Tag: liquidity

Ben Stein under attack!

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.

Bailing out your neighbor

Alan Greenspan is now promoting a direct taxpayer-funded bailout of homeowners. Mr. Greenspan has been trying very hard to shift blame for the mortgage crisis, but this statement takes the cake. Begging for increased Fannie Mae, Freddie Mac, and FHA limits serves much the same purpose. It’s socializing losses.

Be forewarned – a direction is being drawn. A 600 FICO score and a pile of credit card debt is no problem – you are hereby authorized to sign any borrowing agreement you can get your hands on. You won’t need to return that widescreen TV that’s now a part of your HELOC. That leased car you’ve already missed two payments on? It’s yours – just keep it.

It’s not a liquidity issue, or one of solvency. It’s a government problem.

A solution for your debt overindulgence is close at hand – you’re neighbor will soon be bailing you out.

UPDATE: More support for subsidies, at the high end of the market. The high end hasn’t started getting whacked, yet.

UPDATE 2: Yet more on neighbors, including how some are being hurt by the questionable decisions of others.

UPDATE 3: And back to blaming the Fed.

After the Money’s Gone

Paul Krugman speaks:

In past financial crises — the stock market crash of 1987, the aftermath of Russia’s default in 1998 — the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.Why not? Because the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency.

I’m personally divided on Krugman – I often categorize his opinions as bellyaching, sometimes borderline inane. In this case it is the exact opposite – flawless.

Ugly Friday Market Review

I’m not grave dancing – I’m outlining alternative tactics in my own head (and begging for ideas)

  • A jobs report came out today, and it was the opposite of expectation. The Dow promptly tanked. I think there are still liquidity problems that need working out, and this just exacerbated the situation. Frankly, a few lost jobs would keep inflation in check – goddamit…I was just forced to spend sixty-five bucks on flies!
  • Speaking of jobs, Countrywide is now laying off up to 12,000 workers. That’s a lot of brokers and backoffice folks out looking for work, and I can’t help but think it WILL affect online advertising.
  • Another hedge fund comes clean – they were on the winning side of the subprime mess. The problem as I see it – it’s tough to gain a real edge unless you have tons of capital – there aren’t enough products available for the little guy to take advantage of.

I’ll ponder what to do while searching for trophy trout this weekend…not!

UPDATE: It seems the fixed income markets are looking for someone to blame…and finding it.

Milk Ain’t Cheap

Prices are headed up. What a landmark piece of news! The Los Angeles Times reported Wholesale Prices Increase 0.3%. Not exactly a scoop.

Prices increase and decrease in trends. Traders (and the Fed) know this, but the government uses these funny little reports like the colored sign at Homeland Security.

We created a huge ATM network with real estate HELOC’s (home equity lines of credit), allowed the dollar to slide to pathetic levels, subsidized the food producers until we choked on our own gratuity, and gorged on foriegn goods supposedly in the name of cheaper prices, so this recent pop should come as no surprise.

Unfortunately, it didn’t need to happen that way, and Greenspan knows it.

Major Bank Embroiled in Money Making Plans

A Guardian Unlimited report yesterday declared Citigroup embroiled in bond selling scandal. According to the report, a couple of traders on the other side of the pond purportedly exchanged a memo where they conspired amongst themselves to make some money. Can you believe it? Securities traders planning to make money. As far as I can see, the only stupid thing they did was talk about it too much before they actually did it.