Radio Free Wall Street 4/4/2008

Lee Adler, Aaron Krowne, and Russ Winter talk about the latest developments in the financial markets and analyze the potential implications. Topics include mad max economics, the breakdown of Treasury finances, the coming bond collapse and unstable markets in general.

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4 comments for “Radio Free Wall Street 4/4/2008

  1. bdb
    April 4, 2008 at 9:21 pm

    Another great podcast. Thanks.

  2. just4laughs
    April 5, 2008 at 10:43 pm

    Imagine you are a financial institution who is holding billions in ‘worthless’ paper backed up by subprime and Alt-A mortgages. Imagine you have to report to your investors your quarterly financial statement to show how much you made for them or lost. Now imagine that you have to post to that section called ‘unrealized gains/losses’ how much money you are losing due to the devaluation of that paper you are holding.

    So what do you do? Luckily the Fed comes to your rescue. Simply, give that worthless paper to them and they give you back cash in the form of a loan and at the full face value of the paper. So if the paper is currently valued at, say 20 cents to the dollar, they will give you back 100 cents or how much it used to worth probably a few years ago. This way you erase from your balance sheet much of that unrealized losses and instead you report that worthless assets of yours that the Fed is now holding as a collateral to the loan you got from them at full value in the assets section of your balance sheet and the loan you got from them as a liability, netting of course zero. This way you cleverly hide away that huge loss of yours from your current quarterly financial statement. You repeat the whole process again next reporting period and keep doing that as long as it takes until the markets eventually come back. Rest assure. You don’t have to worry a bit since you have an ally namely the Fed who will stand by you and help you hide those losses of yours for as long as is needed until the next wave of sucker investors come around who either have brain failure or have no clue as to how to read your balance sheet because you have done it so many times that they lost count.

    Great! Thank you Bernanke and Paulson for your zeal to bring transparency and honesty to our ailing financial markets.

  3. Raymond
    April 9, 2008 at 10:59 am

    Thank you Lee, Russ, and Aaron for another great popcast.

    just to echo Russ’ saying about rice and steel – I am a Chinese-American living in NYC. this past weekend I went grocery shopping with my wife and found that the 25-lb rices packs went from $12 each to $17 and they were out of stock in most supermarkets in Chinatown. The Dow Jones US Steel index $djusst went from 348 to 488 since mid-January, a 40% gain.

    I also suggested my wife to move all her mutual fund holdings to cash by early May – thanks for pointing out the signs of our times each and everyweek.

    Raymond

  4. Lee Adler
    April 9, 2008 at 1:33 pm

    Thanks to all for your comments and kind words!

Comments are closed.