"Evojeesus" <evojeesus[at]mailinator.com> wrote
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On the premise that a response may help U.S. investors
understand the pros and cons of investing in U.S. based
stocks, bonds, CDs etc., and so plan, here is a brief
response, designed for casual chatter and nothing more:

Controls on money supply: Alter interest rates and taxes
(individual, corporate, import etc.); set tighter or looser
controls on lending standards and amounts banks must
maintain "in reserve." Etc. One recent interesting example
in this vein involves the government (if need be) granting
an exception to Bank of America so it can buy Countrywide
Financial. Without this exception, BAC would be in violation
of a law that says no single bank yada can hold more than
10% of the country's money deposits.

Controls on stock markets: The stock market is abruptly and
automatically shut down (to give investors a chance to come
to their senses, say, in an irrationally-based panic) when
certain types of declines take place.

Controls on jobs and products: Nationalize certain
industries to ensure commerce flows as freely as possible,
promote creation of more jobs; prevent price gouging;
require lenders to make special allowances for those facing
foreclosure; etc.

Controls on foreign policy: War or no war.

Econ is not an exact science, of course, and naturally there
is no precise answer. I do think it's important to
understand that changing the "financial health of a society"
requires taking a long view. It's a collection of actions
that over time (sometimes several years or more) causes
change. Never expect immediate correction of a situation
like that we are in today, with poorer people losing their
homes and wealthier people seeing their investments take
huge hits.

One has to consider the means by which cultural change is
effected (sic). It's social science, which is as inexact or
synonymous with economics.

I think folks who are most interested in improving their own
lot have to look out for the good of society as a whole.
Government is supposed to look out for society as a whole,
but it helps if the populace "gets" that the reason for
doing so is not for lame-assed, "fuzzy feel good" results.
Rather doing so is a matter of sound financial reasoning.
See for example Safeway CEO Steve Burd's commentary on how
"investing" in the physical health of his employees via XYZ
has improved Safeway's financial health. What is good for
all does help the economy profoundly, meaning more are more
likely to be innovating in business, earnings are up, folks
have jobs so you and I can have growing dividends from
growing company earnings, the human condition (longer life
expectancy yada) improves via technological improvements
etc.

Note: My thoughts are influenced via early study at the feet
of a student of Nobel prize winning economist Paul
Samuelson. He being something like an early (the earliest?)
composition of Ben Graham, Warren Buffett, Alan Greenspan
(hmm, to those in the know), Jeremy Siegel, Robert Shiller,
and others who are regularly highly regarded.

If you are investing in a bank-manged security,
they have to tell in the perspectus.
Otherwise you only learn about it if it goes bad
and the bank has to explain it in their annual
profit nd loss report.

Evojeesus <evojeesus[at]mailinator.com> wrote:

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Out of respect for our moderators, I'll stick to what the government can do, not
what it should do. The short answer is not much.

The Fed can lower interest rates, but that takes about 18 months to have much
effect on the economy. The Keynesian possibility is to increase the deficit,
either by lowering taxes (such as a cash rebate like was done in 2001) or
increasing spending. That would have a more immediate impact on the economy,
but it would require a massive increase in the deficit to have a significant
effect.

-- Doug

On Jan 11, 5:31 pm, "Elle" <honda.lion...[at]nospam.earthlink.net> wrote:

- quote -

What do you think the government can do in this situation?

Alternatively, you may also want to look at Wachovia (WB) which is
trading at very attractive levels. Good dividend too. The company has
said the dividend is safe but we will have to see. I own a little bit
of them.

Rather than getting individual bank stocks, you might also want to
consider Ultrashor Pro Financials (UYG) a leveraged ETF that has
tanked this year. It might be an excellent investment for the long
term. I don't own any.

W. Wells, I thought this an interesting article on the lack
of transparency in general of subprime exposure:
http://www.thestreet.com/newsanalysi.../10344210.html
(dated March, 2007). Notice that Washington Mutual is not
mentioned. Generally speaking, WaMu has been one of the ones
hit hardest, behind Countrywide and maybe a few others it
seems. You can google using {subprime exposure banks} and
find more.

I agree with Elizabeth R. about Warren Buffett's savvy in
general. He made the BAC purchase in the second quarter of
2007. It's less than 1% of his portfolio. With this being
such a small stock position, one could say his risk was
small. Still I wonder what Buffett says about the disconnect
between what he knew then and what we know today, hindsight
being 20/20 of course.

- quote -

fundamentals. National City Corp. cut its dividend by half
in early January. Citigroup has not ruled out a dividend
cut. But importantly and relevant to your question, the
media has not made similar predictions for BAC. I hope it's
not too obvious, but you want to look for announcements
about bank "writedowns." These denote a reduced appraised
value of assets, in this case tracing back one way or
another to reduced valuation of mortgages. Articles such as
http://www.streetinsider.com/Basic+Content/Bernstein+Sees+Citigroup+(C)+Q4+Write-Downs+of+$12B/3229599.html
suggest that BAC's writedowns are not nearly as severe as
Citigroup's.

It's a highly anomalous time for dividends, particularly (or
maybe only) in the finance industry. This is trickling
through the whole economy, as I am sure you have read.
"Depression" is a nasty word, but I think it's important for
laypeople to understand that an overabundance of credit (c.
1929 and in the last few years) can lead a nation to
economic chaos and sometimes disaster. Too much credit is
when wealth all of a sudden disappears, because it was built
on a house of cards in the first place.

I think the government is smarter today and we will not have
a depression, but I am seeing a year or more of recession.
Sit tight, and reinvest those dividends now when so many
stock prices are down, so as to buy more stock at bargain
prices. I can't say that WaMu is a good buy now, but even
with the dividend cut (and due of course to the fall in
stock price) its dividend yield is now over 4%. This should
entice at least some investors to keep holding it. Likewise
with other bank stocks.

"W. Wells" <otf70[at]nc.rr.com> wrote in message
news:47851a74$0$16806$4c368faf[at]roadrunner.com...

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Yes, but Buffett isn't a gambler, he's a highly successful, long-term
investor. If Buffett is buying, it is probably the best recommendation
you'll ever get.

Elizabeth Richardson

On Jan 9, 12:04*pm, "W. Wells" <ot...[at]nc.rr.com> wrote:
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Here's an article from Fortune about BAC and Countrywide:

http://money.cnn.com/2008/01/09/news...ion=2008010914

I would to know as much as I can on BAC subprime exposure. The 6% dividend
looks good but I'm worried about their ability to pay future dividends.
Buffett bought it at $50 a few months ago but he can afford to loose his
money more than I can.