"Mad Money's" Jim Cramer on The Colbert Report
By SilentPatriot Thursday Aug 09, 2007 12:10pm
CNBC's high-energy economic analyst Jim Cramer sits down with Stephen to discuss the collapsing housing market and what it means for millions of Americans who were lured by low teaser rates a few years back when the market was hot, and are now at risk of losing their homes due to skyrocketing interest rates.
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For video of Cramer's latest on-air meltdown, see here. This guy sure does add some excitement to the usually boring market analysis.
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things will get worse....
I set up a sample portfolio a few years back where I pretended to invest in all the stocks Cramer recommended. I also set up one where I invested in stocks Cramer didn't like, two years later, the portfolio of his recommendations is worth only 60% of its original value! The portfolio where I invested in stocks he panned is worth 80% of its value. It's widely known in the investment community that following Cramer's financial advice is about as productive as using a Magic 8-ball for recommendations. Actually, that's not true. You probably will get more legitimate advice from the Magic 8-ball.
Frist!
Video no trabajando!
Video isn't working for me.
As for the financial problems... anyone who fell for an adjustable-rate-mortgage was just plain stupid. If you have to lose your house to learn, I guess that's the way it's going to be. You don't spend more than you have, and you certainly don't trust the banks to not exploit every angle possible to take as much money from you as they can. At least with a fixed rate mortgage, you protect yourself to some degree against that. But even with a fixed rate, some of these fly-by-night mortgage lenders had so much fine print in their agreements, if you miss a payment they could in some circumstances force you to pay off the loan or be in default. People were taking huge risks dealing with these companies, driven exclusively by greed.
And Cramer has his manties in a bunch over this and wants the feds to blow smoke up the mortgage lending industry's ass to perpetrate the illusion of stability a little longer? How longer? Just until he can get his money and his friends' money back? Forget it. The industry has been propped up on cardboard long enough. If you made bad choices, you have to pay the piper. As a taxpayer I sure as hell don't want the government bailing out a bunch of greedy investment bankers who made a career out of screwing over middle class homeowners.
Market analysis.... TO THE EXTREEEEEEEEME!!!
das Video funktioniert nicht!
He upgraded the Bluth company to a Don't Buy.
Il video non funzione.
Keep your money safe. The market is designed for wealthy people, not the average joe. Better to have your money safe (with no decent interest) than pissed away into some companies pocket.
Cramer is a complete and utter tool. The guys at iTulip have an annotated version of his "meltdown":
http://www.itulip.com/forums/showthread.php?t=1726
Pile @ 5:
Someone mentioned in the comments the other day that he talked to a lender who said that they didn't even a require an appraisal of the house to write a loan. To me, it is totally mind boggling that things were that lax.
And yeah... it looks like the banks are crying for a bailout, just like the last time this happened in the early 90's with the collapse of the S&Ls.
I keep my money so safe, that it's protected before it even gets to me.
You know, The Daily Show had a interesting bit a few days ago with Larry Wilmore about how this reflects the racial divide in this country. They comically pointed out that those who are losing their houses are, in a way, getting back at The Man by just not paying him back. That's why these hedge funds are taking a dive. Since, thank god, we still don't have debtors' prisons, those getting their homes repo'd, as tragic as it is to lose your house, aren't losing financially what the investors are. Which I think is FANTASTIC. See? The invisible hand of the market isn't always bad.
I would like to say I don't like how this guy just screams. It's annoying and makes it unbearable to watch. His personal performance on Colbert was much better, and much more informative.
Most people just don't have the knowledge needed to understand the business of finance like a loan officer. And not all of the people that know next to nothing about banking, are stupid. but, half the population falls on the left side of the median line. They also buy houses and cars. When a very smart loan officer gives young people advice, is their fault that they are being cheated, or is the loan officer simply a cheat and a fraud?
I've seen a number of friends sign up on ARMS, because they were advised by responsible and knowledgeable people that it was a good idea. The loan officer didn't even properly explain to them what it was, beyond telling them that an ARM would get them cheaper house payments. If you ask about rising rates, a good shyster will explain that your pay scale will go up by then...
