FDIC R.I.P - Eric Janszen

[TheServant]

Re: FDIC R.I.P - Eric Janszen

I want to thank Mr. Janszen and others on this board for providing such a wide range of helpful insights into this fiasco. Eric gave me the final nudge to shift the lion's share of my retirement from stocks to treasuries when I first came upon ITulip in the fall of 2006.

My wife and I moved from a small mid America town to the Detroit Metro area in 2003. I remember her asking me in the summer of '06 where these people got all their money. My tongue and cheek response was that they were all in debt. At the time, I did not quite appreciate the true magnitude of the problem. It was not too long after that day that it became painfully obvious what was coming, if you chose to look. We kind of led the charge into the abyss here in car country.

Anyway, enough rambling. I just registered to the forum yesterday and am looking forward to sharing in some thought provoking discussions as this economic "transition" continues to unfold over the coming years.

Thanks again.

[Supercilious]

Re: FDIC R.I.P - Eric Janszen

Pres. Obama talked of the surprisingly strong dollar. Next target.... Selling dollars in the open market?

That starts tomorrow...

By the way, just in case you were wondering how successful was the Bear Stearns bailout:

http://www.marketwatch.com/news/story/Treasury-take-over-Bear-Stearns/story.aspx?guid={855A56BF-E8A1-49B5-BD95-02F6A9A813B2}&dist=hplatest

WASHINGTON (MarketWatch) -- The Treasury and the Federal Reserve released a joint statement Monday that spells out the different responsibilities of the two agencies in dealing with the financial crisis. In the most noteworthy part of the agreement, Treasury said it would take over the Fed's holding of assets of Bear Stearns and American International Group. Treasury did not say how it would pay for these programs and said it would only make the move "in the longer term and as its authorities permit." The Fed's investments in the three funds, known as Maiden Lane, totaled $72.21 billion in the latest week, according to Fed statistics.

Yey for us! We are all now owners of about $1000 worth share of Bear Stearns and AIG ... Wow it feels good to be a shareholder of two great companies.

[mmr]

Re: FDIC R.I.P - Eric Janszen

Here's one idea that an acquaintance suggested today that could allow banks to use this lovely program to offload a majority of their future credit losses onto the public:

- Several banks would form a consortium to qualify as an investor for the public / private partnership program

- Bank consortium agrees to pay a premium for loans on the banks' balance sheets (e.g., bid 90% of par for Florida construction loans when the actual cash flows will be, say, 50% of par)

- FDIC offers 4:1 leverage and Treasury puts up 50% equity stake (banks' maximum loss share is 10% of the purchase price, or 1/2 of the 20% equity contribution)

- Capital structure for investment therefore allocated as follows: 72% of par in FDIC debt, 9% Treasury equity stake, 9% bank consortium equity stake

- Maximum loss for the banks reduced from 50% of par to 19% (10% loss on sale + 10% of the 90% bid value)

- Loss for taxpayers of 31% of par (9% Treasury equity position wiped out and 22% loss on FDIC-guaranteed debt)

The FDIC would theoretically offer lower amounts of leverage for riskier pools of assets, but as long as the Treasury is willing to offer a dollar for dollar coinvestment, the banks can reduce their expected losses through this structure by at least the amount of that coinvestment (relative to holding the loans on balance sheet). This would also have the side benefit of establishing an inflated value for their remaining loans and related types of securities.

I'm sure there are hundreds (or thousands?) of far brighter minds than my own working on other ways to profit from this program at our collective expense.

[FRED]

Re: FDIC R.I.P - Eric Janszen

EJ's 30%-40% drop call puts the Dow bottoming out between 4600 and 5360, basically the 5000 target he has had for a long time. When the Dow gets below 5000, stocks will be attractive. Even below 6000 there's a lot more upside than downside. This will be an especially good trade if we can all sell our gold for $2500 to buy cheap stocks.

Jimmy

We have our first major allocation change in many years coming.

[jimmygu3]

Re: FDIC R.I.P - Eric Janszen

I guess my point is that you've noticed that EJ has been pretty spot on with his calls so far, so why would you be itching to buy again when he's shown absolutely no hint that we're anywhere close to that point?

Reading this site might give one the impression that pessimism is high in the economy, but I think we readers are always ahead of the curve. The real level of pessimism on the street is nowhere near what it will be if EJ is right.

Right. The attitude I find on the street is, "I've already lost 40%, what's the point in selling now?". The bottom will come when that changes to "I'm gonna sell everything before it goes to zero!"

