What you are witnessing is the
markets attempt to stay alive. It is that simple. In many aspects, you are
witness to historic events as the markets, and the economy, are struggling to
stay afloat. There is a thin rope that is currently keeping the market from
falling down a very deep hole. This is no longer about whether Apple, IBM, GE,
or CROX report inline, slightly above, or slightly below anymore. The problems
that surfaced last year (credit implosion), has metastasized into a cancer that
is spreading to all parts of the economy, and the world.
You are a witness to history in the making. Yes, I mean that. The Government
is trying to hide the cancer from view, so as not to panic the public. What the
Government wants you to do is to simply trust that they have everything under
control. They want you to believe that there is no cancer in the system, and
they want you to go about your lives and spend money like you always do.
[Related -How to Tell False Hope From Rational Optimism]
Of course we are going to go about our lives, take care of our families, buy
our food, and turn on the TV to watch a ball game at the end of the day. But, by
not giving the people the true story and the facts of what is happening to the
economy, they are depriving you the ability to choose for yourselves what to do
with your money. They want you to be in the dark and just let the cancer spread
throughout the economic lymphatic system until it is too late for you to do
anything with your money. They do this, in the hope on their part, that they can
fix it so that you never have to know about how bad the problems became. There
is too much blind faith in the Government and financial department officials to
just "make everything all better". Just let me have my beer at the end of the
day and don't bother me with details of rising interest rates, which may result
from a bond market crash. And don't bother me with details about things like
housing bubbles, credit swaps, loan default rates, and on and on.
[Related -The US Macro Trend Holds Steady To Date Amid Market Turmoil]
Of course the Government can't just come on TV and say "the economy is
terrible and banks may fail at any time", that would create panic. But, what you
don't do is lie to the people either. The Government has been saying that the
"fundamentals of the economy are strong" for a long time now, a broken record of
talk out of Washington, D.C. The Government wants you, the average person, to
rescue the economy by going out any buying more and more stuff, without any
regard for how much debt you are already carrying. The American people are being
forced to be lab rats in the search for a cure to the cancer.
As I said, you are indeed a witness to a potentially historic event unfolding
in the global economy and the markets. Why do you think the Federal Reserve and
the Treasury Department have been so quick to enact new lending windows for
banks, and now for financial institutions. And what about the $160 Billion
dollar stimulus package, have you ever seen something get passed by Congress and
the Senate so quick before? Everything has been done with an urgency about it.
But, the American people are just being told that the fundamentals are strong
and don't worry.
Give the people the facts and let them decide for themselves, period.
Ok, now that you have listened to me rant on my soap box I will go into some
details of today's events. First of all, we are still seeing bank after bank
report more losses and write downs. Every time we hear of another write down
from this bank or that bank we keep hearing the media say that "the tide is
turning". What tide? And turning towards what? A rouge wave perhaps that will
wipe out Wall Street? My favorite banking analyst (that is a joke), Mr. Dick
Bove, said today that he is still very bullish on banks and feels that buying
bank stocks right now is a "generational buy". But, Mr. Bove, what say you on
the fact that the problems banks have been facing have also been on the scale of
‘generational'. Banks and financial institutions will no longer have the
profits, the revenues, and the appreciation in value for what may be another
‘generational' period of time. With the loss of all the mortgage ‘trading',
those extravagant gains are a thing of the past.
Banks should, and must, go back to being banks. Not traders in their own
right playing games with packaging mortgages up in bundles and selling them to
other banks and financial institutions. The days of mortgage backed securities,
CDO's, and SIV's must end. Their desire to create new ways to make more interest
off of what they already made some money on puts at risk the banking system as a
whole. And that is your money they are playing with! It is time for a complete
overhaul of the banking system… banks are supposed to be "a trust" for the
money deposited in them.