News What is wrong with the US economy? Part 2

[mgb_phys]

Rep. Brad Sherman (D-California)...Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it, and the bill has been carefully written to make sure that can happen," he said on Larry Kudlow's CNBC show Tuesday.

And if they didn't , the US would have to invade Canada to get enough wood pulp to print all the dollar bills it would need to buy anything abroad ever again.

 

[edward]

They'll likely borrow money from sovereign funds (welll really anyone who buys T-bills and treasury notes) to bailout the banks which have lots of investment from the same sovereign funds.


Someone pointed out that now Paulson had to put together a team of financial analysts to sort through the bad debt/mortagages to be bought. Where will Paulson find this team, the number of which might rival a Fortune 100 company. Well - from the very financial institutions that are being rescued? A potential conflict? You bet.

I remember when The Resolution Trust Corp hired hundreds of former saving and loan upper echelon employees. People less than happy.

 

[WhoWee]

I certainly hope SOMEONE in Congress took the time between inserting wooden arrow mfg tax credits and other nonsense to specify portfolio acquisition criteria?

Otherwise, I'm afraid the concept of (reverse?) "cherry picking" could be applied to (OUR) government selection...no doubt the mortgage company analysts have studied the choices for a long, long time.

 

[Leah]

What is wrong with the US economy? We're losing jobs and our homes and trying to pay taxes and put gas in our cars and food on the table. We have no or little health insurance. If you get right down to it our economy is on the brink of disaster. It's the middle class that gets hurt the worst and pretty soon there will be no middle class. It'll be poor and rich.

 

[nuby]

Maybe the US had too many jobs and this is a correction.

 

[WhoWee]

Maybe the US had too many jobs and this is a correction.

Huh?

 

[aquitaine]

Sorry for the late responce, I've been busy with the new school year starting up. With all of these bailouts and all of this extra money flooding into the system, where is all of it coming from? The metaphorical printing press is running at full speed at this point, sounds like major inflation is not so far away, if it isn't here already.

Sure this might seem "unusually mild", but that's because we haven't seen the full effects of it yet. The bailouts will postpone, but not prevent the coming financial apocolypse because they do nothing to address the root problems and the rot in the system.

 

[Astronuc]

http://www.time.com/time/business/article/0,8599,1846450,00.html?imw=Y

Congress's initial rejection of the Bush Administration's $700 billion bailout plan calls to mind an unhappy precedent. Back in 1930, the Senate passed the Smoot-Hawley Tariff Act, which raised duties on some 20,000 imported goods. Historians define this as one of the critical steps that led to the Great Depression — a tipping point when the world realized that partisan self-interest had trumped global leadership on Capitol Hill.

It's fair to ask whether America's lawmakers could do it again. The bursting of the debt-fueled property bubble and the crippling losses suffered by banks, together with the political dithering of recent days, have set in motion a chain reaction that, in the worst-case scenario, could lead to something like a 21st century version of the Depression — even if a bailout package does eventually get approved.

The U.S. — not to mention Western Europe — is in the grip of a downward spiral that financial experts call deleveraging. Having accumulated debts beyond what's sustainable, households and financial institutions are being forced to reduce them. The pressure to do so results from a decline in the price of the assets they bought with the money they borrowed. It's a vicious feedback loop. When families and banks tip into bankruptcy, more assets get dumped on the market, driving prices down further and necessitating more deleveraging. This process now has so much momentum that even $700 billion in taxpayers' money may not suffice to stop it.

In the case of households, debt rose from about 50% of GDP in 1980 to a peak of 100% in 2006. In other words, households now owe as much as the entire U.S. economy can produce in a year. Much of the increase in debt was used to invest in real estate. The result was a bubble; at its peak, average U.S. house prices were rising at 20% a year. Then — as bubbles always do — it burst. The S&P Case-Shiller index of house prices in 20 cities has been falling since February 2007. And the decline is accelerating. In June prices were down 16% compared with a year earlier. In some cities — like Phoenix and Miami — they have fallen by as much as a third from their peaks. The U.S. real estate market hasn't faced anything like this since the Depression. And the pain is not over. Credit Suisse predicts that 13% of U.S. homeowners with mortgages could end up losing their homes.

