Episode-428- What Will a U.S. Economic Collapse Look Like — 11 Comments

  1. I just wanted to confirm something you said in today’s show. I have ARM that just reset to a lower rate. I’ve been paying extra toward principle, and I will keep paying the same amount and pay more toward principle. I’ve had to be late once, and the bank had no problem waving my late fee because I had never been late before and was actually ahead.

  2. Jack:

    I think my MSB membership is about to expire. Do you send renewal emails or do members need to keep track of their date and go through the registration process again? Also, do you plan to offer multi-year memberships?



  3. Hi Jack,
    I agree with most of your conclusions.
    However, a bank or insurance firm does not have to sell a RMBS or CMBS or CDO to collect the cash. These are pass through securities. The cash flows are passed through from the individual mortgage holder through a servicer to the ultimate security holder. Thus, a RMBS or CMBS does not need a “market”. Sooner or later either the cash flows will reduce the par balance to zero or the shortage (from foreclosures etc.) will be written off.

  4. Hey Jack,

    Great show as always, but I think it is important to point out that the discount window has a limited dollar amount, so the arbitrage that could potentially take place between banks borrowing and converting to bonds is significantly limited.

    I also recall hearing back when I followed CNBC back in my day-trading days that the compounding period was significantly different between LIBOR and the Fed Window versus how bonds are yielded. I did a little googling before posting this, but couldn’t find anything conclusive to back up my claims. I may be wrong, but I would hate to think such arbitrage is so simple.

    I do agree, at the very least, that some foul play is afoot, as it always is.

    Regardless of what these facts may be, I think it a fools errand to speculate. You are on point however in your suggested preparredness of these events, as they apply in most any situation that may come to pass, espescially if no collapse ever happens.

    Thanks again for a great show.

    Justin in Boston

  5. Jack,

    Thanks for discussing financial matters. It seems like it will be important to continue positioning our assets based on the current actions of the goverment.

    You are right, there is no complete way to isolate ourselves from the consequences of the actions of our clowns, but we can make the best of it.

    Keep up the good work.

  6. Jack\’s on point. Ignore the noise the government and media are making. We are in the middle of a massive financial industry bailout that vastly dwarfs the massive bailout of last year. Toxic assets so overwhelmed the resrves at the financial institutions that they were going to collapse. Mark to Market was set aside so the banks could hide this. In the mean time the government through spreads are making the banks increadbly awash with money. THIS IS SMOKE AND MIRRORS. If they had to go back to mark to market the toxic assets would still drown the reserves. The hope was that the market would recover and the toxic assets wouldn\’t be as toxic. This is not happening. You will see the false recovery as the remaining 2/3 of the stimulus is kicking in. The sad thing in is that we aren\’t investing in things to drive employment now and give returns for years to come in the future like the highway system did in the past. Instead its like putting a fancy dinner on your credit card. The only difference is that the bill will arrive 6-8 months out give or take. Each bubble must be bigger than the last to counter the prior and grow further. Dot com – real estate – credit – Government. The size of the bubble detrmines the trough size. Prepare now…