The global financial crisis

[Watchman]

Hi,

I'd like to bring up this topic not (only) because it has been up in the headlines for weeks and probably is going to stay there for a long time, but instead because it has directly affected me and I suppose many of us will suffer the dire consequences of the fly-by-night behaviour of the self proclaimed "Masters of the Universe" in Wall Street and other financial marketplaces in the world. We are heading into a recession maybe as bad as the one that hit the world in the 1930s and no matter if we are employed, business owners or investors: none of us will be left unharmed. I myself have been hit already:

- About 10K lost that had been invested in Lehman Bros. certifcates -> gone

- a company I hold a 5 percent share in is going to be insolvent in a matter of weeks if they cannot find another investor because their main investor from the last financing round paid in only 30% of his investment until now and will be unable to come up with the rest. Since the shares only cost me 5K this will be the actual loss if that company goes down the drain. But actually the shares were worth MUCH more by now.

- My pension fund: Down 30%

- Order volumes in the company I work for as a managing partner: 30% down in the last 2 months

How about you guys? Has the financial crisis already affected you ? If not, do you think it will ?

Cheers

Oliver

Edited October 12, 2008 by Watchman

[stilty]

My quarterly pension report is due and I'm a little worried at what I'm going to see. I haven't even logged in to see where my funds sit.

[piratedzeus]

It's all the cartel's fault !

Edited October 12, 2008 by piratedzeus

[Pugwash]

I'm too poor to be overly affected and not poor enough to starve. I suspect most people are in my position.

I have a roof over my head and, as long as I don't lose my job, the financial crisis will be something I observe from the outside. I wish I were well-enough off that I had a portfolio to be affected, but I'm not.

... and I can never, ever sympathise with people like this: http://cat5.org/pages/banker-wives.html

[Chicken Manny]

My investments took a major hit as I'm sure many of others here have. But overall things are good. Job, life, family are all in order and that's keeps me happy. I don't need to touch my investments for many years to come so I see this as a good time to buy in at rock bottom prices. So far every loss to me is a 'paper loss'. I had no plan to sell anything so I can't say that I really lost anything. For those of you that have suffered real loss and suffer the associated stress I'm deeply sorry. I hope and believe this crisis will be far less impactful than the 30s.

[ebzen02]

It's all the cartel's fault !

Fortunately for NOW I work in the IT/Healthcare business and we are business as usual. However, I am truely concerned since our generation has yet to experience such events; Gen X/Y especially. The correlations to the Great Depression are eerie, although I think being way hyped by the media; and this has exacerbated fear-- fear and financial markets are a sad and catastrophic combination. I am not sure that the G-7 will make it any better and I see us headed to over 30% losses in the Dow and S&P (adding to the already 40% loss peak to trough) by the time we are done. This will enter the books as a mild-moderate depression or, at the very least, a long lasting recession (at least a 2 year one). Folks, this is global and way bigger and more complicated than anything seen before..IMHO..

Sorry for the words of optimism...I sound gloomier than Nouriel Roubini...I am buying plenty of non-perishables just in case. Now, back to...who has the best sub?!?

Honestly, we'll be fine in the long run. I assure you that our priorities will shift for the better. Materialism will wane and spirituality will guide us thru--fyi, I am not a religious person at all. I think that events like this, although hard to swallow especially if you lost your job or large sums of money, are necessary. These are necessary moral re-alignments that I believe are healthy. Many were taken and consumed by great levels of greed. Hopefully those that took advantage of others will get thier dues..Karma, guilt, jail, whatever..

Remember yourself and your loved ones... they [hopefully] love you more than money, cars, big homes, nice watches (replica or real)...

Peace..

Edited October 12, 2008 by ebzen02

[omni]

I think I picked a lousy time to get old and retire! Cashflow looks shakey.

[ryyannon]

I think I picked a lousy time to get old and retire! Cashflow looks shakey.

Breadfruit, papaya and ocean-fresh fish, Omni.

Things could be worse, no?

Hang in there, old friend, and may the sun shine on you always

[Chronus]

I'm too poor to be overly affected and not poor enough to starve. I suspect most people are in my position.

I have a roof over my head and, as long as I don't lose my job, the financial crisis will be something I observe from the outside. I wish I were well-enough off that I had a portfolio to be affected, but I'm not.

I agree with Pug, I'm in a similar situation... I've never had shares or a pension either. I just hope house prices really drop so I can get my own place someday...

