October 04, 2008

HousingPANIC Quotes of the Day

"You want to be greedy when others are fearful ... It's that simple"

- Warren Buffett, 2004

"In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are now"

- Warrent Buffett, October 2008


Anonymous said...


Anonymous said...

"Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board, and dampening the otherwise harmful effects of inflation.

"A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added.


Anonymous said...


head and shoulders to 8000

Anonymous said...

Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation
and fire sales of assets at below fundamental prices will ensue leading to a cascading and
mounting cycle of losses and further credit contraction. In illiquid market actual market
prices are now even lower than the lower fundamental value that they now have given the
credit problems in the economy. Market prices include a large illiquidity discount on top
of the discount due to the credit and fundamental problems of the underlying assets that
are backing the distressed financial assets. Capital losses will lead to margin calls and
further reduction of risk taking by a variety of financial institutions that are now forced to
mark to market their positions. Such a forced fire sale of assets in illiquid markets will
lead to further losses that will further contract credit and trigger further margin calls and
disintermediation of credit. The triggering event for the next round of this cascade is the
downgrade of the monolines and the ensuing sharp drop in equity markets;


keith said...

Get popcorn, go to the beach, come back in a few months

No need to be a hero right now

The Great Unwinding is still unwinding.

"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king"

Anonymous said...

I think he may have been had this time.

christiangustafson said...

Are you shorting this, Keith?

I am shorting this.

keith said...

I'm on the beach, with hot buttered popcorn

The market is panicked and irrational.

The sidelines, except for a few long term holds that are getting pummeled, feels good

But I've got a list of companies I'd like to own. After Armageddon. Knife catching is hard. Just ask people who listened to realtors on commission and bought homes in Phoenix or Vegas or Cali or hell anywhere last year.

keith said...

If you're long - watch out for a 1929 like crash

If you're short - watch out for Hank and Ben to throw a hail mary - beyond the $800 "if break glass" play this week. Here's some wild thoughts again:

* Interest rates to 0% immediately
* $5 trillion pumped into money markets
* $1 million FDIC - or unlimited
* Nationalization of all banks
* Offer to refi every mortgage in America for 40 years at 2%
* Ban on all stock sales for 30 days
* Ban on bank withdrawals for 30 days

I could go on

You know some really interesting things are being talked about. Right now.

This could go either way.

Get popcorn.

Stay alive to fight another day.

Anonymous said...

I watch Bill Maher last night. It was a must see if you have HBO. Cable is something we will cut soon.
christine Amanpour, Alec Baldwin, and comedian Gary Sandler.
It is a must see. I am telling you folks Barack is our Man. But there are many in powerful position who do not want Barack in Power.
Here is something written about Barack:You know Barack Obama as a candidate has talked about renegotiating NAFTA. Well, that does not go down well in Europe, which believes in internationalism and globalism, in globalization," said Amanpour on the morning broadcast.
Barack is for America, made in America so we can create jobs.
In Europe and other places they do not want that.
We need to fight together to get our Country back. We need to support this man.

Look this is so polticial what has happened to our economy.
The war in Iraq could have paid for healthcare for everyone, fixed every bridge and hospital in America and funded green energy here. Think about that. Just think about it. What a different country if Al Gore would have fought for the recount in Florida.
We have to fight this time.
I fear for Obama if he follows through on his promises for us. We have not had a President on our side.

keyser knifecatcher soze said...

Why do you think they call it DOPE?

I'm with the school of thought saying the hedge funds are cashing out. Just a guess.

The fear is now palpable...oh happy days!
Now is the time a retail investor, without inside information, can make long term buys.
There are corp bonds w/ yields approaching levels not seen since the early 80's! I Need More Cowbell...I gotta fever!!

Dollar cost average this deep recession for 12 more months

christiangustafson said...

How do you think the Baby Boomers feel right about now?

I didn't think we would see TSHTF for them for a couple more years.

But here we are.

yoski said...

This downturn provides great investment opportunity. The trick is you have to invest in the right sectors. In my opinion that is energy. We are entering an era of liquid fuel crisis. Never mind the demand destruction in the industrialized world. The new demand is coming from the developing world. China, India, Brazil, Russia, Mexico, Saudi-Arabia, etc. In those coutries we're looking at billions of people that are switching from donkey to motorized transportation. Exports from many of those countries will face sharp declines as their production will be used to satisfy domestic demand. Right now panic still rules the market. Much more deleveraging to come. Hedge funds are selling everything they can turn into money. I don't think the bottom for energy stocks is in yet, but it is not too far off anymore. You got to be incredibly lucky to hit the exact bottom in the market. I started buying energy and energy service companies.

fast actin tinactin said...