[jimmygu3]

Re: FDIC R.I.P - Eric Janszen

Now that's about as direct a call as can be made! ITulip saved my 401K last year, I'll stick with ITulip this year as well.

Now forgive me for asking: Every stock permabear and permabull is an expert at one time or another. The question is when do we get back in????

I don't accuse ITullip as either, but there has to be a time to buy sometime....... right???

right???

EJ's 30%-40% drop call puts the Dow bottoming out between 4600 and 5360, basically the 5000 target he has had for a long time. When the Dow gets below 5000, stocks will be attractive. Even below 6000 there's a lot more upside than downside. This will be an especially good trade if we can all sell our gold for $2500 to buy cheap stocks.

Jimmy

[CanuckinTX]

Re: FDIC R.I.P - Eric Janszen

when the average joe started flipping houses in 2006 the the feelings were positive too. Problem is when the average joe gets in he gets crushed.

I think the lesson is that when everyone gets overly optimistic or pessimistic its a sign that a turn is about to happen.

But for now I'm sitting out for a little longer ... just in case.

I guess my point is that you've noticed that EJ has been pretty spot on with his calls so far, so why would you be itching to buy again when he's shown absolutely no hint that we're anywhere close to that point?

Reading this site might give one the impression that pessimism is high in the economy, but I think we readers are always ahead of the curve. The real level of pessimism on the street is nowhere near what it will be if EJ is right.

[FRED]

Re: FDIC R.I.P - Eric Janszen

Hey EJ,
Very nice as always, but I'd sure appreciate some guidance as to what direction to take -- both for protection and maybe positioning to take advantage of what you say is coming.
Given some of the postings over the last few months I'd say you must have stock in whomever makes Xanax.....l

Coming tomorrow. That's what the recently debated subscription area is for.

[Sharky]

Re: FDIC R.I.P - Eric Janszen

This tells me it is designed to fail, and leave the taxpayer with the financial party bill.

Of course it's designed to fail. That's the whole idea! It's simply a back-door way of bailing out the banks and sticking the taxpayers with the bill. I don't think anyone is even bothering to deny that.

I have to admit, though, that the ingenuity that the Fed has with spending money that wasn't appropriated by Congress has been very impressive.

[opps]

Re: FDIC R.I.P - Eric Janszen

Pres. Obama talked of the surprisingly strong dollar. Next target.... Selling dollars in the open market?

[cjppjc]

Re: FDIC R.I.P - Eric Janszen

This tells me it is designed to fail, and leave the taxpayer with the financial party bill.

Well, you're a little darker than me. But failure does seem to be baked in.

[Scott4139]

Re: FDIC R.I.P - Eric Janszen

when the average joe started flipping houses in 2006 the the feelings were positive too. Problem is when the average joe gets in he gets crushed.

I think the lesson is that when everyone gets overly optimistic or pessimistic its a sign that a turn is about to happen.

But for now I'm sitting out for a little longer ... just in case.

[Supercilious]

Re: FDIC R.I.P - Eric Janszen

Absolutely. I was wondering why the FDIC needed to be involved. This tells me they don't think it's going to work.

This tells me it is designed to fail, and leave the taxpayer with the financial party bill.

[CanuckinTX]

Re: FDIC R.I.P - Eric Janszen

Now that's about as direct a call as can be made! ITulip saved my 401K last year, I'll stick with ITulip this year as well.

Now forgive me for asking: Every stock permabear and permabull is an expert at one time or another. The question is when do we get back in????

I don't accuse ITullip as either, but there has to be a time to buy sometime....... right???

right???

Sure sometime in the future will be the time to buy, but don't you think the feelings of the posts here will start to turn a lot more positive long in advance of that call? Does it even remotely feel like this is the bottom and it's "champagne time, baby" from here on out!?

Not from what I see and hear. I have friends still getting their pink slips all around me.

[anoop]

Re: FDIC R.I.P - Eric Janszen

Now that's about as direct a call as can be made! ITulip saved my 401K last year, I'll stick with ITulip this year as well.

I also moved to cash last year because of reading blogs (not this one, though, I found out about this one much later). However, I have bought GLD based on the recommendation of this site.

Most other blogs don't seem to be taking a stand as strong as this one that everything will turn to dust. But judging by the looting going on, I would have to agree. However, that the timing has been set as being some time in the next 3 quarters is scary. I thought they would pull of the looting charade for a much longer time.