 

[Astronuc]

Why did Paulson have to do the bailout/rescue?

The commerical paper market, which operates largely in the background of the economy, essentially froze. The most liquid part of the market stopped being liquid. That could mean payrolls and transactions between companies could stop.

The Reserve Money Market Fund (a money market mutual fund) had invested in Lehman Brothers, which went declared bankruptcy, which meant the secure money was essentially lost. Other fund managers panicked and stopped the flow of money.

From this American Life.
http://podcast.thisamericanlife.org/podcast/365.mp3

Lehman Collateral Damage: Reserve Money Market Fund Drops Below $1 NAV
http://www.nakedcapitalism.com/2008/09/lehman-collateral-damage-reserve-money.html

Readers probably know that money market funds seek to maintain a net asset value of $1 a share. The choice of words is precise. There is no guarantee to maintain the $1 value, but industry participants consider it to be so important to the reputation of money market funds that parent companies have upon occasion contributed funds to make up a shortfall,

So for the Reserve Primary Fund to "break the buck" is a big deal indeed. And not only that, the fund is large ($23 billion in assets, and that after two days of withdrawals trimmed its size considerably) and the fall in value is considerable by money fund standards (3%). And redemptions have been halted too, so the final tally could be worse.

From Bloomberg:

Reserve Primary Fund became the first money-market fund in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc.

The fund, whose assets plunged more than 60 percent to $23 billion in the past two days, said the Lehman losses forced the net value of its assets below $1 a share, known as breaking the buck. Reserve Primary, the oldest money fund in the nation, fell to 97 cents a share and redemptions were suspended for as long as seven days...The only other money-market fund to break the buck was the $82.2 million Community Bankers Mutual Fund in Denver, which liquidated in 1994 because of investments in interest-rate derivatives.

Then there are credit default swaps - develop by mathematicians and physicists.

Credit Default Swaps: The Next Crisis?
http://www.time.com/time/business/article/0,8599,1723152,00.html

People betting on the health of the economy, which of course went bad because of bad debt.

AIG went down because it had obligations of $400 billion in credit default swaps, but it didn't have $400 billion on hand. And AIG was not the only one.

The CDS market was not regulated and it was highly leveraged (actually over leveraged). Basically in the global market, more money was promised than there is money.

 

[Astronuc]

If the link to the mp3 cited above, try the following:

365: Another Frightening Show About the Economy
http://www.thislife.org/Radio_Episode.aspx?episode=365

Alex Blumberg and NPR's Adam Davidson—the two guys who reported our Giant Pool of Money episode—are back, in collaboration with the Planet Money podcast. They'll explain what happened this week, including what regulators could've done to prevent this financial crisis from happening in the first place. You can learn more about the daily ins and outs on the Planet Money blog.

Also - http://www.thislife.org/Radio_Episode.aspx?episode=355 (05.09.2008)

http://www.npr.org/blogs/money/


Ripple effect of credit crunch: 'everything's on hold'
http://www.mcclatchydc.com/homepage/story/53476.html

 

[Astronuc]

Hmmm - the ripple effect:

Europeans scramble to save failing banks
http://news.yahoo.com/s/ap/20081005/ap_on_re_eu/eu_europe_meltdown

STOCKHOLM, Sweden - Germany joined Ireland and Greece on Sunday in guaranteeing all private savings accounts, putting Europe's biggest economy at odds with calls for a unified European response to the global financial meltdown.

The decision came as governments across Europe scrambled to save failing banks, working largely on their own a day after leaders of the continent's four biggest economies called for tighter regulation and a coordinated response.

Chancellor Angela Merkel said that no citizen should fear for the safety of their investments, speaking to reporters as her government held crisis talks on the collapse of a ballyhooed euro35 billion (US$48.4 billion) bailout of Hypo Real Estate AG, the country's second- biggest property lender.

