# Optimistic view of US economy pays off



## seabass (Sep 26, 2002)

> Mr. Tepper says the worrywarts have it wrong: "If you think the economy will be fine, as we do, then we're going to do very well."


http://online.wsj.com/article/SB126135805328299533.html?mod=rss_Today's_Most_Popular


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## Chuck Smith (Feb 22, 2005)

I am not subscribed to the Journal. But I can tell you how the rest of the story went. He bought shares of banks going in the crapper. So he bought them for pennies on the dollar. So now when they show a slight up swing. He sold them for double or better than what he bought them for. In a poor economy you can do this. But this one broker's story. It is the old story buy low sell high. Do I think the economy is on recovery......yes in some area's. In others no. I will tell you this that the Health Care debate not moving forward with what was initially in the bill has made the market recover because the people are not as scared. So that is helping.

But yes it is recovering..... Housing market. Not so much because 60-70% of homes selling are short sales, defaults, or repos. So that is throwing off the "market" recovery.


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## TK33 (Aug 12, 2008)

It is too hard to say what the economy is actually doing right now. Too much gov't funding is pushing things around here. It will be interesting to see what happens after healthcare and cap and trade go through.


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## Plainsman (Jul 30, 2003)

Today they are saying that they had over estimated the recovery. Don't start smiling yet. If you do the Kool-aid must be sweet.

If you need an interpretation for the below, it means they exaggerated the heck out of it to fool the American Kool-aid crowd.



> Recovery not as strong as previously thought
> 
> Dec 22, 9:02 AM (ET)
> 
> ...


For the full story: http://apnews.myway.com/article/20091222/D9COD2OG0.html


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## seabass (Sep 26, 2002)

TK33 said:


> It is too hard to say what the economy is actually doing right now. Too much gov't funding is pushing things around here. It will be interesting to see what happens after healthcare and cap and trade go through.


Can you imagine what would have happened if it weren't for the government funding pushing capital around? Stagnation.

Plainsman, the economy is growing. Like or not.


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## Chuck Smith (Feb 22, 2005)

> Can you imagine what would have happened if it weren't for the government funding pushing capital around? Stagnation.
> 
> Plainsman, the economy is growing. Like or not.


Is the economy growing because of artificial factors and will soon go back into a free fall? Will the economy need more goverment funding to keep it from free falling? Will more and more goverment aid be needed to keep status quo?

Stagnation is good for economies. It forces change! When the goverment gets involved.....company's will stay at the status quo to suck off the goverment teet. They will not stick their necks out. Why when they can keep everyone happy and get re-embersed for it.

Here is a little off topic but not much......how much of the "Stimulus" $$$ that was supposed to go to states are not getting cut back or used in other area's leaving states out of luck? So now states are being forced to raise taxes or make cuts. Yep the Fed is not raising taxes or making cuts......but it is forcing the hand of states.


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## seabass (Sep 26, 2002)

> Is the economy growing because of artificial factors


Yes.



> will soon go back into a free fall?


I really don't believe it will, but I'm no economist. Still, I haven't even heard the most pessimistic of nay-sayers say anything like this.



> Will the economy need more goverment funding to keep it from free falling?


Hard to say. I hope not. Hopefully the first stimulus is enough to get the ball rolling. A further stimulus may push the ball faster. But I hope it isn't necessary.



> Stagnation is good for economies.


Really? Kurt, you assume that you know what you are talking about. I don't (assume you know what you're talking about).

We're going to come out of this and be all the stronger for it. Let's check back in a year.


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## Plainsman (Jul 30, 2003)

The economy is still growing because the American economy is so strong Obama can't kill it. Not as fast as he would like anyway, but he sure keeps trying.


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## Chuck Smith (Feb 22, 2005)

> Stagnation is good for economies.
> 
> Really? Kurt, you assume that you know what you are talking about. I don't (assume you know what you're talking about).
> 
> We're going to come out of this and be all the stronger for it. Let's check back in a year.


Yes Mild stagnation or temporary is good. Like I mentioned it forces change if companies want growth. When a company is on an up swing they don't change. When they are on a down swing they will lay off and make cuts to get to an even point. If it is stagnate they will try to grow if they want to go on an up swing.

What is highlighted.....well my degrees and occupation do indicate I know what I am talking about.

Yes our nation will come out stronger. Just like people did during the great depression. Why was that......they learned not to over spend, extend credit, live with in their means. Just like hopefully people will now.....but with Bailouts....what lesson is being taught???


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## Plainsman (Jul 30, 2003)

Chuck with the bailouts I think we will see more headlines and stories like this:



> Small-business bankruptcies rise 81% in California
> With credit tight and consumers still pinching their pennies, many business owners find they can't go on.
> Related
> More prime mortgages default in 3rd quarter
> ...


