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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: pogohere who wrote (7442)	12/27/2007 1:36:01 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 50116

Bitch slappin' John Hussman & Phd afflicted economists... Pogo, you just had to go and do it now -- didn't you? I promised myself I'd try... really, really try. But, now I'm going to have to break bad on my New Year's resolution to be kindler and gentler in 2008, even before the first day of the new year arrives. Well so much for that... A higher calling beckons, namely -- THE TRUTH. And the reason why I'm going to have to apply a good ole fashioned e-bitch slappin' to John Hussman and those you've cited in your response... is because they are leading traders and investors astray with their false conclusions and intellectual dishonesty regarding the Fed's recent actions. Sadly, I really like John Hussman. I consider him to be a very bright guy and generally a straight shooter. So I take no pleasure in this. Partly because it's not even going to be a fair fight. And not because he's not here to defend himself, but rather because I have something that John Hussman doesn't have. And it gives me a huge advantage. And that "huge advantage" is being unencumbered by the traditional brainwashing of a formal economic education. Actually, my arguement is going to be short, sweet and simple. No big words, no economic theory, and no Greenspanesque economic gibberish, or mumbo jumbo. Because it's not about what Hussman said. It's about what he didn't say... what he left out. So let's start by reviewing what he said in his December 17th article titled: "A Little Acid Test for Fed "Liquidity" hussmanfunds.com In his posting, Hussman basically said that the Fed's recent repos were more show than go... terming them: "over-hyped" and accusing the Fed of conducting them with "great fanfare, as if they actually matter." Now don't get me wrong... Hussman doesn't have it "all wrong" here... he half-correctly framed his "acid test" in encouraging his readers to watch the NY Fed's listing of open market operations to determine whether the Fed was actually adding new liquidity. The crux of his case is that the Fed is quote:unquote: "...just trying to brew up a tempest with what's already in that little teapot." And that's where he goes wrong... very wrong. Many of you will recall how many times I've said that: "you will make more money by asking the right question, than by having the right answer"... well this is a prime example of not asking the right question. It is NOT just a question of whether the Fed is merely rolling over it's repo's and withdrawing the same amount of liquidity that it earlier granted... it's a question of what's in the teapot? What Hussman left out is simply this... Fractional Reserve banking means than when a bank get's $10 billion of "dead/illiquid" assets of it's book that it can not monetize...in return for $10 billion of fresh cash from the Fed... it can now make $100 billion in fresh, new loans (applying 10 x leverage to it's new found liquidity). That's the real story on what the Fed is doing. It's monetizing bad paper... Buying it, and in turn handing the banks fresh cash in which they can apply 10 x leverage via fractional reserve banking. If that isn't adding fresh, new liquidity... and a helluva lot of it... then what is it? There are many ways in which the Fed can add liquidity. After Wall Street threw a fit over not getting enough of a rate cut from the Fed.... the Fed started using auctions to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations. Quoting the Fed: "That could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress." Bernanke is already on record for acknowledging that the Fed can monetize nearly any asset they want to. And that is exactly what they are doing by lending new money to the banks based on nearly any asset. A bailout by any other name - remains a bailout. One paid for by you and me. Liquidity by any other name - remains liquidity. Also - paid for by you and me. And a transfer of wealth by any other name - remains a transfer of wealth. Also - paid for by you and me. Hussman further chastized traders here with this quote: "In short, Wall Street analysts aren't paying attention to the data if they believe that the Fed is "pumping" hundreds of billions into the economy to provide some kind of "safety net" into the banking system, or the mortgage market. Is it really to much to ask that they make some attempt to understand the subject about which they opine incessantly?" Given that the Fed will not reveal which banks now come to it's window, or which assets it's monetizing... I think it's Mr. Hussman who needs to attempt to understand the subject about which he is incessantly opining. I remain, S.O.T.B. I will repeat: "Gold is speaking the truth and the truth will set you free" And don't forget to pay attention to what's actually in the teapot!