One thing you get when you're investing billions. Buffet is buying Preferred stock. So if things go to hell in a hand basket he's first in line to get paid from the selloff. If you have common stock you're last in line and end up with nothing.

keith said...

And that's why you should be looking at BRK-A or BRK-B

bickerer said...

IMHO buffet is an enigma. He cares about two things in the world.

Making ultra rich people ultra ultra rich (now there's a noble goal). And giving money to the poorest of the poor in Africa. Not a lot of interaction with the 99.999999% of us in the middle. This is certainly his right but I just find it a little odd.

Chris said...

"I'm on the beach, with hot buttered popcorn"

I prefer six bottles of some ice cold Sam Adams myself.

Knife catching is hard...except in this case, it will be a guillotine. Stay away and watch the drama unfold.

Save your money. Shorting and put options are fine, but there's already been a lot of things hammered in that arena, and the government is trying to interfere with the shorting process.

I set up an online savings account with Capital One in the last few days. They are paying 3.55% APY for accounts over $10,000. Also, there is Capital One Bank and just Capital One, so these are insured separately by FDIC. You can set up an individual account and a joint account with each subsidiary to maximize the insured amount. I assume with the passage of the new legislation, you can be insured up to $1 million through the 4 accounts.

Capital One is also offering a 7-year CD at 5.40% APY. Don't know if you want to keep your money locked up that long, but that's about a 44.5% return over the 7-year period. In hindsight, if you asked people in 1936 if it would have been smart to invest in something like this in 1929 that was 100% insured, I think the answer would be "Hell YES!!!"

christiangustafson said...

Buffett is doomed.

Don't forget about the huge quantity of OTM long puts he sold on the S&P 500.

He is going down.

Chris said...

"One thing you get when you're investing billions. Buffett is buying Preferred stock. So if things go to hell in a hand basket he's first in line to get paid from the selloff. If you have common stock you're last in line and end up with nothing."

Three observations:

1) If you own common stock for just about any company that goes bankrupt, it's almost guaranteed that you will be wiped out.

2) Preferred stock is not first in line. It's second-to-last in line, only ahead of the common stock. Now, if the company went bankrupt, and Buffett offered debtor-in-possession financing in a bankruptcy, and somehow the judge approved it, then he would be first in line, even ahead of any senior secured debt.

3) Anybody can buy preferred stock for a company. The question is, how much will you buy and how much influence can you wield on your own. In Buffett's case, the answer to both questions is "a lot".

keith said...

Betting against Buffett is probably the single dumbest thing you could ever do

Might as well go step in front of a truck.

Always bet on Buffett.


Anonymous said...



No, he just smells that way!


Anonymous said...

Preferreds are usually bought by corporations because they don't have to pay income taxes on 70% of the dividend payments.

hp fan said...

The fundamentals still don't make sense for average investors. Check out how much debt GE has, it's nearly as much as the financial bailout just by itself one company. Buffet is getting senile, don't jump off the cliff just because he is.

As other bloggers have noted, the only reason for optimism is the overwhelming pessimism. The consumer needs to be recapitalized before markets improve and this won't even start to happen until the Neocons are removed from power in November.

keith said...

I don't think I've ever seen pessimism and panic like this. The only two days that were close were the crash in '87 and then 9/11.

That said, this spirals out of control next week, a house of cards falling in on itself, and a desperate rush to raise cash and get out of investments.

Or... we have a classic over-sold relief rally, maybe urged on by Bernanke cutting rates or more Sunday night bailout hijinx from Paulson.

Anyone want to get on record with a guess? I have no idea. But I have popcorn.

Anonymous said...


"For the love of money is the root of all sorts of evil"
1Tim 6:

"Keep your lives free from the love of money, and be happy with what you have"...
Heb 13

"No servant can serve two masters...You cannot serve both God and money"
Lk 16

....not a lover of money"
1Tim 3:3

"Whoever loves money never has enough; whoever loves wealth is never satisfied with his income"
Ecc 5:10

Anonymous said...

I think it was J.P. Morgan who said something to the effect of "you can have the first 10% and the last 10% and I'll take the 80% in the middle"

He was talking about market moves. So don't be too fast to get into the game and don't overstay once you are in.

