points in a day.

The truth is that Cramer and people like him do not want to do REAL work of REAL value. Screaming like an idiot and walking around a studio will not pay well when the era of phoney money for nothing ends.

I never thought I would say this but I prefer the Bush plan. I can buy $800 of silver or gold that I would not otherwise have bought with my check.

Anonymous said...

Cramer you socialist POS SOB!

When the dow is in the green it should all be derrgulated, privatized, and free from govt. regulations. When in red the govt. needs to step in and cover the losses to avoid a disaster?

To hell with this idea.....I'm waiting for my $800 check that will buy survival gear like ammo, food, water, or partially pay for a generator for when the crash comes.

Anonymous said...

Cramer is a fucking idiot.

Anonymous said...

>> You'd have the government bail out the wall St pigs, but won't even provide health care for your own citizens, because thats Socialism. Fucking hypocrites. You'd rather let your citizens die, than have the Dow go back to it's 3000 level (which is where it should be anyway.)

It's only Jan., but I nominate you for Dumbass of the Year.

Anonymous said...

Cramer is a tool, just luring the public into a trap. He is not saying anything that he is not told to say.
He is making a threat, unless you take on the debt we will crash the market and steal your pension.

We are all illegal aliens to the Corporate Global State!

Anonymous said...

This is "The Road To Hell"


Getteing-Sick-To-My-Stomach said...

Man, this is all so obscene. Do people realize how crazy this all is? What a perverse system has developed?

I have a friend who is a teacher in Florida who tells me that the school doesn't have money to buy the books they need. We're talking only a few thousand dollars. Teachers sometimes pay for their own supplies.

Now people are talking about giving away hundreds of billions to programs to support banks and brokerage firms whose executives walked away with hundreds of millions.

Well, I'm an American married to a Swede living overseas. I can watch from here. A safe distance. In a safe environment. Sure, I pay about $7 for a gallon of gas. But the state pays for my kids' college education.

Anonymous said...

let the free markets correct themselves. Govt action only misallocates resources.

Anonymous said...

Cramer's plan may save the banks, but will not stop a recession.

Correct, that's the point. Let the recession happen if it must, but you can't have the financial system freeze up or we will be repeating the 1930s.

I am just a housewife, but if you insure for only 50% won't that be were the market sits? The market is definately down, but would that draw the ceiling for prices? It does not stop the impending mess, just the insurers will still recieve a paycheck, courtesy of Uncle Sam. Yeah, it is bad news when the insurers default,but they really should have been more careful.

It won't have much direct effect on the stock market - it'll still tank if the economy does. What it would do is stop a system-wide collapse of the banking system. 50 cents on the dollar ensures that some pain is meted out to the bag-holders. A few banks may in fact fail as a result. But not a complete meltdown.

The 50 cent figure is Cramer's attempt to put a floor under the true value of the toxic debt. The problem here is lack of liquidity and new accounting rules.

An example of why this might be helpful, and cheap, is as follows.

Suppose that lots of people are saving gold coins, but there are some counterfeit lead coins in circulation, maybe 10% of the total. You walk into a crowded restaurant and wave a gold coin around, asking if anyone wants to buy it. Chances are you will get several offers, and the highest offer will be close to the real value of your coin, allowing for the 10% possibility that it might be a fake. That is a liquid, transparent market.

Now suppose that the number of fakes is unknown. And suppose there are only two people in the restaurant. After hearing your offer, they sit mute for a while. Eventually one of them pulls out a $5 bill and says it's probably fake but he'll take it anyway. You are desparate to eat so you take it, even though you know you're probably getting ripped off. That is an illiquid, opaque, and failed market.

Finally, suppose a lot of other people who have gold coins saved up hear about your experience in the restaurant. Some of them have borrowed money using their gold coins as collateral. Suddenly they are forced by accounting rules to value their coins at the new "market" price of $5. They are now bankrupt (on paper) because this is less than what they borrowed.

So just how bad are those toxic, radioactive, ticking-bomb subprime loans? At 50 cents on the dollar, Cramer is pricing in a 70% default rate and 70% loss in home value in foreclosure. That's pretty extreme, and even at that it's break-even, meaning it doesn't cost the taxpayers anything. The $250 billion price tag would hit the taxpayers if the default rate was 100% and there was a 100% loss in foreclosure. Is it really that bad? Well, for the CDO-squareds, yes. For normal CDOs, we shall see.

Anonymous said...

I like how you guys say nice little comments that rhyme or have made up words in them. Nice.
The real problem is our economy sucks. That's it. We don't make anything. That used to be an issue, back in the early 80's...but we've forgot about that. We've lived on bubble after bubble and we are running out of bubbles to keep us going. There really isn't a fix. What you should be worried about is a complete collapse of our economy. Worse than the Great Depression. There's nothing any of us can do. We decided we wouldn't be isolationists and now we have to play on the big field were people are willing to work for less than a buck an hour. Talk about competition! That's where we are headed. A buck and hour. It really doesn't matter if you didn't buy a new car or didn't buy a McMansion. We are all going to get hit.
That whole idea of "Market Correction" and "Recovery" is crazy. We have had a century long run. That's our entire history of good, civilized times. It isn't much to base our futures on. Most of the world lives in poverty and our capitalistic system kept us above all the rest. As soon as we opened up trade with poor countries, we began the process of leveling out.

We are all going to collapse at different rates. People who made wise decisions and are debt free will last longer than the McMansion crowd, but not much longer. If there is a small bump in the road, my brother will get taken down. If there is a slightly larger bump in the road, I (Mr. Conservative) will get taken down.
It doesn't matter that I get 40mpg in my paid for car. It doesn't matter that my house payment is super low. We are only talking about a few years difference amongst us all. I'm young and I don't have a huge cash reserve. I could last, maybe 6 months, without an income. That's only 6 more than my over extended sister. Half a freakin' year. It doesn't matter.

The only fix in the whole damned world is to stop buying products made in China and the like. And, even then... we are talking "HARD TIMES" and major unemployment.

My brother, owner of a tint shop, could fire half of his employees tomorrow and not flinch. That is extremely common. As soon as we start to experience hard times, Unemployment will sky rocket. SKY ROCKET. Ever been to Wal-mart? Half of their staff is just standing around. Half of my staff stands around. I stand around and I own the company.
If I trimmed the fat, 2 people would get fired (Small company) 2 people would be out of work. Same with my brother and on down the line.
Nothing else matters.

Debating Health care is silly. Whose going to pay for it when the economy collapses?
Environment issues are hilarious. Wait till the collapse. See if I'm not crapping in the river with the rest of you.
Socialism only works if you are a rich country. You can't become rich if you are socialist. We became rich because we were capitalists.
But, it really doesn't matter now. We've let it go on far too long. Write the checks, what does it matter now. We are only talking about a few years.
If I default on my house, it would probably take them 12 months to repo it. 12 months. They don't want it. I don't want it. I'm ready to walk any day. It's just a house and many people are begging to realize that.

You can't see the forest for the trees. You keep blaming people for taking out loans, blaming the banks for loaning it. Who cares. Look at the forest, it's a wreck!