[patinga]

Lost my financing of a business I spent two years putting together, twice, for a total of $20mil. It happens, what are going to do, just keep moving forward.

That being said I feel really blessed with the love and support of my family and friends. Things run in cycles, this is going to be a 10-18 month recession (here in the US) but it has really made me appreciate the things that are actually truly important.

[thomasng]

My stock portfolio's value dipped more than 30%, as well as my mutual funds have fallen 20%. I had $300K in financial stocks, and they're now worth less than $70K. And yes, I am calculating these figures from my initial investment, I was up more than 30% at one point, and all of it disappeared with another few hundred Ks. Fan-****ing-tastic.

However, I'm very thankful for what I have remaining. Much more than a comfortable lifestyle, and with twins on the way, life could not get any better for me. For a number of blessings, there has to be the downs.

I'm also especially thankful that I am no longer in the banking industry, going into academia proved to be a much better life experience for myself even though it does not pay much.

[Bll]

This wouldnt even be able to compare to 1930s as if you take a look at DJ in 1930s, it was down by more than 90%, it dropped to around 2000 right now it is not even 25% as bad as 1930s...

But yes, it is still bad...comparable to 1987 almost. but think about it this way, after GS and MS transform to deposit taking institutions, financial market would be going up again(well, not in next couple yrs, but eventually would).

plus the rest of the world are helping US, it is not like US and England are by themselves alone. China, even tho it is not one of the G7, has lent US more than couple trillion dollars as of today. And China did it without even thinking about the consequences.......the US FX rate and all the bad debt + the begining of the recession would make China lose all its lending. Japan, Sweden have been helping out London to stablize its situation even tho japanese banking industry got hit as bad as everybody else.

[Guest carlsbadrolex]

Lets see...

1. Lost 32% of the investments I had.

2. Pension fund- WHAT pension fund?

3. Mortgage went to variable rate, and nearly doubled - cant afford that anymore.

4. Ex-Wife is dirtbag - I have the boys now (At least thats good, right?)

5. Company I have invested 70 hours per week in for the last two years is shutting down and I was given my last check two weeks ago.

6. Sold off all of my watches here several weeks ago. Selling off my weapons this week (God knows I dont need them around)

7. With varied experience in rather non-standard fields, my job prospects are bleak unless I wish to deploy to Iraq for a year or more.

8. Oh yeah, did I say I have my two sons with me and they keep me going no matter what???

Yeah things are bad... And unfortunately, regardless of what ANYONE says, I think things are going to get MUCH WORSE before they get better! Not just for me, but for MANY Americans. I saw what appeared to be a 25 year old woman with a sign at the off ramp by my house yesterday. It read, " Mother of two only days from being homeless... Anything will help." She was dressed well, and had a very attractively made sign. I stopped and gave her $10 and told her good luck. I saw her again yesterday, same sign, same place... Sign read this time, " Homeless Mother of 2 needs any help you can spare." Maybe I am naive, but I believe her.

The news in San Diego the other night had a story of a rather well know Realtor who was just nabbed by the FBI for bank robbery. He lost everything about 6 months ago in a couple bad investments and went to robbing banks to keep his home and family fed.

Another man shot his wife, daughter and son and then himself after losing ALL their savings in the stock market.

[rek001]

Thomas, with your educational and financial background, what is your prognosis for the future?

Also, congrats on the impending family thing, I remember when you were restless and not sure what direction to take, seems like you've made some good decisions.

[Noel Fleischer]

i'm lucky i have a profession and i had some good years. my pension plan has

been destroyed by the dot com bubble and now this crap! it looks like i'll have to work al least part time for ever.

i'vee spent alot of $$ on my watch collection- i figure it most be worth about 60K by now.

i have a bunch of gens. the rest not valuable for resales.

[Shundi]

Hmm...

Well the younger crowd SHOULD be ok if they're not pulling money out anytime soon...

I'd strongly suggest looking into CD's under 250K with an interest rate of around 4.2 if you can get it (whatever, as long as it's higher than inflation). I've lost a bunch of money in stocks but I looked on the bright side and figured it was a good time to pick up some GE and other stocks at pretty good prices..somewhat risky but I doubt GE will be going under anytime soon...their prices were up 13% Friday after beating projections...