Historically, the year after a Presidential election isn't that great for stocks.

Historically, Nov - April is better than May - Oct for stocks.
Though that didn't work to well last year.

So don't be surprised to see a bounce sometime Nov - April and then a descent to the end of 2009.

West Coast Willie said...

It's retail's turn to burn.

On any bounce, get some retail puts on the high end retailers, Nordstroms, Macy's etc. or short the sector, RTH.

This is obviously a trading strategy.

Other than that, keep accumulating gold, silver, select gold and silver mines.

Time to establish a small position in commodities. Buy the index.

I'll check back in two weeks to see how we did.

Lost Cause said...

Well, well, well. This panic is nothing like 1987 or 9/11. But there has never been anything like the hedge funds and private equity like there is now. I think that we are going to be seeing some awful days ahead. The fun has barely started.

JAWS said...

Classic, over-sold relief rally next week.
The "Point of Maximum Financial Risk" chart is missing "stupid."
We're currently in "stupid."
"Stupid" is a reflection of "Desperation." "Stupid" is also a reflection of "Denial." We're solidly in Stupid. I can't believe what I'm hearing at home. I just want to slap him. He's still playing the stock market, every day, with his finger on the keyboard ready to click. My friends are still buying/attempting to sell houses. They believe it's time to "refi and buy foreclosures", but they don't have a clue how to work the numbers. They don't even have the ears to hear it when I spell it out. It's very clear to me that we're in "Stupid." Not far from Panic. It will be a relief to see Panic; at least we'll be out of Stupid.

Anonymous said...

Buffett is panicking in my opinion...and not picking a bottom. Let's not forget his famous comment in 2002 about derivatives being "weapons of financial mass destruction"... and yet he throws caution to the wind and entered into major derivative positions in 2007!!
He had sold European-style put options on the S&P 500 and three foreign indices for a $4.5 billion premium. Yes, these options expire from a range of 12 to 20 years out...but if this is the mother of all depressions, it will take that much time to come back. Meanwhile, he is showing greater losses on his positions as he waits..mark to market losses are going to be large if this market continues downward...and I'm sure this is making him real uneasy. And the other derivatives position of his: "credit-default swap guaranteeing payment on certain high-yield bonds." Hmmmmmm.

Anonymous said...

Keith said
Anyone want to get on record with a guess? I have no idea. But I have popcorn.

October 04, 2008 5:35 PM"

Yes, I'll be happy to go on the record. Whatever will hurt the country and punish inocent hard working law-abiding people of America the most will be Bushco-Cheneyburton Lord Paulsens next move.

These common criminals will ot stop until their New World Order is in place.

You can run but you cannot hide...

Adam Smith said...

What we call "the Crash of 1929" wasn't so much as a single CRASH, but a prolonged PERIOD of a bear market that lasted about 8 years.

The market hit it's low about 2.5 years after it started (June 1932), but the thing people don't realize is it took YEARS to recover. Yes, YEARS. The bottom is not a point, but a LONG, SLOW painful process where people don't WANT to own stocks, which is precisely WHY the price(s) are so low!

With respect to Buffett's words about buying when the fear is high, I think It's not so much about fear or greed, it's about apathy: you buy when everyone else is completely apathetic.

I'd say we're not there yet....

The market didn't reclaim the 1929 highs until the 1950's, so having patience is key!

Remember that Buffett is playing a DECADES LONG game here: he can afford to, as he's not so much worried about his personal fortune at this point, as much as the status of his living trust and his reputation.

So be careful when making investment decisions based on what Buffett is doing: you're NOT in his league.

Anonymous said...

Is Buffett in a private hedge fund? Chelsea clinton works for one. I have been hearing about hedge funds for a while, they are the blame for sky rocket gas prices and crash

libvet said...

Yo, lost cause.

It's not 1987 or 1929,
it's 1873.


Please don't think I am one of the smart people. But please do have a look at the link.

Makes sense to me.

West Coast Willie said...

Want to make yourself sick and really pissed? Read the indepth article in the NYTimes about the demise of Freddie and Fannie.

"Mr. Raines and Mr. Howard, who kept most of their millions, are living well. Mr. Raines has improved his golf game. Mr. Howard divides his time between large homes outside Washington and Cancun, Mexico, where his staff is learning how to cook American meals."

Let's get out the pitchforks.


keith said...

Remember that whole silly "cash is king" thing that HP'ers have been mocked for?