I posted this on another forum, it applies here as well.
*******************************************
The general sentiment here is that shucksters shouldn't be bailed out, and I agree with that.
But there are a great many Americans who got screwed on purpose in this deal, and I do feel empathy for them. I do feel they deserve and are entitled to better protections than have had.
As it is, the predatory lenders that set this situation and get people who don't understand the system deep in their debt are completely at fault here. They knew they were making bad loans and that in the not too distant future they'd be kicking these families to the curb.
A lender produces money out of thin air. They don't work for it, they don't earn it. They simply generate it as fiat money based on other debts they hold.
So the lender, creates money out of thin air, and loans it to a young couple with a baby and dream. The lender talks them into getting an ARM, pointing that on their budget, they can't afford a higher rate fixed mortgage. The lender knows the rate will go up and the couple will lose the house. The couple haven't a clue, then understand very little of the process. They trust the lender as he must be honest because he's smart and works in a bank.
Later, the couple defaults and the bank forecloses. the bank know has a title to real property. And the bank didn't have to take any risks to get it. They created money out of thin air, and used it to cheat a couple of thousands of dollars. When this is over, the bank has the down payment, they monthly payments made and a home. They get this essentially for free.
But wait, they write this off as a loss. Because their expected profits on paper, were twice the value of the house. A $100,000 house for instance costs the home owner up to $300,000 by the time interests and fees are added in.
So when the bank reports the loss, they report their loss profits. when they get bailed out, this is the value they'll get bailed out for.
So for $200,000 loan made from money that came out of thin air, they get a $200,000 home and $600,000+ in profits.
So by cheating one couple, the bank could possibly see a $800,000 profit.
Think they'll ever explain this on the nightly news?
antihostile @ 11:
Not only a tool(but a fool,who should not be listened to w/advise as to how YOU should invest)but a hyperventillating idiot who is about as knowledgable and can give you good investment advise as my dog or cat.
Videos seem to be down.
Bob Loblaw @ 8:
LOL
bluth, nice
chrisprice @ 4:
I can't download it, too - that's the second video this week!
Site Monitor: I emailed the tech team. There's some problem with the servers. They're working on it.
I remember reading an interesting article around the time Bernake took over Greenspan's position. It said that Greenspan had to pick up the mess that was created from the previous Fed Chairman, which caused the market collapse in 1987, and a few years later, the S&L collapse. Once he straightened that out, he was praised as God and that no one would dare question him. Then he started making the same fuck ups that the previous Fed Chairman did, and left just before the shit was about to hit the fan, only to dump it on Bernake's lap.
Soon, Bernake will do something to "fix" the problem, be praised as God, start screwing up... rinse, lather, repeat.
I seem to have a couple of blind spots--physics & economics--but I can smell bullshit a mile away. The realtors are in on this too.
I wonder what the grandparents of the 20 somethings thought when they saw their grandchildren buying homes at that age.
I think he has to do that crazy, psycho schtick to distract from the fact that he really doesn't have much to say.
I learned in the 1990s, when I invested just a few thousand dollars and lost it, to only invest in what you know and what is real. I invested in real estate in 2001 and my investment doubled. Now it's taken a few steps back, but I'm living in that investment and saving taxes because of it, and I'm there for the long haul. Stocks are an insider's game. Only the super rich and well connected get all the inside information to make a killing. The rest of us pay for that killing.
Losing purchasing power of your money to inflation is not keeping it safe.
Pile @ 2:
I concur. As a trader for the last eight years, I can tell you Cramer's stock picks are horrendous. Everyone knows exactly what he is - ENTERTAINMENT. Nothing more.
Once in awhile the true Cramer comes out and his neo-conservative side shows. And its ugly.
He made his fortune in the 90's as a hedge fund manager when every stock went up. No one could lose money. Show me how you trade in a bad market. That's the sign of a successful trader.
Or, just plain greedy. It would be interesting to find out just how many people were
A) Stupid
--"What do you mean I can't buy a $500k house--that's half-a-million dollars, ferchrissakes!!--and pay only $750/month for 30 years!" (Do the math, moron.)
and how many were
B) Greedy and listened to what the mortgage broker was telling them
--'Look, your mortgage will increase by 3X in 2 years, but by that time your house will be worth 200,000 more, so just re-finance and take out some equity to take a trip to the Bahamas and/or but that Harley you've always wanted!"
