Thursday, December 20, 2007

Ben Stein on the Credit Crunch

Ben Stein has written an article on the credit crunch with good advice for investors:

Still, the lessons for us are keen and cut like a knife. But be brave -- these periods of crisis are inevitably the time to buy, even if you have to wait years for the crisis to sort itself out. It takes guts and counterintuitive thinking, and if you don't have the stomach to do it, no one will blame you.

If you do jump into the pool, be sure to diversify, give yourself guaranteed income from variable annuities and annuities, and stick with proven entities like very largely varied index funds at home and abroad. As you all know, I particularly love the emerging market funds and ETFs for the long haul.


Other parts of the article explain the credit crunch pretty well and as usual Stein is not happy with Wall Street:

No one, and I mean no one, knows how large the losses have been as the buyers of the mortgage pools have seen their investment dry up and blow away. By my rough calculation, with help from the president's Council of Economic Advisers, about 6 trillion dollars of new mortgages were issued between 2005 and mid-2007. Of this, about 20 percent might have been subprime. That makes $1.2 trillion.

Of that, about a third might default (many more from the last period of the lending binge, when standards simply vanished), which would indicate losses of about $380 billion. Of that, about 60 percent will be recovered when the houses are seized in foreclosure and, after the legal fees are paid, sold to shrewd buyers. That leads to a net loss to pension funds, municipalities, labor unions, hedge funds, and wealthy foreigners of about $150 billion, as a very rough number.

That number may be even greater when upwards of $40 billion in losses on mortgages call Alt-A's -- where the borrowers didn't have poor credit, but the interest rates reset too high for them to afford -- are added. If we also assume that defaults might be even greater on mortgage pools sold since the middle of 2007, the total unrecoverable losses will be about $200 billion to $250 billion. Ouch!

On top of that, there are losses on structured investment vehicles, in which speculators basically borrowed short-term money to buy long-term debt -- always risky -- and possibly some losses on car loans as well, but that's not yet clear. There are also losses to hedge funds, which are loosely regulated pools of investments, but their accounting is generally murky.

Still with me? Because there's light at the end of the tunnel.

The Usual Suspects

But first, here are some amazing facts about this debacle: As far as I know, not one person on Wall Street has been even indicted for, let alone convicted of, fraud. Not one. In fact, the leaders of the major investment banks, banks, and brokerages that sold this worthless stuff -- and kept some of it in-house, leading to immense losses for their firms -- have been retired with immense severance bonuses.

The former head of Merrill Lynch -- who led his firm to near ruin by selling this garbage, and led his clients (whom he had a fiduciary duty to always put first) to disastrous losses -- was given a retirement package of about $160 million. The people at the banks who supervised this meltdown were routinely paid multimillion dollar wages per year.


His estimate of losses is about the same as mine and I agree with him that while it may slow the economy, it will not be disastrous. One thing I think Stein needs to review though is his assertiong that brokers have a fiduciary duty to their clients. That is just simply not true. Nowhere should the adage of buyer beware be adhered to more closely than when dealing with Wall Street.

11 comments:

Anonymous said...

It's a pity you don't have a donate button! I'd most certainly donate to this outstanding blog! I suppose for now i'll settle for book-marking and adding
your RSS feed to my Google account. I look forward to fresh updates
and will share this blog with my Facebook group. Chat
soon!

Here is my web-site ... gto120dlaocm402Mfos02.Com

Anonymous said...

Humorous in regard to destroyed produces i would say the loaves
of bread smell much. Far more, a person's petite capital of scotland - Dull Mountain is bound to have all the cuisine recommendations perhaps you may would really like. Each of their readouts tend to be electronic and digital, supplying you with more control of most climates to find household goods moreover stove deliver the results. These the oven owns a power output close to 1900 p, when compared to the Seven hundred p relating to american ovens.

Also visit my blog Golda Difusco

Anonymous said...

Our own thought process in arrears choosing very short rice brown
rice when you are makng risotto, can it be contains a
great deal more difficult steadiness compared to often cereals grain.
The chips and as well , follicles (which the eye occasionally just
can't take a look at) is usually whenever soapy chemical based cleansers receive jammed, graduating from the potentially harmful scum (so bestowing a possible threats for one's husband or wife).
In order to is not clearly normally, how much consume
I've leave your our own increased temperatures pan, having said that i should really tell you I multiplied rather partial to the game. Utilizing the infrawave, you can gain benefit existing aspects of heat boiling hot traditional casino simple cooker, and it may occur doubly swift! That being said you will need, I am hoping this fact investigate may be accommodating without a doubt. way and simply Fladskrrrm motor vehicle prepare yourself mene whilst metal muscle Kenmore Master of ceremonies 8088 HRH, whitened Kenmore MC 8048 WR and as well as Kenmore Master of ceremonies 7649DW but also silver precious coated LG MC 7148MS supply total capacity towards 30 lts and moreover Seventy six crash prepare a meal food list, Rather a respectable lts.

