More interesting comments from Cramer

[bsrsharma]

“If you’re so concerned about FDIC, keep your money with the big banks”

Don’t underrate FDIC so fast! In the 1980s, it was FDIC (actually another agency called FSLIC) that prevented Savings & Loan collapse from becoming a 1929. When systemic instabilities occur, a large institution is no match to US government’s full faith backing. I can well imagine Wells, BoA, Citi all going down and the world will continue, though with quite a few hiccups.

BTW, FDIC doesn’t cover “all the deposits”. There in lies the secret. It covers just enough that you don’t have to worry where you will get your next hamburger. That prevents the type of panic that caused 1929.

See http://en.wikipedia.org/wiki/Savings_and_loan_crisis

Also, if you don’t like FDIC for any reason, a good way to invest your cash equivalents is to directly buy Treasury instruments. Especially good in a potentially high inflationary regime are the TIPS (Treasury Inflation-Protected Securities)

See

http://en.wikipedia.org/wiki/Treasury_security#TIPS

http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm

[LA_Renter]

Dr Chaos,

Thanks for that post. In theory I can see how they could cut rates now. So in essence the FED won’t actually be adding liquidity to the system rather than slowing down the money contraction of the private banks. If dollars are still being destroyed in the credit contraction in lieu of rate cuts then the value of the Dollar will hold because there are fewer of them. So putting Cramer in context here, being the mouth piece of his hedge fund and investment bank buddies, he is saying the credit contraction taking place is now getting out of control. The third and possibly fourth Bear Stearns hedge fund blow ups and the belly flop of AHM this week acted as the catalyst for his psychotic rant yesterday. I imagine there is some very large ugly blow ups simmering under the surface right now getting ready to pop up. I also imagine most central banks across the globe are saying good riddance to this excess liquidity and the pesky inflation (possibly hyper-inflation) threat but are sitting on pins and needles to avoid a global systemic shock in the credit markets. From my very limited view there is little margin for error here. We do live in interesting times.

[LA_Renter]

Dr Chaos,

Thanks for that post. In theory I can see how they could cut rates now. So in essence the FED won’t actually be adding liquidity to the system rather than slowing down the money contraction of the private banks. If dollars are still being destroyed in the credit contraction in lieu of rate cuts then the value of the Dollar will hold because there are fewer of them. So putting Cramer in context here, being the mouth piece of his hedge fund and investment bank buddies, he is saying the credit contraction taking place is now getting out of control. The third and possibly fourth Bear Stearns hedge fund blow ups and the belly flop of AHM this week acted as the catalyst for his psychotic rant yesterday. I imagine there is some very large ugly blow ups simmering under the surface right now getting ready to pop up. I also imagine most central banks across the globe are saying good riddance to this excess liquidity and the pesky inflation (possibly hyper-inflation) threat but are sitting on pins and needles to avoid a global systemic shock in the credit markets. From my very limited view there is little margin for error here. We do live in interesting times.

[temeculaguy]

I think there is an alterior motive to his comments and the comments of others. The builders association economist, the ceo’s of mortgage banks and builders have been putting out some overly negative statements in the last two weeks (maybe true but out of form for them). I am not sure if they are trying to pressure the fed or make people believe we have hit the bottom but I am dumbfounded as to why they would all find god at the same time and become honest.

I am also unsure if I truly believe they got caught with their pants down and that they didn’t see this coming. I discovered this site a year ago and in that year have attained a basic knowledge of a few market dynamics and I saw this coming. I am just some dude who thinks economics is a cool hobby, but the real players do this for a living and have better acccess to information, how did not see this coming? Read some 2006 threads, it’s all there, the subprime implosion, the credit crunch, the foreclosures, the arm re-sets, the must sell inventory driving prices down and thus trapping the arm resets and speculators. Even as early as February there were many on this site that said the end of the summer would be exciting because the spring sales bounce wouldn’t materialize and the mainstream media would pick up on it. All of it happened or is happening, right on schedule as predicted by collections of armchair quarterbacks on a few websites like this one and a few professors (Shiller and Roubini).

There are only a few hundred of us here and we figured it out, I believe they did too and they have an exit strategy. I think the current spin from the spokesholes and the analysts is part of that strategy, but I could be wrong.

[temeculaguy]

I think there is an alterior motive to his comments and the comments of others. The builders association economist, the ceo’s of mortgage banks and builders have been putting out some overly negative statements in the last two weeks (maybe true but out of form for them). I am not sure if they are trying to pressure the fed or make people believe we have hit the bottom but I am dumbfounded as to why they would all find god at the same time and become honest.

I am also unsure if I truly believe they got caught with their pants down and that they didn’t see this coming. I discovered this site a year ago and in that year have attained a basic knowledge of a few market dynamics and I saw this coming. I am just some dude who thinks economics is a cool hobby, but the real players do this for a living and have better acccess to information, how did not see this coming? Read some 2006 threads, it’s all there, the subprime implosion, the credit crunch, the foreclosures, the arm re-sets, the must sell inventory driving prices down and thus trapping the arm resets and speculators. Even as early as February there were many on this site that said the end of the summer would be exciting because the spring sales bounce wouldn’t materialize and the mainstream media would pick up on it. All of it happened or is happening, right on schedule as predicted by collections of armchair quarterbacks on a few websites like this one and a few professors (Shiller and Roubini).