Obama bailed out the fat cats, not the people who really needed it. The small business can be bailed out by simply not taxing them out of existence. The banks would not have failed if Barney Frank and friends had not forced banks to give loans to people who could not pay them back. So what they have done is force the banks to give loans to freeloaders, then take money from the working stiff to pay back the banks. Sounds like a redistribution of wealth scheme to me.


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## Chuck Smith (Feb 22, 2005)

Now lets get back to the topic about this guy making money. Lets look at what he made $$$ in A hedge Fund. Hedge funds are funds that a group of investors go into and buy debt, buy investments (stocks, bonds, etc), and/or commodities.

Now like i mentioned before. I am sure this guy got investors and went to banks and bought the debt from banks, and stocks in banks. Now this does two fold.

1. Buying the debt people can do it for pennies on the dollar. Example. A bank is in foreclosure on a home ($100,000 loan) an investor or group comes in and buys this debt from the bank for $80,000....since the bank knows on an open market or sheriffs sale they will get $60,000. Now these investors go to the homeowner in default and offer them a deal to allow them to stay in the home. ie... $80,000 mortgage instead of the $100,000. Less interest rate than what they were paying....and on the ARM loans out there it was around 8%....so they back that off to lets say 4%. Now that would roughly save that home owner $2000+ a year.....they stay in the home and now the "fund" makes all the interest payments (4% growth for that year).

2. Another part of this is they buy stock in said bank. Now the bank is showing less debt to income ratio and stock goes up. So more growth. Now compile that with safe bets on this fund....ie bonds or stable stocks, and then play with commodities. You can show major growth!

Now here is something to think about......if the goverment did not step in and this guy did what I said he did (example above)....he would have made even more $$$. So are investor out there still waiting for things to keep going lower so they can start to invest again? If the goverment did not step in....would they have invested sooner? Are we at bottom yet? Lots of questions investors are waiting on. One thing many are worried about is the Health Care bill. Because investor in the past 15 years or so have invested big time in Pharma and medical side......now with some of the purposed legislation these investors are scared and nervous.

This hedge fund making money is not a sign of economic turnaround. When the unemployement rate gets back to 7% or so is a sign that things are changing. This is just a story of an investor making a smart decision.


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## seabass (Sep 26, 2002)

Plainsman said:


> The economy is still growing because the American economy is so strong Obama can't kill it. Not as fast as he would like anyway, but he sure keeps trying.


I knew you'd come out swinging with a pessimism. never fails.


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## Chuck Smith (Feb 22, 2005)

> Chuck with the bailouts I think we will see more headlines and stories like this:
> 
> Small-business bankruptcies rise 81% in California
> With credit tight and consumers still pinching their pennies, many business owners find they can't go on.
> ...


Plainsman.... You are 100% correct. Try to go to a bank and get an operation loan.....it is way more difficult. Small farmers this past fall had to jump through more hoops than before to get operation loans. Some in my area were holding grain and waiting to sell it when it was on an up swing and the banks forced them to sell a portion of it if they wanted to get the operation loan. Some farmers could not get a bigger loan to expand with out selling grain or other assets.

Also with anyone wanting to start a business they need more down and banks are giving less money out. Is this good for economic growth? Or expansion of business......same thing. Hard to get that loan.


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## seabass (Sep 26, 2002)

Chuck Smith said:


> Now lets get back to the topic about this guy making money. Lets look at what he made $$$ in A hedge Fund. Hedge funds are funds that a group of investors go into and buy debt, buy investments (stocks, bonds, etc), and/or commodities.
> 
> Now like i mentioned before. I am sure this guy got investors and went to banks and bought the debt from banks, and stocks in banks. Now this does two fold.
> 
> ...


Chuck, did you subscribe to the WSJ so you could read the article?


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## Chuck Smith (Feb 22, 2005)

Nope no subscription......and I don't know how that hedge fund worked.....but there are ones out there like i mentioned. ;-)

Also most hedge funds make the best return from buying debt.


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## seabass (Sep 26, 2002)

Chuck Smith said:


> Nope no subscription......and I don't know how that hedge fund worked.....but there are ones out there like i mentioned. ;-)
> 
> Also most hedge funds make the best return from buying debt.


I figured... I could tell you hadn't read it. Because he made his money entirely on buying depreciated bank *stocks*, not debt. The second I saw that big banks were repaying back their TARP funds, I sure wish I would have strengthened my holdings in bank stocks, but of course I didn't.

Other points you attempted (stock price raising which allows banks to report "income" thereby making their debt-to-income ratio better, etc.) are not valid and/or do not pertain to the topic.