In Iceland — particularly hard-hit by the credit crunch — government officials and banking chiefs were discussing a possible rescue plan for the country's overstretched commercial banks.

Belgian Prime Minister Yves Leterme said he aims to find a new owner for troubled bank Fortis NV to restore confidence in the company before the opening of markets on Monday.

Leterme told two media outlets that government officials were going over a takeover bid for Fortis' Belgian operations. The bank's Dutch operations were nationalized amid fears they could go insolvent.

British treasury chief Alistair Darling said that he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country in weather the credit crunch.

So the global economy is teetering.

I wonder have far down the US equities markets will go tomorrow (Monday) and the rest of the week. I wonder if a black Monday will happen - like a 500 point drop in the Dow30 - or will some brave souls jump in a buy some bargains.

 

[OmCheeto]

I certainly hope SOMEONE in Congress took the time between inserting wooden arrow mfg tax credits and other nonsense to specify portfolio acquisition criteria?

Otherwise, I'm afraid the concept of (reverse?) "cherry picking" could be applied to (OUR) government selection...no doubt the mortgage company analysts have studied the choices for a long, long time.

Well, as an Oregnian, I was interested in the pork coming our way, so I did a bit of research on the "wooden arrow" tax credit. As a few of you may know, we are one of the few states without a sales tax. The wooden arrow tax is a federal excise tax, or for all practical purposes in this case, a federal sales tax.

Now I don't know about anyone else, but I have to agree with both of my senators. Taxing a stick, with some glued on feathers, and a suction cup on the end for $0.39 a piece? I'm surprised the company is still in business. This was a stupid tax, and should have never been there in the first place.

http://news.aol.com/political-machine/2008/10/02/the-wooden-arrow-bailout/
The Wooden Arrow Bailout
By David Knowles
Oct 2nd 2008 8:20AM

While Senators should be applauded for finally recognizing that America's financial system is on the brink, one can't help but wonder why in the world they included a provision to protect a company that makes children's toy arrows into the bailout bill. Did they think no one would notice the pork added to what is probably the most important bill of a lifetime? Amazing

(via Bloomberg):
Senators attached a provision repealing a 39-cent excise tax on wooden arrows designed for children to an historic $700 billion financial-markets rescue that passed tonight by a vote of 74-25. The provision, originally proposed by Oregon senators Ron Wyden [D] and Gordon Smith [R], will save manufacturers such as Rose City Archery in Myrtle Point, Oregon, about $200,000 a year.

I wouldn't be surprised if their annual profits weren't $20,000 a year with that stinking god awful tax.

I'd say this is one thing that is wrong with the economy.

Be a coward and not raise income taxes while sucking the life out of businesses, 39 cents at a time.

Actually, this excise tax strikes me as what was wrong with the Soviet economy, and perhaps is more pervasive in the American economy than I was aware. Get a bunch of people in a centralized location to decide what things should be worth and if they're not selling at that price then put a tax on it.

Argh! Where's the report button... I'm out of control!

 

[WhoWee]

Why did Paulson have to do the bailout/resuce?
Then there are credit default swaps - develop by mathematicians and physicists.

Credit Default Swaps: The Next Crisis?
http://www.time.com/time/business/article/0,8599,1723152,00.html

People betting on the health of the economy, which of course went bad because of bad debt.

AIG went down because it had obligations of $400 billion in credit default swaps, but it didn't have $400 billion on hand. And AIG was not the only one.

The CDS market was not regulated and it was highly leveraged (actually over leveraged). Basically in the global market, more money was promised than there is money.

Derivatives are a BIG concern...PLEASE READ what Warren Buffet said to his shareholders...

http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid={B9E54A5D-4796-4D0D-AC9E-D9124B59D436}

 

[Astronuc]

Derivatives are a BIG concern...PLEASE READ what Warren Buffet said to his shareholders...

http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid={B9E54A5D-4796-4D0D-AC9E-D9124B59D436}[/QUOTE] Yes - I posted about that in Part 1 thread of this topic.