--"Great! Where do I sign!"
Video ne radi!
If this right wing loud mouth bastard would ever tell the truth about the market, he would never even attempt to call it hot, under the guidance of this administration and all the cheap thugs that have been dipping and dabbing and lying and cheating people out of their money at all.
The market has been under serious question sense these people high jacked it period and it will continue, especially with Rupert Murdock, controlling any and everything we know about our money invested in this shit.
Stand by folks, cause you ain't seen nothing yet and need to get you money out NOW.
So let me get this straigt....People here (rightly) say that those who took the teaser rate and are getting forclosed on should not have been so foolhearty. ... But I say in another post/comment that someone should ask the candidates (Dems) how they plan to pay for all thier promies and I get DELETED??? Crooks readers-- do you think such comments should be DELETED by the monitors??
(P.S. I also said that they guy who lost his pension should have saved and not relied on the pension - for full discolsure)
Wow, he gets as mad as I get...I could play the audio of this guy and poeple we swear it was me...I guess it's true what they say...I need to lay off the coffee.
Boom. Bust. Why? Maybe, it's because greedy people at the top make stupid choices because they are greedy, and ignorant people at the bottom make poor choices because they have been suckered by greedy people at the top who are empowered by corrupt government policy. Everyone in the middle gets screwed too. That's my take on the fundamentals of capitalist economics 101.
"New Order Ushers in A World of Instability"
The US govt does not GOVERN in this vital area as well, as in many others. The 'little people' have been conned much worse by the US govt (non-regulated markets up to the neck in speculation) than any glib brokers. The 'flex rate ' mortgages were created to suck up every single $$$ and fry it in speculative manipulations, to cover up money/stocks 'laundering' sanctioned by the US government. .. Where do you think the $$ came from to provide hundreds of billions of dollars in corporate takeover loans !???
Most if this 'value' does NOT exist - it ALL is one BIG SCAM, our National Bush-Ponzi Scheme. This is from WaPo today - I hope Sitemonitor will permit this to be available here for all posters.
."".. the new financial order is not all it is cracked up to be.
....it is many of the same firms -- Goldman Sachs, Bear Stearns, Deutsche Bank, Citicorp -- that have also underwritten hundreds of billions of dollars in corporate takeover loans that, suddenly, they cannot sell as they had planned. ..
...has also created opportunities for potentially destabilizing speculation ..
..often it is the trading on derivatives markets that now drives the trading on "real" markets, rather than the other way around...
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/09/AR200708...
New Order Ushers in A World of Instability
By Steven Pearlstein
Friday, August 10, 2007; D01
Hint to White House economic team: You might not want to have had the president repeat that numbskull prediction about a "soft landing" for housing at precisely the moment central banks were pumping $150 billion into the financial system to prevent a market meltdown over anxieties about mortgage-backed securities. Brings back
memories of "Mission Accomplished."
Seriously, folks, we all need to get used to days like yesterday because there are going to be a lot more of them. In a world in which trillions of dollars have been bet on the premise that low interest rates and record-low default rates would continue forever, "repricing of risk," as the administration likes to call it, is not some minor technical event. It's more like a tectonic shift going on beneath the surface of the economy
Think about it. In the space of just several months, we've moved from an environment in which fly-by-night brokers were peddling low-interest mortgages to bad credit risks with no documentation and no money down, to one in which the largest banks are raising rates and tightening terms for their best borrowers.
In the space of several weeks, we've moved from an environment in which 25 percent of corporate takeovers could be financed with the junkiest of C-rate bonds, to a world in which the market for C-bonds has completely evaporated.
In just the past few days, problems in the U.S. housing and mortgage markets have come to pose serious challenges for Australian hedge funds, French insurers and mid-market German banks.
And in the course of several hours, a financial system that was seemingly awash in liquidity suddenly didn't have enough.