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## Chuck Smith (Feb 22, 2005)

So telling me banks unloading their debt did nothing for this guys holding in said banks? So if a bank unloads debt and gets that off its books the stock won't rise? So the banks debt to income ratio means nothing?

The examples of banks selling loans for pennies on the $$$ does nothing to banks stocks?

Everything I used in my example will help raise the stock values of banks. The goverment bailing out the banks made the stock don't go completely belly up....then in return the banks repaying the goverment loans is the banks unloading its debt.....which in turn raises stock value.

Everything I stated is why banks stocks are on the rise. Are banks giving more loans? Not like they were. Is it harder to get commercial loans.....yes. Is it harder to get operation loans....yes. Is it harder for business to grow....yes.

Like i have stated in other threads........The National Association of Realtors is stating that home sales are up..... But the thing they don't want you to know is that over 50% of the home sales are REPO's. So banks are unloading their debt. All in which will make bank stocks rise. Does it mean the economy is growing? nope. It is just lining the pockets of smart investors and banks.


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## Chuck Smith (Feb 22, 2005)

Also to try and discredit my posts.... Read my first post.

well here a part of it...



> I am not subscribed to the Journal. But I can tell you how the rest of the story went. He bought shares of banks going in the crapper. So he bought them for pennies on the dollar. So now when they show a slight up swing. He sold them for double or better than what he bought them for. In a poor economy you can do this. But this one broker's story. It is the old story buy low sell high.


So then play the other part of banks dumping debt.....yep I think I know how they made money.


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## seabass (Sep 26, 2002)

> Another part of this is they buy stock in said bank. Now the bank is showing less debt to income ratio and stock goes up


Chuck, I took your writing above to mean that the guy buys bank stock (cause), which then subsequently causes the bank to be able to report less debt (effect).


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## Chuck Smith (Feb 22, 2005)

No what I meant by that is you could be double dipping. ie....buying the debt for pennies on the $$. Then buying the cheap stock. So then when the bank shows better numbers.....you can sell the stock or keep it. even though you are the reason why the bank is showing better numbers is because the fund is buying the debt.

To make it more simple.... With my example.....the investor/hedge fund is making 4% return on just the purchase of the debt. Then if fund/investor bought the stock at $1 and the stock was now at $2. The portfolio (hedge fund) is making a 104% return....or something to that effect.

Again the banks are paying off the TARP loans because they are selling their debt. What they needed to do with those TARP loans is both....get rid of bad debt and make good loans. They are only doing one side....selling debt...even good debt.


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## seabass (Sep 26, 2002)

okay, but what you meant and what you wrote are two different things.



> Again the banks are paying off the TARP loans because they are selling their debt. What they needed to do with those TARP loans is both....get rid of bad debt and make good loans. They are only doing one side....selling debt...even good debt.


Chuck, I'm amazed at the inside information you have. I'm amazed that you know that the big banks paid back their TARP loans by "selling their debt" rather than just using their profits to pay back the loan.... the loan they needed to keep from going under. You should go to wall street so you can tell them what "they" need to do. Might as well tell them what "they" did wrong while you're at it!


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## Chuck Smith (Feb 22, 2005)

No what I wrote was two things or steps.... 1. Buy debt. 2. Buy stock in bank. This together makes stocks rise at a higher level. But also with buying stock.....it makes stock value rise if the stock purchased is from the company. This generates income for the company. So again it will help lower the company (bank) income to debt ratio. Which will artificially make stock value rise....a little. But this is a whole different can of worms and another side to economics.

Insider info....not really....

Industry leaders told banks this would happen with making sub prime loans. Nobody listened. This is like a repeat of the late 70's and early 80's. History should have been an indicator. Many individuals involved in real estate saw this coming. But nobody listened. Brief history lesson (i was only apart of a little bit of this since I was not born during some of it).... late 70's.... Oil crisis (long lines at pumps, gas scares)....followed by foreclosures.....fast forward to 2007 or so....oil crisis (price of oil, shortage scare)....home foreclosures. Sounds familiar doesn't it.

Here are some indicators i have mentioned over and over...... Housing was growing at a nation wide average of 25% a year (some area's even stronger and other weaker)...for 10+ years. While inflation and wage increase was only increasing at a 5% average during the same time frame. How could nobody see the housing bubble bursting! Then you see banks offering people 0% down loans, no PMI, 105% loans, etc. How could they not see people over extending themselves. I am just amazed it lasted as long as it did.

Now with telling banks what then need to do......why sell good loans. Why sell off a loan where people are paying it back on time....but banks are doing it to make up for loss elsewhere....and paying back the TARP loans. The majority of homes being sold are foreclosures......who debt is the foreclosure....banks! Sheriff sales....who gets that $$$....banks. Not insider info....basic facts. This is not rocket science like they want you to believe.

