Quote Originally Posted by Mr. Silver View Post
We've had good times for so long, a little bump is a big deal when we've forgotten what difficult is...

When things are good, the media says "this time things are different and they'll always be good"...then pop!

So, when things are bad, the media says "this time things are different and they can't get better"...but they do.

I'll share a portion of a PM I sent to sundial in response to a question she asked regarding bank failures:

Are the banks safe? There are many ways to measure this and many answers to your question...but on a whole, YES...the industry is safe and sound. There are 10,000 banks in America, so far about three or four have failed this year. There will be more...let's say there are 50 more failures...we're still talking about a 99.5% survival rate. The media hypes the .5%, but doesn't celebrate the 99.5%.

Prior to IndyMac's failure last week, the largest failure in some time was in sundials backyard. IndyMac's failure last week was really triggered by some irresponsible politics...but that's a different story.

From a banking perspective, this is EXACTLY how it was in the last real downturn we saw in 1989 to 1991...and I suspect that we'll see it again before I retire in 15 years.

Am I discouraged? I'm CAUTIOUS, but not discouraged.

I don't know where "bottom" is, but I know that we're closer today than two years ago...and after the bottom, things get better.

Dear Mr. Silver,

The 99.5% is the rate of failure in terms of number of banks. It isn't the same when one looks from a perspective of total capitalization etc. $$ instead of number of banks. I'm thinking in terms of 700 S&L in the 90's with Keating 5... Lincoln Savings with $160+ billion loss. and we the tax payer paid out how much?? That's a lot of programs it could have funded.

Anyway, Indy Mac is not a small bank nor is it a large bank. Those who had their money there, hopefully will get their money back or access in REASONABLE amount of time. This is provided Feds can find a buyer with a help from Leman Bros. The run on indy bank amounted to just $1.3billion.

Now of the 10,000 banks if few small one fails its one thing. But someone like Wachovia or WaMu (PLEASE NOTE THIS IN BIG BIG BOLD LETTER, I'M NOT SAYING THEY ARE IN BAD SHAPE. I HAVE NO IDEA WHERE THEY STAND FINANCIALLY) or Citi Group. If any of the big names falter then we would have some problems. Silver lining is that one of the big ones Wells Fargo posted better than expected performance. One of the reasons the market bounced this past week.

And their are the two behemouth 700pound gorillas. Fannie and Freddie... The two will pose major major problems with Feds. Indy is just a small mosquito bite compared to the two. numbers I heard are combined total cost of in excess of $1 trillion ($1000 billion) . And oh our GNP is what?? oh around $11-12 trillion.

Feds have gone or will be going?? to the capitol for authorization to help the two out. This is euphormism for "just print more money". This invariably leads to very strong inflationary pressure. and more pressure on the international market for devaluation of the $$. But if they don't bail out Fannie and Freddie, some other things can happen. And its not good.

to others here, I think Mr. Silver and I may disagree where the bottom is. Well no one has a crystal ball. So he infact may not disagree with me. just matter of symantics. Anyway getting back to market/economy worries. It doesn't hurt to be thrifty. It helps to be saving for the rainy day because you never will have green light through your life. There will always be bumps and bruises.

Do I know where the market is heading? absolutely not. As a proof, I was thinking about GM about week and half ago, it dipped to around $8.90/share, divident at that share price was in excess of 10% (heck of lot better than 3% savings rate) today monday morning, it should get close to $14.00/share. And I didn't. I'm just too chicken. thats nearly 50% gain. But GM board cancelled divident payouts. so its 0% . It was necessary though.

So if you are worried, you are not the only one. About 70% of the population are looking glass 3/4 empty. Things will eventually get better so have hope, be cautious and be thrifty.

smilingcat