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Denbury Resources Inc. Message Board

  • oilnewby oilnewby Nov 20, 2008 2:33 PM Flag

    Liquidation

    This company is in danger of being delisted. You can thank our buddy Hank Paulson at the Treasury. As I learned today, last summer Paulson leaned hard on CALPERS to sell all of their commodity positions (significant amount) in the interest of "preventing a financial collapse". At the same time Hank was working his magic through his buddies at JP Morgan. He had JPM take out massive short positions in metals and other commodities knowing how "long and leveraged" Bear Stearns was to the commodity sector. That strategy deliberately shoved Bear Stearns into bankruptcy. And like a bunch of dominoes falling it set off a chain reaction which ended up taking down Lehman Bros and AIG. Talk about the "Law of Unintended Consequences". In an attempt to "take down" commodities Paulson precipitated the worst global economic crisis in history. Nice job Hank. I would love to kick his ass right out of Washington. This admininstration makes Hoover look like a genius. And I'm a Republican sad to say. Not for much longer.

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    • <As I learned today . . .>

      Where did you learn this information? Link?

    • If you google Antal Fekete, and read through some of his recent articles, he has a theory regarding this. He's a professor of economics, I think.

      Anyway, in a nutshell, his view is that that we have been in a steadily declining interest rate environment for 28 years. He says that, as interest rates drop, banks need to retain more capital, since future loans will garner less interest income than existing loans that are being repaid. So to make the same revenue, you will need more capital. But, he says, instead banks paid out most of their free cash flow in dividends and didn't retain enough capital. IMHO, pipe

      Thanks for that, Pipe. I'm going to google him and read that over the weekend. We've got a lot of bright people here on this board. Maybe if we put our heads together we can actually unravel the Gordian knot of things that brought this all about.

    • I am 59, self made, 500-700K gross income yr. Quiet frankly, I consider myself ahead of the crowd for my accomplishments but this market has turned my logic on its end. Who in hell would have ever thought that our banking system is virtually broke?.>mississippi

      Congratulations on your success. I've only made 6 figures a few years in my life, though the combination of a modest lifestyle, saving, and investing fairly well (until this year)has our future secure barring total calamity. But as I said, if things don't turn around and my energy positions don't rebound significantly, our retirement will have less travel and fewer frills. And if that's the case it's OK. We like our life, our home, and where we live so I'm trying to concentrate on counting our blessings.
      I hope you toss in your discoveries to the conversation Newby and I are having about how all this came to be.

    • 1. In 1998 in the waning days of Clinton's administration, Phil Gramm (R-TX) manages to sponsor and get passed a bill ending the Glass-Stegall Act (GSA). Recall that the GSA was enacted back in the Great Depression to install a "firewall" between commercial, regional, investment, and Savings & Loan banks. The general idea was to prevent the kind of banking excesses in the 1920s that led to the October 1929 market crash. So far, so good.

      2. From this point all the way up to 2007, the various bankers engage in all kinds of speculative risk-taking with swaps, derivatives, and other opaque investment strategies. The Investment Bankers develop something called the Risk Pricing Model (RPM)>oilnewby

      Newby, thanks so much for that. I've decided to make a real effort to try and understand how all this came to be and the complex instruments the financial institutions used are difficult for a layman to understand. Actually I wonder how well the CEOs of the companies employing them understand them (re. Enron)

      I think I've got a handle on how political meddling jump-started the real estate bubble and collapse. Essentially the Gramm bill facilitated a wave of mergers and consolidation in the financial sector. With community action groups given almost veto power over mergers and expansions and favor earned by making enough loans to target groups, lenders found ways to make those loans by tossing prudent lending practices out the window.

      And incredibly they made money abandoning sound lending practices as the influx of new buyers pushed up real estate prices, no one defaulted at higher prices and either sold or refinanced and cashed in. Lenders expanded the practices outside the target groups to other home buyers and investors and the snowball rolled till homes were no longer affordable it fell off a cliff. And various scoundrels at Fannie and Freddie, pretty much a who's who from the Clinton administration walked off with well over a hundred million cooking the books. Various CEO's at banks and other financial institutions also found ways to personally profit while their companies soundness was being undermined. I also understand how the Bush Administration and Republicans tried to take credit for the rise in home ownership and its efforts to install some oversight way to meek and mild.

      Here's what I don't get:
      1. Fannie, Freddie, and some others packaged the subprime loans with traditional ones and sold the bundles-traunches to other financial institutions, investors, pension funds and others. These bundles were rated Triple A. How'd that happen? Incompetence or misconduct at S&P, Moody's and others? Now none of the buyers/investors know just what percentage of their investments are the odious loans.