I see a lot of people investing in US treasury bonds due to the fact that they carry just about zero risk...while that's true, the interest rate on them (due to the demand) is lower than inflation...so you actually end up losing money by investing in US treasury stock at the moment.

At the same time, I've had some luck in UltraShort funds in my mutual fund portfolio... I was fortunate enough to pick up UFPIX and USPIX in my portfolio which have increased 135% and 62% since I've owned them basically erasing major losses in my stock portfolio... some of my stocks have cut or eliminated dividends which sucks but is probably necessary.

I think a major thing to look to is the finacial status of the American auto industry. GM is about to tank with Ford not far behind (there's even talks of a merger...). Chrysler is held by Cerebus and so not too much is known about their profitability but they must be hurting...if they go under, millions of jobs will be lost not to mention the financing woes from their financial divisions...

All in all, I do think there are some great companies that will weather the storm (Especially defensive stocks like Coca-Cola, PepsiCo, Raytheon, etc) like GE, (hopefully) JPM, Goldman Sachs (another hopeful) and I think this should serve as an eye opener that people need to ensure that they have a diversified portfolio... blended mutual funds incorporating stocks and bonds are generally thought of as "overly conservative" for people under 35-40 however I've been very conservative with the majority of my investment money and inheritance money and while some of my funds have performed very well in the past few years it's tough to see plunges like those we've seen the past few weeks erase major gains. If it wasn't for the money I had pumped into UF and US PIX, I'd probably be much, much worse off...those two have basically balenced out my total losses YTD.

My humble strategy with CD's is to invest in 10-12 month CD's, purchasing 2 minor per month and 4 major per year (Major being over 10K). Each "major" I purchase at the end of the fiscal quarter so that 4 times a year, I have the option to withdraw that money (in a pinch) or roll it over for another year if the interest rate is good... While the historical rate of return for the stock market is around 8%, we're not going to see that this year so CD's and a good blend of mutual funds tend to alliviate some of the headaches of an unpredictable market imho.

[Shundi]

Haha and BOOM my USPIX and UFPIX were WAY down yesterday (like 50%) seeing as they are somewhat inversely correlated to market performance...

[fakemaster]

There's a crisis?

[JohnG]

There's a crisis?

Yup. Great opportunity for post whores!

[fat.tail.event]

This "crisis" (this is simply what happens in the form of capitalism We The People choose to practice) was front and center a little bit earlier for our household. Unfortunately, I work for the first investment bank that went down earlier in the year. Are we crying and unprepared like these folks?.... http://cat5.org/pages/banker-wives.html ....No. I remind my wife regularly that we have to be prepared to walk away from luxuries at any moment. Man performs best when adversities are present. Maybe my family doesnt realize it, but I purposely introduce them. I work in a boom and bust industry that follows our roller coaster economic cycles. I fully accept and embrace that risk/reward environment...it is the path I have chosen. There are no more victims in this current situation than there were at any other time during the last 25 yrs. The media just needs something to fill the 24 hr. news channel air time. There is a lot of blame going up and down the pyramid. Just another way to avoid personal responsibility and accountability. Did the Maestro Greenspan keep rates too low too long...yes. Did scumbag mortgage brokers sell product that they knew would blow up families after 24 months...yes. But the bottom is this: very few of us examine, or even think about future consequences of our actions. It is human nature to keep more for yourself. God bless those who consciously struggle to suppress this trait on a daily basis; however, there are very few people who practice this habit. We have conditioned ourselves to think about whats best for us tomorrow, end of month/quarter/year. Capitalism has taught us to fully optimize, maximize, become most efficient...essentially run full tilt with no slack in the system. And just when some slack is needed to absorb a shock, you're wound as tight as can be. Our government, our businesses and our families all operate on this model. Am I advocating socialism? No. Capitalism works for the majority, most of the time. Its people that have focused on their various forms of 'slack'...future, family, friends, foundations...they will be fine.

So has this 'crisis' inconvenienced me? Probably. But if these things (they happen every 5-7 yrs now, you know) ever begin to truly affect me, I know it will be time to go back to the drawing board.

[Shundi]

Very well said FTE... I believe I've mentioned it before but it drives me nuts when people are flying off the handle at CEO's and executives whose banks were destroyed by market speculation and then going crazy because of the compensation packages... where were they years ago when such agreements were signed? When the CEO's were hired? Hell, there was no oversight at all because people's money was up...now that it's down there's a witch hunt...