The derivatives and CDS's are a destabilizing combination. As debt goes bad, companies default, the derivatives go bad, and the CDS's become worthless because there is insufficient funds to cover the all the positions. What was a potentially a very bad situation when Buffet made those comments has apparently become much worse, because so much debt went bad very quickly, and since the CDS's were done quietly with no oversight or regulation, nobody knows what companies are vulnerable - hence the panic - and from what I've heard their is a lot of panicking going around right now.

Basically, as I understand it, the entire global economy is over-leveraged, i.e. there is much more debt obligation than there are funds or collateral. And people have been warning the governments and markets for years.

 

[WhoWee]

One more example of the arrogance of a few resulting in real consequences for many.

 

[Astronuc]

A little humor on the bailout.

Daily Show - Bailout Bill - "The Senate is very proud to have done the work they're supposed to do all the time."

 

[WhoWee]

There WAS speculation as to whether or not they'd break for the Jewish holidays and deal with it later.

 

[Astronuc]

Credit crisis adds to pressures on auto dealers
http://news.yahoo.com/s/ap/20081005/ap_on_bi_ge/auto_dealers_credit

For auto dealers already suffering under the worst U.S. sales downturn in 15 years, the increasing cost of the credit they use to keep inventory in their showrooms means every Ford Focus and Jeep Grand Cherokee with a sale sticker in the window is chipping away at dealers' razor-thin profit margins every day and threatening to send more of them out of business.

Like the banks that have been collapsing under the weight of the credit crunch, auto dealers are highly leveraged, making them some of its first victims, said Sheldon Sandler, founder of Bel Air Partners, a New Jersey-based firm that helps car dealers find options when they want out of the business.

"Car dealers are like the canaries in the coal mine," he said. "The energy crisis had been affecting their revenue for a while. And now with the credit crisis, in some cases, banks are turning off their credit."

They sure charge enough for those cars, which drop about 40% as soon as you drive off the lot.

 

[Astronuc]

Goldman Sachs economists: GDP flat or falling for 4 quarters

and one GS economist sees 8% unemployment in 2009.


I have to imagine that tomorrow will be another down day on the stock markets.

Asian/Pacific markets are all down at the start of Monday.

 

[Astronuc]

NY Times Editorial on the Economy, October 5, 2008
http://www.nytimes.com/2008/10/05/opinion/05sun1.html
Meanwhile, in the Economy

After the Senate approved the $700 billion bank bailout, the majority leader, Harry Reid, tried to persuade his colleagues to address another economic calamity before they left town for the long election recess. He urged them to extend unemployment benefits for 800,000 jobless Americans.

In the face of Republican opposition, the measure failed. Benefits start expiring this week. So much for Main Street.

If it works as promised, the bailout will thaw the credit freeze and keep more banks from going under. But it is unlikely to save even more Americans from losing their jobs and homes.

The Labor Department reported on Friday that 159,000 jobs were lost in September. That is the biggest monthly drop in five years and the ninth straight month of job contraction. It brings total job losses for this year to 760,000.

Of the 9.5 million Americans now out of work, two million have been jobless for more than six months. Nearly 6.1 million people are working part time because they cannot find full-time work or because slack business conditions have led to fewer hours — and less pay.

Cutbacks in hours and pay are especially pernicious because for most of the Bush years, wage growth has lagged behind worker productivity and prices. As Americans have worked harder they have fallen further behind. The only good news — if you can call it that — was that credit was easy.

As a result, many Americans today have no savings and are deep in debt. That means they are even less prepared to take care of themselves and their families when they lose their jobs.

Conditions are only getting worse. Personal spending stagnated in August, the latest month with government data. Auto sales plunged in September. Factory orders are off. New home sales fell to a 17-year low in August, according to the Census Bureau. And home prices continued to fall sharply in July, for a decline of 16.3 percent over 12 months, according to the Standard & Poor’s/Case-Shiller index of prices in 20 major cities. There is no sign that prices have hit their bottom.

