How far will gold and silver fall?

If you don't understand that the preferred shareholders of GM, Lehman and Washington Mutual all lost their investment, then you will never understand why your contention is wrong that the preferred investment by Buffett is risk free. But I guess it's easier to continue to pretend you are right than admit that your facts and reasoning regarding BAC specifically, and preferred stocks in general, is COMPLETELY WRONG.

But it's what I expected.

 

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I don't want to cause a debate, just pointing out one thing to you Inflexion. You are saying that if we continue the course, you expect 30+% increases in PM. However, if we change course, you still expect PM to rise. Those are the only two options?

I am just saying be careful because if your logic concludes that whatever happens your investment has to go up, that is, to me, a sure sign there is a flaw. There is almost no good, service, or anything I could ever convince myself has to go up over inflation no matter what happens. I am sure Cloud and I could paint you some scenarios where PM would go down. I am just saying it seems your post completely dismisses that possibility, and to me that should be a red flag. I will point out many times in history where investors colelctively convinced themselves that up is the only direction something can POSSIBLY go. It will not be pretty.

I know people like to say history is different now, I am too old, whatever, but I like to draw on recent experience to think things through. Lots of PM prognosticators have had the exact same circular logic in the last 30 years, that PM has to go up regardless of what happens economically. Its like a broken clock is right twice a day, they are right now, but what about the last 30 years?

I am simply asking, for me, for you to think about your statement and see if you really believe that, under anything that can reasonably happen, if PM HAS to go up in all circumstances. I like you Inflexion, so I am asking you this not out of malice but out of genuine concern.

Chris

 

It's neither son. There are legal requirements of capital asset reserves vs liabilities.

 

You didn't answer the question posed. It should only take a couple of sentences.

 

It is still obvious that you don't understand (1) BAC financials, (2) Buffett's purchase, or (3) the characteristics of preferred stocks. QED.

 

I don't think I'm saying what you thought I said. Although that could entirely be my fault for not conveying it the way I intended. I gave 3 scenarios, only 1 of which (which is the most likely one to me for at least the near term) has PM's going up for certain which is the one of monetary easing plus runaway debt. It would certainly be foolish to say PM's have to go up in every case. Anybody who says that should be junked.

The other 2 scenarios are deflationary in which I said buying power would likely still increase even if the price itself decreases. One scenario is that we pay off the debt, which would erase a lot of the monetary supply causing deflation and under normal circumstances would cause PM's to decrease in both price and buying power. However this only works in my mind if the economy can support serious interest rate hikes and I don't think that's plausible. So if they were to go that route before the economy can handle it then commerce would most likely screech to a halt, things would come unwound and metals would emerge as a safe haven. If this happens then I could see price going up or down depending on magnitude, but either way having more buying power relatively speaking.

If the economy could actually handle this then that's the one scenario I see PM's dropping in both price and buying power, where stocks, bonds, and currencies would thrive, but based on the numbers that doesn't seem like an option at this point. The other scenario is halting monetary easing while not addressing the debt in which case I believe we would reach the same outcome.

I suppose we could add one more scenario for the case of both monetary easing subsiding and the debt being paid off, but that would just be a more extreme deflation. If the economy can handle it then I'd be the first one to cheer even as I lose my shirt, but that doesn't seem likely based on unemployment, GDP growth, and the debt situation, as well the obstacles facing small businesses.

 

You linked my response, it was one sentence Fatima.

"The securitizations structure, not Countrywide"

That is your answer. Five words, do you want me to rephrase it?

 

Yes, please do. "securitizations structure" is not an answer as to Who is responsible. That is a "what" not a "who".

 

No it's not obvious. But it is obvious that 95% of your posts are nothing more than insults directed at the one you are responding to when you have lost an argument. You already ran off with your marbles once in this topic. If this is the best you can do, I recommend that you do it again.

 

Yes sir. Securitization structure is a separate legal entity that holds the mortgages legally. There are even some mortgage originators who sold off their servicing rights as well, so they originated the loan, but now have no contact whatsoever with it. The business model CW and other large servicers followed were to sell off every aspect of the loan, including equity residual, to these separate legal firms, but keep the servicing rights. Servicing is where they make their money. However, they are simply a contracted firm for the securitization structure, with the right to service the loan and keep a fee. CW at that point has no legal recourse, possibility of gain or loss, regarding what happens to the mortgages. Likewise, the securitization structure has no legal recourse back to CW. The only recourse would be on an incomplete loan package, which is found out quickly, and CW would have to substitute in an equal quality loan.

