You have to admit that things got overbought.
Don't see it that way at all.
The CDOs did not and will not all of a sudden become worthwhile.
No one knows how much there is of them.
A very substantial amount of 'liar loans' ARMs will be resetting next year. Do you imagine that the holders of the CDOs backed up by these pieces of garbage are marking them down now, before FASB 157 comes into effect? Before this bit of financial legerdemain can be set up?
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The multiplying effect of the toxic waste in the banks' balance sheets will be horrid. Commercial real estate loans are next.
Mervin King, the Governor of the Bank of England, thinks that the whole stinking mess is worth $400 billion scattered around the globe. Assuming - conservatively - a 50% reduction in value, then the write downs so far are a fraction of what is coming.
Credit transactions will come to a near end. Without the fix of easy credit, the junkie will got through withdrawal. Not a pretty sight.
And when that happens, everything that has value because it is worth something to someone because something useful can be done with it, i.e., oil, commodities, and gold, will go up and stay up. Gold is a store of value, and has no counterparties or liabilities associated with its ownership; that is its value, a safe port in a storm. The usefulness of the others should be obvious.
Because they scattered toxic garbage around the planet, the big US banks/Wall St. scamsters will be hammered as no one but no one globally will be buying anything from them. This is essentially why I am short financials. No one will buy their paper if only to punish them, which is just and proper.
And this is why the dollar will continue to plummet.
Today was an anomaly. The macro trends are too obvious and near-irreversible in my view. |