      Regarding the Gramm bill, Why did Clinton sign it? There was no veto proof majority. Did the Gramm bill bring about all the complex and opaque strategies and instruments? If so, how? Didn't banks and investment firms outside the US use them and are sufferring now as well? Or was the SEC responsible?

      At least we finally had a big day up today.

    • "Who in hell would have ever thought that our banking system is virtually broke?"

      If you google Antal Fekete, and read through some of his recent articles, he has a theory regarding this. He's a professor of economics, I think.

      Anyway, in a nutshell, his view is that that we have been in a steadily declining interest rate environment for 28 years. He says that, as interest rates drop, banks need to retain more capital, since future loans will garner less interest income than existing loans that are being repaid. So to make the same revenue, you will need more capital. But, he says, instead banks paid out most of their free cash flow in dividends and didn't retain enough capital. IMHO, pipe

    • >>Before this happened I had my assets split with about a third each in cash(CDs), the market, and real estate. Now after the market and my stocks and funds have been whacked so bad, it's about 40% real estate, 40% cash(CDs), and 20% stocks and funds and my total net worth is down about 15%.<< Bigriver
      My breakdown 18% cash(CDs), the market 28%, RE 54%(owner financed 12 properties-re in my area is stable to slight increase). Net worth down 11% but that number is tied to the 28% in the market or just shy of 40% in market investment losses. I am 59, self made, 500-700K gross income yr. Quiet frankly, I consider myself ahead of the crowd for my accomplishments but this market has turned my logic on its end. Who in hell would have ever thought that our banking system is virtually broke?

    • interesting thought by Andrew B. Busch of BMO:
      Ironic Thought For the Day: What if Congress gives the auto companies their loan, but mandates they make expensive hybrids.......then gasoline goes back below $1.50 a gallon, everyone wants a pickup truck, and US car companies don't make enough of them......

    • oilnewby-Your version of events is certainly believeable. If true, one has to wonder, if Paulson was really scared about high oil prices, why he didn't tell W. Bush to cool it with the constant fear mongering chatter about invading Iran and thereby maintaing a constant $25/bbl Iran war premium on the fluid, over and above any other speculative premiums.

      There is a lot more here at play than Hank and Morgan, but it wouldn't surprise me if they conspired to steal Bear Sterns 'good' parts, assuming there are any. What ever happened to the 'bad' parts? IMHO, pipe

      • 1 Reply to pipefitter9
      • I'm not buying the scapegoating for this downturn. Endless chorus from the administration about invading Iran? That's not my take on the usual endless conferences with the do nothing-cheating Euros and bland no options are off the table rhetoric, pretty much the same as we've been hearing from Obama regarding Iranian nukes other than the fact he'd sit down face to face with Mr. Ahmadinijad.

        We are 25% of the oil market. There's another three quarters out there. This is a global collapse, not just a US collapse and we are far from the most severly impacted. Go take a look at the recent Barrons. As of last Friday:
        Brazil-down 57.8%
        Canada-down 48.64%
        France-down 49.30%
        Germany-down 51.88%
        Russia-down 71.38%
        The UK-down 51.94%
        Australia-down 56.77%
        China-down 58.19%
        Japan-down 34.78%
        South Korea-down 61.30%
        India-down 53.74%
        The US-down 41.04%

        The downturn is not only worse just about everywhere else, it started in most of these countries before it did here.

        This has been a perfect storm of speculative and other bubbles popping. One in residential real estate, as bad abroad as it has been here, another in commodity prices, another in emerging markets, another in consumer credit, and another in the labyrinth of leverage instruments none of us fully understand (do those using them even fully understand them?) that the financial institutions worldwide have employed.

        Mistakes? Sure. Just as Hoover (and FDR) made mistakes, but blaming Bush, Paulson, Greenspan,Bernanke, Barney Frank, Clinton, ACORN or any of the other usual targets for this misses the big picture IMO. Even if they'd all in 20/20 hindsight done everything better, things here would likely be only slightly better. This is a combination of unsustainable long term global trends, decades in the making, that have finally gone bust. Here's one more. In the last 30-40 years in the G7 world we've decided that after 30 years on the job we're entitled to retire on a pension so literally tens of millions of private and public sector employees have retired and started collecting in their late,mid, and even early 50's. That isn't sustainable either and there's no better place to see that than the American car industry. Neither private employers nor the tax payers can afford that burden of an extra 5 to 15 years of retirement.

        The person I'm most angry at is me for not seeing this coming.

 
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