CW exposure is if a court found they misled investors as to the quality of the loans they donated into the securitization structure. That is what is being settled and litigated on, hence my statement that the lawsuits are CW only real exposure to housing defaults. People can send in jingle mail all day long, and it is the investors in the securitization structure that takes the losses.

Chris

 

It's just proof that you have no understanding of the subject other than to insult those who offer better information than you have.

 

OK, but I am asking about the specifics of BAC.

 

Sir, I do not know the specific names of the Securitization structures they created, there are thousands of them out there. I simply know the standard procedures of the industry since both my background and education related to it. I dealt with these topics in both circumstances, and dealt with certain tax issues first hand.

Did I work for BAC? No. Did I work for their main competitor? Yes. Do I know for certain that Countrywide used the same structure for securitizing their loans? Yes I do. 95+% of the industry used the exact same umbrella structures, they would only vary in crafting the tranches.

For any more information than I have, you would have to ask either a Countrywide executive or someone who rated them at the agencies. I am simply saying I know more about this than probably anyone else on this board, and more than 99.99% of all other Americans, so I would think my opinion on it would be worth listening to.

If you choose not to, that is your right.

Chris

 

It was you that said their only liability was the lawsuits being filed because of it. I am only asking that you explain it relative to this bank. If you don't really know afterall, I don't mind dropping it. (even after telling me I have no idea what I am talking about)

 

Well, back to the original question, I suspect the correction will be larger now than yesterday or Wed., as it appears the "fear factor" has lifted almost every gold and precious metal segments again. I think that nibbling some away into other investments or cash might be appropriate for investors. IMO.

Jim

 

CW exposure is if a court found they misled investors as to the quality of the loans they donated into the securitization structure. That is what is being settled and litigated on, hence my statement that the lawsuits are CW only real exposure to housing defaults. People can send in jingle mail all day long, and it is the investors in the securitization structure that takes the losses.



Read more: http://www.cointalk.com/t190568-14/#ixzz1Wp98Ev5e

Asked and answered Fatima. I truly do not see the point of further engaging in this discussion any longer. Every answer I provide you either you say I am incompetent or you simply ignore and claim that I am unable to provide an answer. I guess unless I am the CEO of Countrywide you will not accept my answer, so apparently you are smarter than I am. Go ahead and use that in a quote out of context as well.

 

Unfortunately I don't have much gold I would wish to part with, (most numismatic), so I agree with your sentiments but unable to take advantage.

With the fear in the markets, and not a great hope looming for better news, I am not sure when it will turn around.

Jim, do you think increased M&A activity could give the market a rally? I have seen this multiple times in a downturn, with equities lower an increase in mergers leading the market higher. This in turn fuels further speculation and generally an upturn in the market, (to the detriment of gold historically).

Chris

 

M & A would probably be seen as a coin flip to most companies, even those with a large cash component. I would favor areas where large companies with a specific future resource need, such as steel, copper, coal, nat. gas, PM, even patents or land, could merge or acquire a smaller company with such assets to supplement their for the long. long term. I think some of the increase in PM miners lately has been due to the CNBC series on how difficult it is to obtain and develop new resources. Most are digging deeper on old sources, so I think there may be strategic M & A, probably for stock, that won't be immediately beneficial to the resulting company, but will enhance their long term resource.

 

I was thinking more of the "pop" it gives to the owners of the acquired company, since M&A almost always involves a premium to previous day's share price. It just seems the overall market benefits when more of these deals get put together, since many start looking for other takeover targets and start bidding up their stock. Even if its a stock swap, if you own a stock one day valued at $16, and tomorrow a deal is announced giving you $22 of a new stock, its still good movement, and positive movement at that.

Btw, I am a firm believer that most M&A activity benefits the acquired company much greater than the acquiring firm. A large acquisition announcement actually make me look at possibly divesting the acquiring firm, since many times the planned economies never materialize, and companies have a bad habit of overpaying usually.

Chris

Btw how this ties in to the OP question would be if the market can start generating more interest, I believe money that is either in cash or PM may become more interested.

 

I am sorry I didn't make that mention, thank you, that the acquired company usually gets the pop, and it can be very significant, but the acquiring property gets the resources it needs for future production, extending it's base, and this use to be just the thing for long term mutual funds and such, but we live in a different world now, with few such investors. However, if demand ( such as gold) does continue on a bull run for a longer time than I might imagine, the acquiring company will be the winner by far. IMO.

Jim