AA -- now let's be careful out there....
You and I (and most of the other members of this and its sister thread) know what the real problem is. The press is all focussed on capital spending on tech or the mis-deeds of corporate executives, but the real, underlying issue here is the credit bubble. all the rest of it is just small sideshow manifestations. And I have a very great fear that the credit bubble is coming un-wound, and quickly.
If you read Minsky or even some recent op-ed pieces by George Soros he/they describe how a leveraged economy, especially one that comes to rely on what Minsky calls "ponzi finance" (where finance units are not repaid out of cash flow of the asset they finance but instead out of the creation of new finance units), is an inherently UNSTABLE system. a stable system tends toward an equilibrium point; i.e. vascilating within Myth's "range". unstable systems, on the other hand, are characterized by multiple equilibria, i.e. huge overshoots to the upside and massive overshoot to the downside. in a stable system movements in one 'direction' feed back through the system and cause a tendency to move back in the other direction. in an unstable system movements in one 'direction' feed back through the system and actually accelerate the move.
while you say we are at the point of "recognition", i am quite fearful that the point we are at is the point of acceleration. Bobcor posted earlier about MBIA (which i have been short for going on 2 years); Patron responded about how he is (i) short; and (ii) expecting it to go to zero (a sentiment i agree with). but we should all just think for a second about what it would REALLY mean if MBIA (and its evil twin ABK) really did go to zero. money market funds, which people have come to believe are CASH and probably think in the back of their minds are insured by the US gov't via the FDIC, will 'break the buck', and they won't break it by a penny or two; it will be measured in dimes and quarters. municipal finance as we know it will be hamstrung (since most municipal bonds are insured by MBIA or ABK), which will dis-able an important "automatic stabilizer" to hard times. heck, credit probably won't even be available to you and me.
anyway, this is why i am thinking there may not be a "bounce". if i remember right, from October 1998 to March 2000 we went basically STRAIGHT up, with nary a play-able decline; this was the manifestation of the unstable economy/credit bubble to the upside. i am deathly afraid we are on the verge of witnessing the brother move.
re: my earlier post. i did not mean to say that i wouldn't be posting; its too much fun and you guys are all too smart for me to not hang around. what i meant to say is i am considering closing out my stock positions. it has been kinda fun to make money off of scumbag bullshit companies like Metris, Providian, Enron and Mutual Risk, but frankly i'm getting less and less comfortable profiting from the misery of others. i don't really WANT MBIA to go to zero (as you said in an earlier post, "be careful what you wish for") as the chaos that would ensue is nearly un-speakable. so i'm thinking of just getting out, and biding my time until a true, durable bottom shows itself (likely in 6-10 years).
also, feeling better after Pedro beat the Yanks last night (though we still have two to go). all bets are off, though, if Armstrong and Heras go up the Ventoux 1/2 tomorrow.
Cheers |