As it all unfolds, we are learning several painful truths about the new global financial system, which until recently was widely lauded for its ability to price and spread financial risk to investors willing to accept it.
One lesson is that the sophisticated strategies employed by bank and investment funds to "hedge" risk may not be as reliable as had been thought.
In recent years, for example, banks and hedge funds created elaborate investment strategies built around the presumption that Bond A would always go up when the price of Bond B went down, effectively limiting potential losses. But in recent weeks, many such strategies began to go awry as markets for mortgage securities dried up and fund managers began selling whatever they could to raise cash to pay lenders. As a result, Bond A and Bond B began moving in the same direction, creating losses on both.
Another popular way for sophisticated investors to hedge their bets is to buy insurance against the possibility that a particular company or set of mortgage holders will default on their loans. But in some cases, this insurance policy, known as a credit swap, has been issued by hedge funds that themselves had taken on similar risks. If things go bad, a hedge fund may not have the money to uphold its side of the insurance bargain.
It is in the nature of the new financial order that it's hard to figure out exactly what everyone's role is. All the borrowers are lenders and all the lenders turn out to be borrowers, so nobody -- including regulators -- can quite figure out where the ultimate risks really lie.
Yesterday's turmoil, for example, started when BNP Paribas, France's largest bank, announced that it was halting withdrawals from three of its hedge funds. So is BNP Paribas a bank or a hedge fund? Well, it's both.
The bank part has surely made lots of loans to hedge funds, including its own. And the BNP hedge funds surely used those loans to buy other loans and bonds, perhaps even those originated by BNP's bank or underwritten by BNP's investment bank.
These complex and synergic relationships have created a system that is more stable in the face of a mild economic downturn, a string of bankruptcies, or the failure of a hedge fund or two. But as Tim Geithner, the president of the New York Fed has warned, when the financial system comes under extreme stress, those same complex relationships could have just the opposite effect, creating a "domino effect" that increases the risk of a system-wide failure. That fear was very much present in the markets yesterday.
One concern is that rather than spreading risk among millions of investors, the current system has reconcentrated risk on the books of a dozen global broker-dealers who lend most of the money to fund managers so they can buy all those credit instruments. And it is many of the same firms -- Goldman Sachs, Bear Stearns, Deutsche Bank, Citicorp -- that have also underwritten hundreds of billions of dollars in corporate takeover loans that, suddenly, they cannot sell as they had planned. It's no coincidence that the shares of such firms have taken a beating in the past few months as rumors swirl around Wall Street that one or another is facing major losses.
We may be discovering, in fact, that the new financial order is not all it is cracked up to be.
Although it has provided ingenious new mechanisms to finance the legitimate needs of businesses and householders and new ways for investors to hedge risks, it has also created opportunities for potentially destabilizing speculation. It is now common for the aggregate value of "derivative" instruments to be many times the volume of the stocks, bonds or commodities on which they are supposedly based. And often it is the trading on derivatives markets that now drives the trading on "real" markets, rather than the other way around.
Australian analyst Satyajit Das makes the point that the main achievement of the new financial architecture has not been to spread risk so much as it has been to expand risk by vastly increasing the amount of borrowed money. Making loans to buy bonds secured by packages of other loans makes for big fees and exciting work for bankers. But as Das predicted last year in his book, "Traders, Guns & Money" -- and as we all iscovered yesterday -- if the supply of credit suddenly dries up anywhere in the system, the elaborate new structure they've created can come crashing down on itself.
Steven Pearlstein can be reached atpearlsteins@washpost.com.
hadenuf @ 21:
I don't see how the grandparents would have thought it odd. My grandparents moved into their house which they purchased in their twenties. It cost $3000. 3 Bedroom 1 bath two story with a small lot in a Philly suburb.
drb @ 27:
As for your full disclosure, and please correct me if I'm wrong in my interpretation, but you are saying he should have expected to have gotten completely d*cked by this company whom he devoted 35 years of his life to.
The rising tide is not raising my boat
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Colbert coulda really nailed this guy to the wall - what a disingenuous pussy, simpering on tv, pretty pathetic for a fox to act all guilty after eating all the baby chicks in the henhouse. Oh poor little fox!
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