There are only a few hundred of us here and we figured it out, I believe they did too and they have an exit strategy. I think the current spin from the spokesholes and the analysts is part of that strategy, but I could be wrong.

[GoUSC]

Maybe they are positioning themselves for some kind of bailout from the government? Unfortunately, the Chinese probably aren’t willing to buy more T-bills from us to finance that bailout. The past two years had made me really come to realize a couple things:

1. The market is completely irration and I will never understand it.
2. The market is setup to make a few people very very rich and screw everyone else.
3. American’s are about as stupid (financially) as you can be.
4. Business leaders can be as misleading as they want to be because no-one will hold their feet to the fire. *UNLESS* they run a company into bankruptcy.

[GoUSC]

Maybe they are positioning themselves for some kind of bailout from the government? Unfortunately, the Chinese probably aren’t willing to buy more T-bills from us to finance that bailout. The past two years had made me really come to realize a couple things:

1. The market is completely irration and I will never understand it.
2. The market is setup to make a few people very very rich and screw everyone else.
3. American’s are about as stupid (financially) as you can be.
4. Business leaders can be as misleading as they want to be because no-one will hold their feet to the fire. *UNLESS* they run a company into bankruptcy.

[LA_Renter]

It is called playing the Ref. Cramer to a lesser extent did the same thing when the FED was raising especially from 4.75 to 5.25. When they raised to 5 and kept the language in place for further hikes he went ballistic on his show. I think he even mentioned a housing crash back then. Bill Gross of Pimco has been uber bearish on housing and pleaded with the FED to lower at the beginning of this year or else. Of course being the largest bond trader he stood to benefit the most from an easing. To me watching CNBC is no different than watching the Cartoon Network. The should open each show with the Warner Bros Looney Toons intro. I’m like you Temeculaguy “I am just some dude who thinks economics is a cool hobby”. I don’t have the info that these guys have but I have a gut feeling that this problem is more than they can chew and they have known that for quite some time.

[LA_Renter]

It is called playing the Ref. Cramer to a lesser extent did the same thing when the FED was raising especially from 4.75 to 5.25. When they raised to 5 and kept the language in place for further hikes he went ballistic on his show. I think he even mentioned a housing crash back then. Bill Gross of Pimco has been uber bearish on housing and pleaded with the FED to lower at the beginning of this year or else. Of course being the largest bond trader he stood to benefit the most from an easing. To me watching CNBC is no different than watching the Cartoon Network. The should open each show with the Warner Bros Looney Toons intro. I’m like you Temeculaguy “I am just some dude who thinks economics is a cool hobby”. I don’t have the info that these guys have but I have a gut feeling that this problem is more than they can chew and they have known that for quite some time.

[lniles]

FDIC: I have spoken with the managers of my banks, and you are only covered to $100k per bank per account holder. If you and your wife are on the account, you’re covered for $200k. If you name some beneficiaries, they are each covered for $100k but you have to die to get that coverage. Even if you have one account which is a CD and one which is checking you are only covered for a combined $100k.

Wanna guess when the FDIC came about? After the last great depression in 1933 when people lost funds in accounts at crashed banks. Scary thought, no?

There are networks of banks which spread your account over several banks in the network, thus giving you FDIC insurance up to $30 Million. These are called CDARs:

http://www.cdars.com/

Links from that site will help you find CDAR banks in your area. You usually get a slightly lower CD rate but are covered up to $30M with one easily accessible account and you get to sleep at night knowing your hard-earned cash is safe.

[lniles]

FDIC: I have spoken with the managers of my banks, and you are only covered to $100k per bank per account holder. If you and your wife are on the account, you’re covered for $200k. If you name some beneficiaries, they are each covered for $100k but you have to die to get that coverage. Even if you have one account which is a CD and one which is checking you are only covered for a combined $100k.

Wanna guess when the FDIC came about? After the last great depression in 1933 when people lost funds in accounts at crashed banks. Scary thought, no?

There are networks of banks which spread your account over several banks in the network, thus giving you FDIC insurance up to $30 Million. These are called CDARs:

http://www.cdars.com/

Links from that site will help you find CDAR banks in your area. You usually get a slightly lower CD rate but are covered up to $30M with one easily accessible account and you get to sleep at night knowing your hard-earned cash is safe.

[Fearful]

You can also buy CDs from a fixed income trading desk. I bought mine through Schwab. I was able to get 5.15-5.2 in 1-2 year maturities, and spread the portfolio across different banks to get under the $100K FDIC limit. I think the rates are slightly lower than direct bank purchases, and certainly lower than teaser rates, but I did not have the stomach for a bunch of accounts all over the place.

[Fearful]

You can also buy CDs from a fixed income trading desk. I bought mine through Schwab. I was able to get 5.15-5.2 in 1-2 year maturities, and spread the portfolio across different banks to get under the $100K FDIC limit. I think the rates are slightly lower than direct bank purchases, and certainly lower than teaser rates, but I did not have the stomach for a bunch of accounts all over the place.

[Author]

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