If you are like me, the frustration is reaching critical mass. On one front, politicos and pundits grouse about what to do to save troubled homeowners and speed the economic turnaround. What they do not realize, or won't admit, is that to not permit home prices to find the bottom and let the free market reward the wise and punish the foolish, the recession could be long and deep. The same could be said about banks and investment banks. Many will be spared because the lesson which should be taught is a costly one.
Short speculators and and muckrakers are also getting my dander up. These "investors" will do anything to see their prophecy fulfilled. Take Lehman Brothers for example. The firm has ample liquidity, can tap the Fed for liquidity and can use non-treasuries as collateral. That still was not good enough for some on Wall Street. Lehman then announces plans to raise $3 billion via a convertible preferred deal. The short speculators denounced it as proof that Lehman is in trouble. This may or may not be true, but these same "experts" would be just as negative if Lehman did not come with a deal, expressing their opinions that Lehman cannot raise capital. This is a Catch-22.
As with politicians, market pundits should be taken with a grain of salt. We (I am also a pundit) have agendas. Mine to to shoot holes in the theories and bloviations of various talking heads and legalized market manipulators.
I will leave all with two words of advice. First, beware of strategies which blindly use cyclical historic precedents. Secondly, beware of regulators bearing new rules.
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