That Didn’t Take Long Dept.
15 September 2008Those following this blog know what happened within a day of the last posting. We were able to get a Special Alert out to our members on Sunday evening as this drama unfolded.
The questions coming back seem pretty straightforward: Now what?
Since even the comedy channels seem to have their radar up for AIG, getting that company refinanced would be Job One. I assume it will be taken care of during this week.
It strikes me that the bullet that gets you is always the one you didn’t see. So worrying more about U.S. financial institutions is probably not focusing on the greatest threat at the moment.
I will be looking around other US sectors, and around other countries, for potential sudden problems with the capacity to derange the global system. And I’ll add what I’ve said before: thank goodness for the single competent officer in the Bush administration, Henry Paulson, who has done a great job with these issues to date. Ben Bernanke, ditto. I continue to have faith in both of them.
Meanwhile, oil and energy prices will be coming down, which is one of the secondary problems in all this. Sen. Maria Cantwell begins hearings this week on increasing proof from trade records that the price spikes of the last year were caused by speculators, and not supply / demand variances, much in agreement with many like comments made here.
Other commodities are also coming down, as speculators pull out not only of oil, but of other metals and foodstuffs. In other words, like Bogart in the swamps of Africa, we are ridding ourselves, at least temporarily, of the leeches I’ve been calling “vampire investors” – a new class of Wall St. specialists who have been taking the world’s commodities for an accelerated ride.
It won’t be long before they return, I think, because they seem to have no sense not only of common weal, but even for their own survival. Don’t kill the host, most brainless leeches and other parasites already know the mantra.
Meanwhile, the banking lobby should be taken out to the shed to have their xxxxx kicked, and then we can go about reinstating the various measures from the Glass-Steagall Act that we learned in 1929 on, and that they spent the last ten years throwing out. Banks are not shopping mall investment vehicles, period.
This is going to be a very rough week, and I’m glad I’ve been strongly in cash since my liquidity contraction warning in February of 2007. Now we get to wonder: is the cash itself safe?
8 Responses to “That Didn’t Take Long Dept.”
September 16th, 2008 at 8:20 am
JON MOULTON: FOUNDER OF PRIVATE EQUITY FIRM, ALCHEMY
Bankers got rich by making others poor and they behaved like a pack of hungry dogs in a butcher’s.
Sadly banks lost their integrity and engaged in ‘fire and forget’ deals.
The banks are now in a mess and they’ve put the UK economy into the worst recession in living memory.
Now the banks are working out how much of the truth they can tell about themselves – and everyone knows it.
http://news.bbc.co.uk/1/hi/business/7613071.stm
I get the impression that you and Jon would get on well together:-) He opens his new office Oct 1st with an evening drinks party. I’ll be there, Chunnel fires permitting, and looking for sound advice on where to hold cash too.
Tim
September 16th, 2008 at 9:18 am
More insight from Jon about PE money on the sidelines looking for deals falling out of distressed entities.
http://www.cnbc.com/id/15840232?video=857590002
Tim
September 16th, 2008 at 5:34 pm
http://www.nakedcapitalism.com/2008/09/fed-ponders-85-billion-rescue-for-aig.html
http://www.reuters.com/article/topNews/idUSHKG1567720080917?feedType=RSS&feedName=topNews
http://www.monkeybusinessblog.com/mbb_weblog/2008/09/imagine-another.html
The last one is more fun.
September 17th, 2008 at 7:31 am
The Fed’s run out of money
Seriously. It’s broke. Here’s the statement from the US Treasury:
http://ftalphaville.ft.com/blog/2008/09/17/16019/the-feds-run-out-of-money/
September 17th, 2008 at 2:38 pm
“…I’ve been strongly in cash since my liquidity contraction warning in February of 2007. Now we get to wonder: is the cash itself safe?”
well, that depends on the currency I suppose.
September 18th, 2008 at 8:34 am
“there is one thing about common sense… is not so common!!!” Ross Perot
September 18th, 2008 at 9:12 am
So you don’t think we’ve hit bottom yet? I’m very much a small (and poorly informed) investor compared to the circles you run in. I just took some cash that I had pulled out of investments last year and reinvested it.
What sort of signals are you looking for that would tell you it’s time to start investing again?
September 20th, 2008 at 8:11 am
Re- Cash and Investing again – which seems to be in the “taking longer” dept.
If US main street banks are so strapped for cash why are their savings accounts offering such low (~ 3.5%) rates? Is it perhaps that they wouldn’t know what to do with the cash if they had it? Are local municipalities so flush they don’t need finance for local infrastructure works etc? Waiting for help on fed funds for local investments? Waiting for CDS insurance payouts? Long wait methinks – they just blew it on another mega wall street (Oil China) funded bailout.
If local banks need equity to support their liquidity ratios, maybe local savers can get warrants attached to savings accounts giving rights to be involved (vetos) on what is done with their loot? Maybe what’s good for the fed gander could be good for the local gander.
Gander Warrants are the new Black? Seems appropiate to me given the new Washington/New York socialist coup.
Revolution? Anyone for tea
Tim
BTW, My favourite (incredibly popular?) new tax would still be on trading derivatives, especially CDS. Such activities are not going to go away any time soon. Might even be enough over a few years to pay for the bailouts. In true Washington style it could be labelled “temporary”, of course.
CDS are insurance without regulation aka crap shooting unless you are an AIG customer. Even casino operators pay some direct turnover levies/taxes.