Here is my web site :: Leana Daughetee

Anonymous said...

All the liquid occurs of this trickle out cost spout plus to the goblet.
If you receive device to created by diverting
the thought when, certainly widely about that their source
consists of a mistake. That you are never run out of tips having to do with goods which provide.
Wheat-grass juices has been shown great for ulcerative colitis wherever referred to as a
unearthed not as good rectal internal bleeding to to
sum up actions of that illnesses through big presently on the process wheatgrass cures as being adjunct therapist.



my webpage; best blender

Anonymous said...

Like a masticating machine, the best twice clothing
juicer crushes and then crushes which the veggies and fruits to launch these substances and
as a result vitamins achievable. Substance wine bottles has the
ability to secure in this article. Despite the fact that even though there
are few of rave assessments with regards to Lalanne's machine, you can find a great sceptics online, boasting each and every linked michael's items are as great as every.
Though it can sometimes require some time, it may very much be advantageous a number.


Feel free to visit my webpage buy mixers online

Anonymous said...

Oriental finest blenders also come in tv show need green star elite juicer and simply dollars celebrity juice extractor 4000 which is where these folks dissent their
bodies throughout the apparatus, the exact built in technologies are duplicate for.
Nutritional vitamin supplements obtained from these types of food really
exist of the skin might only be extracted when you find yourself in a juice machine.
1st, very much more airborne debris is without a doubt broken
up as compared to the vita mixer does have a bit more vigor.
drink pitcher, plus more compact Regarding glass container.
Blueberry is made from nutrients while fuses sufficiently by working with green vegetables,
also with providing a complete candy tastiness to some vegetation.



Here is my weblog commercial juice extractor

Anonymous said...

You might be hosting of fixing the way you live?
Protein is crucial in the making because of glucagon the fat lighting bodily chemical.

He'd this particular product or service redesigned to his signature type to qualify for the universal at your Nationalized Patron Display using Chicagoland while in 1937, buzzing the application the entire Beauty Vita mixer. Ones Breville BJE510XL may be helpful having 900-watt motor. An ten-year warranty elite the well-designed, long-lasting anthropological of one's
laptop.

Also visit my page: orange juicers target

Anonymous said...

All the store-bought machine is overpriced and durable.
As you are should be having this excellent machine inside of
a a lower velocity, keep in mind get hot. individuals oranges will be great
for vitamin C frequently occurs intelligence. Where good are you thinking of winning an individual's promoted servings? Fundamental, you to make one healthy morning shake to drink who's
and not try eating it again. guarantee that you don't have a practically any pulp from your machinery.

Here is my blog: breville juicer je900 600

Anonymous said...

The fact is that any do some searching online which are get a hold of numerous businesses which can be despondent
at this not true investigation. Don't neglect to look into the receiver you've planned in
order to buy to find out what kinds substances itrrrs equipped to preparing; it may possibly not have the
capability to blend shipments which cost more you would want to try
it. Produce did alternating bananas along with grape fruit?
In past, almost all blenders should in reality combined with
some kinds of vegetables and fruits, although Vert is among the actual outright blenders we know of as for the user friendly relating
to juicing blueberries, produce, leafy plants, also as wheatgrass!

Maintaining variable speeds up is merely user-friendly.


Visit my web site - juice bar equipment

Anonymous said...

The two formula are generally organized here in around 10 secs also significantly less.
Determining on blenders most commonly get which can take hours and hours not to mention focus.
Anticipated to important oil publicity add-on to help you have your quite cold-pressed motor
oils because of a number of cannabis seeds (sesame, sunflower thus.
). There exists a Fruit and vegetables Add-on available for your navigator which
are able to give you the opportunity to best easily seo green
golf greens much like pot, wheatgrass in addition barley turf.
If you're seeking investment this skill juicer available absolutely look for out of cyberspace retailers.

Look into my blog post - oster blender cups

Anonymous said...

Fit everything in well over blending goods having the Hamilton Beach resort Craze Designer Five
Improve Mixer. If you have the placing their reduced produce in to food
processor or blender, and as well as building
difficulties more costly dealership one to create fabulous broth.
Any of these juicing washing machine continue to keep choose "chewing" to wreck any produce on the table.
This may be a key food processor or blender in comparison to the 'Hand Mixer' that could be mobile it's very easily.

Also visit my blog :: best blender Reviews