Here is the sad part......if the goverment would not have stepped in and let some of these banks collapse. We could have been better off. Because the banks that made the right decisions would be in a better situation now. But again all it is doing is keeping a status quo.

Here is a kicker......the same economists that predicted the burst and talked about the burst of the housing market are the same ones saying how this health care bill is BS and won't do anything to lower rates. But again are the elected officials listening.....NOPE!


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## seabass (Sep 26, 2002)

Every time I spar with you I feel like I need to fine a bang-your-head-against-the-wall emotiocon. What you wrote and what you wanted to say weren't the same thing. On top of that, virtually everything you have written doesn't pertain to the article. 

Your stories are written with the benefit of hind-sight. The commonalities between 'then' and 'now' are not as strong as their differences. No offense Chuck, but I think you don't know as much as you think you do on the subject. We all pick and choose the news stories, trends, or stats that we want to hear, me included. I still have optimism that the stimilus/TARP/etc. was the right choice. Let's just call a truce and resume this in a year. I'll be the first to admit I'm wrong, if necessary.


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## Chuck Smith (Feb 22, 2005)

With this article and the guy making $$ I am correct.

Again. He bought bank stock when it was low. The banks got bailed out. So now they have time to sell there debt with out going under. Now with over 60% of home sales being foreclosures that is the banks dumping debt. Which makes debt to income ratio for banks good. IE they are now running in the black instead of in the red. So that will in turn make stock value in a bank rise.

This is what this Hedge Fund did.

Now what I did was assume the hedge fund did two things.....ie buy the debt and also buy the devalued stock. OPPS. I only had one of the two correct.

Now with the TARP loans.... Banks got bailed out or got a loan. Now with selling the inventory that they possess (homes). They sell the inventory they can pay back the loan. Correct. So again with over 60% of the home sales are foreclosures....banks are losing the inventory or their debt. So now with that generated capital they can pay back loans. Correct. So with what I have typed is not incorrect.

Then you said I had insider info or what ever......nope all indicators that people did not want to listen too. By people I mean the nation not just elected officials.



> Your stories are written with the benefit of hind-sight. The commonalities between 'then' and 'now' are not as strong as their differences. No offense Chuck, but I think you don't know as much as you think you do on the subject. We all pick and choose the news stories, trends, or stats that we want to hear, me included. I still have optimism that the stimilus/TARP/etc. was the right choice. Let's just call a truce and resume this in a year. I'll be the first to admit I'm wrong, if necessary.


Here is the thing......the only way we can compare this year to next year is if no new legislation gets made that will create jobs, bail outs, or over hauls of any type of industry. That is the only way to truly tell if the first stimulus worked. But yet more and more legislation is coming. They are not giving it time to work or fail. Yet unemployment is still rising, consumer spending is down for the year (hard to tell this time of year because spending always happens around x-mas), no industrial or commercial growth, etc. All indicators are pointing that it is not working...so far. That is why they are pushing for more legislation.


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## Plainsman (Jul 30, 2003)

> Chuck, I'm amazed at the inside information you have. I'm amazed that you know that the big banks paid back their TARP loans by "selling their debt" rather than just using their profits to pay back the loan.... the loan they needed to keep from going under. You should go to wall street so you can tell them what "they" need to do. Might as well tell them what "they" did wrong while you're at it!


Oh, come now seabass, your doing the same thing. As a matter of fact we all have our opinions.

I knew you'd come out swinging with a pessimism. never fails.


Plainsman said:


> The economy is still growing because the American economy is so strong Obama can't kill it. Not as fast as he would like anyway, but he sure keeps trying.





> I knew you'd come out swinging with a pessimism. never fails.


No, I come out swinging with reality. I don't think you will get it any better than those in Washington. Maybe you will understand after 2010, but I doubt it. If after 2010 we get a congress that corrects the mistakes of the fools in now the average liberal will never understand the trouble we were in in the first place.

I'm not that much of an economist to make the comments you and Chuck are making, but I know people well enough to know that the power currently rests with those who will do their best to destroy capitalism.


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## zogman (Mar 20, 2002)

Seabass, Take your, hey where did the Koolaid symbol go? and go to Bismarck and tell the Bobcat workers how flippin good things are. uke:


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## seabass (Sep 26, 2002)

I think all of you made good points. There is no silver bullet, I think at least that much is clear.

Plainsman, you're right. I do the same thing.

Zogman, it's not a good situation there. I hope things come around soon.

Whatever the best way to get out of this, I hope we get through it soon.

Have a great Christmas gentlemen...


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## Plainsman (Jul 30, 2003)

Merry Christmas to you seabass, and God's blessings for the next year. Same to you zogman and anyone who reads this.


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