Dec

16

When the Fed lowered rates to 1% in 2002 did JDSU or any of the old high fliers of 1999 make new highs on the easy money? Okay if that analogy is stupid, its that simple. People are smart. If they do not get the joke, they will tell it to their friends after laughing or crying. Yet, they wont continue to make the same mistakes over and over. Only the insane do that. Most are too rational to take much risk if any at all.

Thousands descended on the NASDAQ to day trade. They failed. Thousands became home flippers. They failed. Is there a "moral hazard" or if the fed takes off the price controls to its own clients (ugg) will the banks be stupid enough, will home flipper be dumb enough, will Lack go back to Boca Raton and trade 200 Nasdaq stocks per day? No way!

If das Bundasbank gave free money would the Germans flock back to Spain? Sure it was global. Once the Chinese make a buck per hour and some one realizes there are three factories for every part machined, the order that doesn't come through was a communist take over, the part that does come through the next price quote is up some 200% perhaps Peoria will become more competitive. Judging by recent price action and anecdotes from friends, that is sooner rather than later.

Its never been about Nazz stocks trading 100x sales. Its not about whether a house should be 70 bucks per Sq Ft vs 170. It is about the wives. The joke is "where are the clients?"

Everyone has a wife, or a friends wife that had some brilliant business idea that can't work. Its not that the idea was bad. Its not that the business plan way bad. Its the competition that is ruinous. You cant compete in business vs people that do not need to profit. HUH?

Yes, there are always moments in time where the cost of capital is so much lower for a few, that they do not need to profit. In the simplest terms I call it the wives club. There are thousands of wives of lawyers that have nothing to do with their time. Their husbands back their business without a need to profit. The Wives Club accounting method is such, that if the loss of the business is less then the expense of frivolous shopping, it's a "net savings": "Look dear how much money I saved us"

Economists call this overcapacity, but it's not. From restaurants that go to the markets for lower costs of capital and string up 1,000 bad diners across the country. To the Walmart's that strong arm Local governments for Tax breaks and use the Welfare system in their pay plan for employees. To the Chinese that dump so much pollution into the air that there is no way in hades I am going there for the BMX worlds this spring. Yet the Olympics will be fine as they do a Chrysler and shut down their operations for a few weeks. It's simply bad business. Sooner rather than later wives get sick of working. People get sick from pollution. Citizens get sick of taxes for everyday low prices on shampoo.

To the Pparsimonious that state "we should all be debt free". The significance and fun in life are bargains. Everyone wrongly acquired "stuff" by finance that was too cheap? Is it that you do not like everyone having "stuff" or is it that your cash competitive advantage is too low and you don't like that? Or is it everything is a bargain and the challenge is lost?

For the Prudent that call out historic lending spreads. Was this the bond.com? Was the internet and price discovery, data mined information on risk taken too far? The repricing of risk! Yes, lets go back to the days where banks only lent money to people that do not need the money, the parsimonious or the endowed.

How long does it take for "unrealistic price levels" to become fact? Wasn't it a bitch to the Soviets to realize, "damn that capitalism deal isn't falling apart." Oh perhaps it was just bad luck? If they Commies had 5 years of Ups in Oils could they have made it? My goodness were they so stupid to realize all they had to do was start a war to get oil up, cause the USA to print money for war?

Okay my rant has gone too far. Just as the global thermal credit crunch meme has gone waaay to far. Yet the joke is it's in the banks best interest not to reprice these pools until every single mortgage broker is dead. The Fed with their client Banks and juvenile ego's vs the Prez with the regional banks VS congress and FNM FRE for the good of the people… Oh my goodness… get that joke. It's financial war!

Now back to the original gist… Is it bad to bail out those with debts or let them go belly up quickly and start over? The day trader in me says take the loss and move on. However my personality and the way I view life is what one in a million? You would literally ruin an extra 1-2 million marriages, children's families all in the name of prudence? Good grief… price the funds rate at 2.5% and tell everyone you have 5 years until its back to 5, period? Better yet scrap the price controls all together and let the market work YEA! Whoa, wait are you nuts? Let me, a trader set the funds rate? Goodness, not the traders, call a real firm like Goldman. Wait a minute what about leverage?

Insurance is regulated. Let's not get into all regulated business and the power grids, telephones and taxes for now. Lets look at insurance and the balloon head from Nebraska's comments after Sept 11th  "there will be a nuclear attack". Now the head of an insurance company speaketh on the net for the good of whom? If this was 1942 he would have been summoned to DC to sell War Bonds. Wait, No its the new economy. Congress please help with a back stop and a lift of price controls. Is the reason insurance companies try to never pay claims is price controls?

Is the reason the insurance market on the SNP, rises very high, for just a few short days, to stop out and ruin so many every few years, because it always pays its claims? Is the SNP 500 too big that if the market's traders had the ability to shut off short term funding it could not in a few days (like short options) drop some 55% to stop out many a leveraged account in America? Is 50% margin debt not prudent? Should all stock accounts be cash?

What are the differences in this money panic Vs 1907? Why is it JP Morgan said to sell down to a sleeping level? He was buying your sleep. Why is it Rothschild's said to buy when there was blood in the streets? They are already long.

During 2000 the Fed should have never run up rates again and again. No one complains about Greenspans 1pm rate shot in 2001. We were already long. Everyone snivels about last week because they didn't give most enough "time" to square the trading books. Is it not obvious that the central banks took rate hikes too far again? There are complete nut jobs out there saying they should raise rates! Oh wait they are not nuts they are prudently short banks.

In 2000 I heard on and on how the inverted yield curve wasn't bearish because the US treasury stopped the 30 year new issues. This time it was because if you "test it" and pick a time frame to support your mumbo its not bearish. Yet no one besides Goldman Sachs figured out how to profit off the inverted curve. Sell everything in debt land short. It was bond.com

Now that Goldman runs the Treasury Dept, the state of NJ, Merrill Lynch, the NYSE and soon to be Britain's Northern Rock what will Bernanke do? Will childhood battles prevail? Or is it the "Traders" vs the Academics with the Lawyers and the Wives Club elected by the people for the people?

Will the Sheiks and the Red Chinese get the joke and help their best client? Or will bond.com crash like the Nazz from some 75%?

Lower the cost of capital for everyone and leave it alone! Only those with want those with out to pay more. The housing crash the dot com crash would have never happened in such a short time without price controls. Sure over time everything returns to a norm. Give it time! Either that or let everyone have a "do over" not just the clients of Goldman.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search