Exports, the one bright spot, are also set to fall, because many other nations took part in America’s financial follies and are now faltering as well.

. . . .

So much for strong fundamentals.

 

[Astronuc]

STOCKS TO WATCH
Wells Fargo, Wachovia, Citigroup, AIG

Citigroup may consider legal action after it was jilted by Wachovia in favor of Wells Fargo. In a strongly-worded response to the news that Wells Fargo is buying Wachovia, Citi claimed it had exclusive rights and that Wachovia was not permitted to talk to anyone else.

American International Group Inc. plans to refocus on its core property and casualty insurance businesses and look into the sale of other units as it seeks to repay a massive loan from the U.S. Federal Reserve. However, S&P noted that there could be downward pressure on the company's ratings because of the risks around the execution of the plan as well as the heavy debt-service requirements of a much smaller and less-diversified AIG after the sales. "The current disruption in the credit markets could make it difficult to sell businesses at attractive valuations," the ratings agency said.

Wells Fargo Nixes Citi’s Wachovia Deal; Futures Bet On Bailout
http://blogs.barrons.com/stockstowatchtoday/2008/10/03/wells-fargo-nixes-citis-wachovia-deal-futures-bet-on-bailout/

SOMEHOW, WELLS FARGO SEES PROFIT OPS IN WACHOVIA
Warren Buffett is used to shopping in the value aisle. But it’s a little unusual to see him browsing through the trash bin. But Buffett apparently saw some value in the carcass of Wachovia (WB) that wasn’t apparent to banking regulators (wow - imagine hoodwinking government agencies?) and so Wells Fargo (WFC) - the banking titan in which Buffett’s Berkshire Hathaway (BRKA) is the largest shareholder - swooped into steal it out of the government-backed maw of Citigroup (C). For Wells Fargo, it meant that changing its mind - it had crept close to a deal for Wachovia last weekend, only to back out so suddenly that banking regulators had to work furiously to fashion the half-a-loaf asset sale to Citi - saved the bank nearly $5 billion. The $15.1 billion price tag for the entirety of Wachovia is about 25% below the $20 billion that it considered offering just days ago.

Somehow Wells is convinced that it can turn a profit on the transaction in the first year of operation, after backing out the roughly $10 billion it expected to pay in integration and merger costs. Wells has been a tough dog to bet against this year, inasmuch as it can crow about being one of the few major banks to survive the financial services crisis relatively unscathed. Its shares actually have appreciated 17% this year when the average bank stock has declined. Still, Citi had enough concerns about Wachovia’s $312 billion mortgage portfolio, which include a huge chunk of the fragrantly lethal options-ARMs products, that it secured the government’s assurance that taxpayers would absorb anything beyond the first $42 billion in losses. Citi agreed to send the government $12 billion in warrants and preferred shares in return for shouldering the responsibility for what could have been enormous losses. Wells Fargo isn’t asking the government to assume any liabilities in the transaction. And it’s apparently willing to shoulder the roughly $54 billion in Wachovia debt that Citi had to agree to absorb in order to make the deal work. Regulators worried that, if bondholders had been wiped out, the banking system would have suffered widespread repercussions.

Over the weekend, Citigroup got an injunction against Wells Fargo.

Citi gets court order blocking Wells-Wachovia deal
Citigroup said late on Saturday that a New York court issued an order extending its agreement under which it has exclusive rights to negotiate a purchase of Wachovia Corp.

But - Wells Fargo insists Wachovia deal will go forward
Comments follow Citigroup's first legal win in banking battle

NEW YORK (MarketWatch) -- Wells Fargo insisted Sunday that it's takeover agreement with Wachovia will go forward, notwithstanding a court order won by rival Citigroup over the weekend to block the $15 billion transaction.

