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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Augustus Gloop who wrote (9145)	3/22/2008 6:09:03 PM
From: Lazarus_Long	Read Replies (2) \| Respond to of 33421

I know what you're saying and I know you're baiting me into a political debate here. DOOD "WHO? ME? The Fed won't save me if I make a stupid trade and I pay their salaries. They won't save you or John. Who are these Bear & Sterns DOODS to expect the Fed to save them from the consequences of their stupidity? I thought we lived in a capitalist system. The Commissars couldn't have come up with a more true-to-their-philosophy move than this. Let them go. It will be a warning in the future to other brokers and commercial and investment bankers to watch their moves. Even you have admitted destroying Glass-Steagall was a mistake." - think run on the bank! "Let them run. This is apparently what these DOODS need to get the point through through thick skulls. Continued use of the Greenspan Put just tells them it safe to take riskier and riskier bets. Uncle Sugar will always bail you out." Had the Fed allowed both Countrywide and Bear Stearns to fail (and I think the Fed helped grease both deals under the table - we'll never know) we'd have a bigger crisis. "Oh, they did. Did you think LTCM put itself together all by itself? That crisis still may come to pass but I think the fed needs to use every tool they've got to avoid a potential collapse. "DOOD, RE prices and asset values NEED to adjust to something like their true levels in this country or you WILL pay a much worse price than you're imagining. Think sliding back to an East Indian standard of living- -in the 1970's- -due to runaway inflation because the Fed and Treasury keep playing with interest rates and money supply. Right now, we are the world reserve currency. Right now. There are already countries pushing to change that. THAT fact has been a major support under the US$. It means that EVERY foreign central bank has to have a supply of US$s on hand to settle international debts. Pull that support out and the whole house of cards falls. And neither the Fed nor the Treasury can control THAT. Consider worse can happen than anything you've envisioned in your scenario. Then see if you can still justify it. We got into this mess because the Fed dropped rates to ridiculously low levels in response to the dot-bomb. They then set off the RE bubble. Now that it has burst, once again they are taking interest rates down to ridiculous levels. The commodities bubble may have burst now. What bubbles next? If the answer is 'There's nothing left', then the answer is 'Everything'- -ie., inflation, mega-inflation." They're doing things I've never seen the Fed do before. "This should worry you. It's worrying lots of people." That tells me things are WAY more ugly than you and I want to know. "NO. We need badly to know exactly how bad things are. One of the problems of the present market is it doesn't know how bad things are - who's solvent and who isn't - and is pricing for the worst case it can make out with available information. That info is likely seriously wrong; it could be better, it could be worse. But the financial institutions are doing their best to lie to us and we are rapidly reaching a point where we won't believe them even when they tell the truth. Think about the consequences of that for a while."

To: Augustus Gloop who wrote (9145)	3/22/2008 6:14:42 PM
From: Lazarus_Long	Read Replies (1) \| Respond to of 33421

Message 24420520