Michael Gracie

A picture is worth a thousand words.

And roughly 200 points up, and then down. Seems you can’t make anyone happy.

Me thinks he deserves it.

Two economics/finance minded fellows that I thoroughly enjoy reading are taking Ben Stein to task. Stein recently layed out the notion that the financial markets exist to provide retirees with their nest eggs - Paul Kedrosky corrects, noting the markets are about liquidity, not serving the baby boomers. Barry Ritholtz simply bids farewell to Stein after Mr. Anyone, Anyone? tried blaming traders for recent market dips.

Take it easy on him, gentlemen. All Ben Stein is trying to do is perpetuate the myth that asset prices should (and will) go up forever, as long as everyone follows playground rules. To me it vaguely resembles a Ponzi scheme pitch.

Furthermore, I’m surprised it’s taken people so long to get a clue about this guy and his thinking.

Your economic worries are over, at least if you are a shareholder of United Industrial (NYSE: UIC).

An $85 trillion market cap! These guys must have been doing one hell of a rollup - the only reason nobody heard about it was because of the M&A backlog on the street .

UPDATE: Oops…that must have been Zimbabwe dollars.

You’re on the board of a couple of big companies. Their business is investing in home mortgages, and you force them to be moderately picky about what they buy. It can’t be too big, and must garner a sufficient rate of interest over a sufficient length of time. You also subsidize these companies through loan guarantees - it’s the only way anyone will buy their debt. Meanwhile, the companies’ management really has your ear because they take you out on the town a lot, and their private-sector brethren foot the bill.

By the way…how are those companies of yours performing? Well, they’re losing tens of billions of dollars each quarter, with little end in sight.

What do you do?

A) Nothing, and let the markets weed out all the garbage over the next two years or so
B) Recommend getting rid of all their analysts, and go party with the CEO
C) Vote for a top management shake-up, and go party with the private-sector folks
D) Relax their investment restrictions, giving them yet more avenues to lose their investors’ money

It’s a tough call. But if you picked “D” you’ve won!

It may have been a “rogue trader” that caused a $7 billion loss for Société Générale, or maybe it wasn’t.

If someone, say six months from now, came out and said Société Générale lost that money on the up-and-up, that like every other bank on planet Earth they made big bets on mortgage securities and related derivatives, summarily lost their shirts, and then found someone to pin it on, I wouldn’t be a bit surprised.

Regardless, every single person even remotely associated with the compliance department at that financial institution should be sent packing immediately.

It just doesn’t pass my smell test.

UPDATE: Henry Blodget says the rogue trader/patsy/what-have-you still performed better than some Wall Street traders.

UPDATE 2: Of course Jermone Kerviel’s Facebook friends aren’t truly friends. All those “friends” wanted to do was get noticed themselves.

UPDATE 3: But, the Fed didn’t know about this before their historic rate cut. Either they’re out of touch, or…I’ve got a bridge I want to sell you.

UPDATE 4: Fodder for conspiracy theorists.

Nobody should care about this except the National Association of Realtors, who sole purpose is to promote transactions (not smart, stable homeownership).

Mortgage rates are also dropping, making homes more affordable to those able to get financing. The Realtors group’s affordability index in November and October was at the highest level in more than two years.

What nobody will tell you is that the affordability index is likely barely off it’s lows, measured over say seven to ten years. They also won’t tell you that while new home sales contracts are a leading indicator of economic viability, they don’t actually revise the contract number when folks aren’t able to get financing and the deal falls through.