For so many years the man at the helm of the federal reserve was alan greenspan and the question that im going to ask everybody reading this blog is.... “is alan greenspan a genius or a fool?” genius because for so many years he was able to keep the american economy afloat or is he a fool because of too gimmickery that when after he left his post the economy had nowhere to go but down. :) as they say the higher you are the harder the fall. :) economies by nature are cyclical meaning there will be periods of prosperity and there will be periods of depression which is normal. :) just like life itself. :) but during his long term in office which if i remember correctly is over 20years there was hardly a very serious depression. And if i remember correctly the life cycle of an economy with a great upswing and a great downswing is about 30-50 years according to marc faber in his book but i have to check on that again. :) so the last great depression was in 1929, 1973 and possibly 1987 could be considered as well but the question is when is the next great depression? Could it be happening now? Time will tell. :) the federal reserve has been drastically cutting interest rates and it hasn't had any effect yet. (another point that my friend has been raising about greenspan is that if he raised interest rates a bit during his term the crisis wouldnt be this bad) I have a little opinion or theory if you'd like to call it. Interest rates have been lowered so where are people putting there money? For sure its not in stocks and most likely it is also not in real estate because of the subprime mortgage mess. So where are the americans, investors and fundies putting their money? Possibly in assets outside the us and most likely in commodities which would explain the rise in prices. And could it be possible??? according to the charts, gold has a mimun upside of $1,250 and with this credit crunch fundamentally the us economy will stay down for a while and the most likely place that people will place their bets in would be commodities so hold on tight guys. :)
maybe you guys are wondering why i made a poll about jamby madrigal and pia cayetano. It was just an idea that came up when they had a cat fight in the senate. :) i voted for pia cayetano i have to admit(she's also cute by the way) but i didn't vote for jamby madrigal. What have they both done while they were in office. Jamby making the news for protecting a tree and pia cayetano for entering all those athletic races and stuff. I have to admit they both haven't done enough and i could say that more deserving people deserve to be there. Let your vote be counted. :) good luck on all you invesments. :) God bless. :)
p.s. For any comments, questions and suggestions please email me at compounder888@gmail.com
and a joke for all of you! What disease is the market suffering right now??? answer: beary-beary. :)
2 comments:
Americans/fundies parked most of their money in US treasuries since the start of the crisis. And lately there was some "diversification" into commodities as treasury yields dropped to very low levels. It is also possible that americans are cashing out of their investments/funds to support personal spending and debt payments, now that home prices, which used to be their source of equity and net worth, are falling drastically.
ey, chief!! hehe, sunod man ko sa imo, pre :-)
indirectly, many mutual funds parked their money in real estate pre. to be more specific, real estate mortgage-backed securities, or cdo's (collateral debt obligations).
with low interest rates, mortgage companies encouraged home financing and refinancing. middle men and wall street wizards then repackaged these mortgages into securities, and sold them in the open market as cdo's (aka, subprime mortgage securities) to buyers the likes of bear stearns, morgan stanley, citigroup, and all them other finacial institutions who were forced to make write-downs.
ang lain diri pre, amo ni ang nagfuel sang real estate boom. with low interest and mortgage companies, wall street wizards, fundies and everyone else worked to perpetuate the cdo's, even up to the point when they became subprime (i.e., they were made by people whose capacity to pay were much less than the loans they were making, and whose home values were bloated because of the boom that was caused by low interest rates...vicious cycle siya pre).
so when the bubble burst, real estate prices suddenly went down, cdo's (even those with AAA ratings) suddenly became subprime, mortgagees defaulted, mortgagors forclosed, fundies wrote off, and everybody lost.
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