Read this one.


In just two weeks, a new corporate pecking order has emerged, forged in part by prudent financial management and, in some cases, plain luck. Those with cash are sitting on top, while those that need quick money - including many former high fliers - are scrambling. Gordon Pitts and Boyd Erman examine the victors and the vanquished


Anonymous said...

The thing is that we don't have another bubble in sight to get us out of this funk. We've run out of bubbles! How's the market going to go up without a bubble if most of people have a rotten credit score, no money, a huge welfare system to pay (especially after Michelle Obama gives the 20 million citizenships to illegals, as she mentioned on her DNC speech). I can't see a way out of this very soon.

hp fan said...

Stock up on popcorn.

A stock rally is just about as likely as a housing rally. Next week there will be more volatility and the week will finish with DOW under 10K.

I'm not pessimistic, I'm realistic.

Anonymous said...


wings said...

"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to feed on their neighbors like Night of the Living Dead.

Whatever they have bought at greater and greater losses, and cash becomes king and they eat their neighbor's cat by BBQ'ing it without shame and naked abandon."

Old Woman: What are you doing, get off my arm, you rat!

Man: I'm in a self-feeding panic and am munching on your arm.

Old Woman: (Whaps him over the head with her purse). Act like a man and quit trying to eat my arm you little schizophrenic biatch!

For it hath been foretold: KAGUNGA!

Anonymous said...

Anon wrote:


What language is this?

Anonymous said...

Keith- What stocks do you have on your watch list?


buffett schmuffett said...

Keith, go back and look at your 1929 crash chart. It looks like a sawtooth for all the numerous sucker rallies.

Good luck catching that falling knife.

It's easy to see Case-Shiller chart is only about half back to normal, and Shiller verbalized the same fact.

And old Buffett was born after the crash so it's true he's "..never seen this much panic....etc etc".

He hasn't seen shit compared to what we're facing.

Anonymous said...

Blogger keith said...

Get popcorn, go to the beach, come back in a few months
My thoughts exactly. I think it will get even scarier than this.


Anonymous said...

Making ultra rich people ultra ultra rich (now there's a noble goal). And giving money to the poorest of the poor in Africa. Not a lot of interaction with the 99.999999% of us in the middle. This is certainly his right but I just find it a little odd.


buffet is just another form of wealth redistribution except in this case he takes from the massive middle and gives it to the two extremes (rich and poor).

Anonymous said...

If one of us doesn't end up making billions from this mess, I'll be disappointed.

For right now, I see upward pressure on the dollar because of the mad rush to cash. At some point (who knows exactly when) that's going to level off and then I believe the dollar will collapse against several currencies.

I like the yen since Japan has a high savings rate and experience dealing with slow economic growth due to their shrinking population.

Someone else mentioned the Swiss Franc holding value.

mickeyc said...

BRK-A or BRK-B are going to get hammered. There are some really bad industries in the Berkshire mix - large brokerages, car yards etc.
Buffett is a genius mainly because he affects a down home demeanor while actually being a rapacious corporate raider. His other genius is avoiding excessive leverage.
At some point these will be fantastic buys but we are so far from the bottom why buy now?
I have had people scream in my ear "buy when there is blood in the streets" since September last year.
I have literally been told this with each of these companies as the person involved "dollar cost averaged": FRE, FNM, BSC, AIG, WM, WB, MBI & ABK.
You can easily dollar cost average yourself to zero.
We have $60 000.00 in derivatives outstanding for every person drawing breath on the planet. Seeing as how a vast number of the world earns around $1.00 per day in income we are going to implode under the weight of this as the unwind continues. These positions cannot be paid.
I am still mildly short but I have serious reservations about counter party risk now so have a lot of cash out of the market. If you get a 1 000% return and the counter party can't pay you've lost 100%.

Anonymous said...


"IMHO buffet is an enigma. He cares about two things in the world.

Making ultra rich people ultra ultra rich (now there's a noble goal). And giving money to the poorest of the poor in Africa. Not a lot of interaction with the 99.999999% of us in the middle. This is certainly his right but I just find it a little odd."


Read "Guns, Germs, and Steele".
Their is a passage about how the rich give "just enough" back to the masses(aka brainwashed uneducated laboring public school educated class) to prevent revolt on their system of choice(which made them rich in the first place)

Buffmeister and his money-printing cohorts benefit from any policy that maintains their current system(at the expense of the rest of us paying $12 for a loaf of bread).