The battle for Wachovia Corp. intensified after Citigroup said late Saturday that a court order extended its agreement to negotiate a purchase of Wachovia.
. . .
Wells Fargo, Wachovia counter

In a counter statement Sunday, Wells Fargo said that "nothing in the court's temporary order impacts our ability" to ultimately complete a merger with Wachovia.

Wells Fargo said that it has "a firm, binding merger agreement" with Wachovia.

"That agreement represents a transaction that, in stark contrast to Citigroup's proposal, provides significant and certain value to Wachovia shareholders, keeps Wachovia intact, is better for all of Wachovia's stakeholders including its employees and does not demand financial support from our government," Wells Fargo said. "We are confident that we will complete our announced merger with Wachovia."

In a separate statement on Sunday, Wachovia said it "does not believe Justice Ramos's order has any effect on the validity of the Wells Fargo agreement with Wachovia."

Moody's Investors Service lowered the ratings outlook on Wells Fargo & Co. and its subsidiaries, including Wells Fargo Bank, to negative from stable.

Warren Buffett boosts stake in Wells Fargo
http://albuquerque.bizjournals.com/albuquerque/stories/2008/02/18/daily3.html

Warren Buffett, chairman of Berkshire Hathaway, boosted the investment company's sizable stake in Wells Fargo.

Berkshire owned 311.4 million shares of Wells Fargo at the end of 2007, according to documents Berkshire Hathaway (NYSE: BRK-A) filed with the U.S. Securities and Exchange Commission. That's up from the 284.2 million shares of the San Francisco bank (NYSE: WFC) the company owned at the end of the third quarter.

The Omaha billionaire also disclosed for the first time that he's built huge stakes in Kraft and GlaxoSmithKline, according to the SEC filing.

Kraft just replaced AIG in the Dow (30) Industrials, as of Sept 22, 2008.

 

[mheslep]

Hmmm - the ripple effect:

Europeans scramble to save failing banks
http://news.yahoo.com/s/ap/20081005/ap_on_re_eu/eu_europe_meltdown

So the global economy is teetering.

Europe is not the whole world, but that is where the most danger to world economy lurks right now - the big banks in the smaller countries (Switzerland, Belgium, ...) are far bigger than their host country's GDP so they can't be saved if they fail.

 

[mgb_phys]

Europe is not the whole world, but that is where the most danger to world economy lurks right now - the big banks in the smaller countries (Switzerland, Belgium, ...) are far bigger than their host country's GDP so they can't be saved if they fail.

And they aren't going to try.
The european goverments will pay their own voters saving deposits but there is no mileage in bailing out Japanese merchant banks or Saudi billionaires that happen to be using an Icelandic or Luxembourg address.

The US unfortunaetly doesn't have this option. If you want people to sell you things (oil) you have to persuade them to accept dollars. If they get dollars there are only three things they can do with them.
1, Roll around in huge piles of dollar bills laughing manically - not an option for chinese burocrats
2, Buy something america sells - like Sony buying music/movie studios
3, Invest the dollars in US companies.

Now if you think that 75% of the US$ you invest is going to be lost by the US bank then you need to get 4* more US$ for your products to make up the loss - $500/barrel oil anyone?

The worst outcome is that the seller refuses to accept US$ at any price and starts demanding Euros for the oil. To get euros you have to find something to sell to the europeans, so you have to sell Detroit cars to the Germans, California wine to the French and Holywood comedies to the British - as they say in Canada - "good luck with that!"

 

[jal]

Hi mgb_phys!
It looks like the big lenders will get their money back. Let see how pissed of the asian are by the opening of the US markets.
However, grandma is going to have to accept that the grandkids borrowed all of her money and that they will not be able to pay her back.
Who is going to move into who's house?
heheh I forgot ... the grankids lost their house.

 

[Art]

It seems the Asian and European markets are tanking this morning. France and Britain are both currently down 5% and Hong Kong and Japan were down 4.3% overnight. The US bail out plan has not yet had a positive effect on interbank lending rates and so investors fear recession as companies access to funds is cut off through the continuing credit squeeze.

Maybe the US should look at nationalising the Federal Reserve given it's abject failure in stopping this crisis from happening and for it's hopelessness in managing the crisis once it broke.

 

[WhoWee]

STOCKS TO WATCH
Wells Fargo, Wachovia, Citigroup, AIG


Wells Fargo Nixes Citi’s Wachovia Deal; Futures Bet On Bailout
http://blogs.barrons.com/stockstowatchtoday/2008/10/03/wells-fargo-nixes-citis-wachovia-deal-futures-bet-on-bailout/


Over the weekend, Citigroup got an injunction against Wells Fargo.

Citi gets court order blocking Wells-Wachovia deal
Citigroup said late on Saturday that a New York court issued an order extending its agreement under which it has exclusive rights to negotiate a purchase of Wachovia Corp.

But - Wells Fargo insists Wachovia deal will go forward
Comments follow Citigroup's first legal win in banking battle


Moody's Investors Service lowered the ratings outlook on Wells Fargo & Co. and its subsidiaries, including Wells Fargo Bank, to negative from stable.

Warren Buffett boosts stake in Wells Fargo
http://albuquerque.bizjournals.com/albuquerque/stories/2008/02/18/daily3.html


Kraft just replaced AIG in the Dow (30) Industrials, as of Sept 22, 2008.

Do you think Buffet is confident or scared? His moves seem VERY risky...unless he's already in so deep it doesn't matter...maybe all or nothing(?)...anyone know?

 

[Astronuc]

Buffett is a fairly conservative and successful investor, but I believe he's conceded he's made mistakes in the past.

As far as I know, Wells Fargo is well run, but one should check their balance sheet before investing, and exposure to debt.

Check this out - Wells Fargo strikes deal to buy Wachovia
Stock swap both sidesteps FDIC and trumps Citigroup offer

and this -

Appeals court overturns Citi-Wachovia exclusivity extension

NEW YORK (MarketWatch) -- An appellate court Sunday overturned an earlier lower-court decision to block Wells Fargo & Co.'s (WFC) acquisition of Wachovia Corp (WB). I imagine WFC is a reasonable investment as far as banks go.

 

[WhoWee]

I agree...conservative and very successful...maybe Buffet just sees a solid company...at a good price...but it seems like he's tied up a lot of cash ($ Billions) lately...not exactly a conservative approach.

 

[Astronuc]

I agree...conservative and very successful...maybe Buffet just sees a solid company...at a good price...but it seems like he's tied up a lot of cash ($ Billions) lately...not exactly a conservative approach.

The conservative approach is to do due diligence, which means checking the balance sheets and fundamentals of a company. Buffett is no dummy, and he is generally not reckless.


Here's this mornings (0700 EDT) financial picture:

About 1100 in Europe, or 1000 GMT

German DAX 30 index down 4.3% at 5,546.55 (low 5,447.03 about noon local)
French CAC 40 index down 4.8% at 3,884.43 (low 3,818.16 about noon local)
U.K. FTSE 100 index down 4.8% at 4,740.64 (low 4,670.89 about 1100 local)

Commerzbank down 21% after European bailouts
Royal Bank of Scotland down 13%
HBOS down about 50%, HBOS down 19.5% in London

With financial sector in disarray, Europe indexes drop around 5-6%

Indonesia was down 9.9%

Russian RTS index plunges 14 percent ; Micex tumbles 15%

S&P 500 futures fell 34.4 points to 1,073.90 and Nasdaq 100 futures dropped 44 points to 1,433.25. Dow industrial futures fell 268 points.

But some good news of holders of ImClone.
Eli Lilly and Co. to buy ImClone Systems for $6.5 billion


EU countries are apparently doing their own thing. From MarketWatch "Europe didn't reach an accord on bailouts over the weekend, and instead each country is handling the fallouts on their own."

Remember money knows no borders.

 

[Gokul43201]

Don't know if this has been posted before:

XE1ayDZfmIQ[/youtube] What's the d... has a Neanderthal on, only some of the time.