Buff is NOT an enigma(aka puzzle). He is protecting his own ass at the expense of the rest of us.

"And giving money to the poorest of the poor in Africa."

This is a bullshit public image play that reinforces my argument. Buffett is an Orwelian master and would be best served in the fashion that other "elite" were served during the French Revolution.

Anonymous said...

I wonder why so many rich Americans have charities to help other countries, while our own country is falling apart. Shouldn't that money be invested here first? Case in point, Oprah and other puke celebs keep helping Africa while just 1 out 4 kids graduate from high school in Detroit. Helloooo?

Anonymous said...

Buffet missed the extent of the housing bubble ,so hes out of touch to some extent. I also think he has
missed the potential for a massive blow up on Depression levels .

I think Buffet was thinking that it
was going to be one of those mild recessions whereby he can pick up
deals like he has in the past .

In the 1929 stock market crash ,many a wealthy investor went broke ,some jumped out of windows .Joseph Kennedy was one that got
out ahead of the crash .

One thing that I have discovered about people who have amassed a lot of wealth ,nine times out of ten it becomes a game of amassing more ,rather than a need for more wealth . It becomes a power thing at some point .

Just read up on Getty and JP Morgan and all those guys.Socially a lot of times they were cruel to their employees and cheap with wages ,yet they would give to charity upon their death . In most cases some sort of advantage was taken to amass wealth ,usually at the expense of the working class .

There was a time where the great working middle and upper middle class was gaining and that was between 1948 and 1985.Between 1999
and 2008 ,that decade was the greatest transfer of wealth to the upper upper upper class ,and the rest just had fake wealth based on debt and bubble investments .

The wealthy have for most part have taken their profits ,and Wall Street took their profits leaving the lower class entitlement society left with a bubble crash and debt obligations . Corporations gained by all the buying that took place by debt for that decade. Now that the market is crashing ,the bag holders are looking to unload on the suckers and change their positions ,with a little help from their friends like Paulson and Politicians like Dodds .

Anonymous said...

I will say it again, we're only getting out of this funk if we can come up with a new bubble.

And I'll participate because Americans are nothing but marks to me now, especially after all the ponzi scheme and bailouts.

Fuck principles, I'm going for the throat...fuck the flag too. What did I get for playing Mr. Nice guy, being responsible, saving money, playing by the rules?

Just look at that disgusting piece of $hit Barney Frank still denying on national TV that he was one of the enablers of this mess.

Anonymous said...

The only bubble we can invent right now to fool the world is Green Everything. And if Hussein wins, that's what's going to happen because Pelosi, Gore, and other freaks are all putting their money in it. So you heard it here first, Cleantech to the moon if Barry wins.

Anonymous said...

"America has been on the biggest consumption binge of any large economy in recorded history," Roach told the forum. "The American consumer is toast, done, finished."

Anonymous said...


Watch this one - unintended consequences and why everything will now crash

wings said...

Anonymous said:

"Americans are nothing but marks to me now...F-ck principles...f-ck the flag too..."

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to feed on their neighbors like Night of the Living Dead.

No, my little fine, furry friend: F you!

Wings: Here ye, here ye hungry Americanos. I present to you the great Un-Americano who considers the hungry, huddled, screwed masses to be nothing but "marks." And he spits on your flag, to boot.

Have at him! Feast upon his loins, in this here era of housing panic, and BBQ his fritters--till they sizzle on the griddle--for his transgressions against Gawd, family, country...and flag are multitudinous and wanton!

For it hath been declared:

Anonymous said...


Some how, Some way, someone is gonna make Big money!

It won't be me, but it never fails that when things look bad for 99.9% of us, there's always some S.O.B that rakes in Millions or Billions.

And it's always some A**hole that already has Millions and or Billions made from some underhanded scheme!


Anonymous said...

And so it begins.

A very good friend of mine (I was his best man) his father runs a very successful albeit small FBO (flight training, fuel, maintenance...) at a very busy airport in So Cal. He had a guy come in last week who had recently bought a hi-end (glass panel), high-performance single airplane.
This guy needs to sell it quickly because he lost his biggest account (good luck)
He runs a printing company, who printed up all the mailers, flyers and brochures for WaMu!
He also said, that his business has been extremely slow as of late. But, WaMu was about 60% of his guaranteed contract work.
This guy is hurtin, and it hit him overnight!

What and who is next?




Anonymous said...


Is everybody happy!