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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (16642)	1/24/2009 10:04:23 AM
From: Real Man	Read Replies (1) \| Respond to of 71456

And you thought Bankrupt Lehman paying 2.5 Bilion in bonuses this Summer for bankrupting the company, and bringing the system down to its knees was OK? All of them are doing that.

To: carranza2 who wrote (16642)	1/24/2009 10:58:43 AM
From: RockyBalboa	2 Recommendations Respond to of 71456

I just completed re reading "When Genius failed", The Fall and the epilogue of said book to draw an analogy to the ongoing U.S bailout, an admittedly mechanistic approach. Turns out that there are many parallels and also possible "success factors". But, the end result was again no recovery, but a wind down of excessive positioning, a payoff of creditors and complete return of the bailout money. First, the underlying positions (then swap spreads, volatility) never returned to the initial values. The market, and the world had and have to live with higher risk / credit spreads and new lower valuations. Meaning, the position taking was at wrong prices from the beginning. Today... the underlying positions are loans and RE and have yet to adopt sustainable values, but will likewise not return to their bubble values. Second, the essential liquidation of the speculative bubble (ie, the huge derivative book) was only successful because of super tight controls applied to the former principals, while giving them some reward (ie. payment). The consortium supervised the activity on a daily basis to ensure that their funds are used properly and not for new speculation. Today, TARP money was given with practically no regulations, with ever changing purpose, and with no oversight by a gonvermnental / taxpayer commission. Third, it only worked because all parties chipped in money not only a few and faced consequences for deviating behaviour; which ensure that interests are aligned and no one would profit from trading against the positions. We don´t have that today yet; with the government (and the taxpayer) shouldering the load indiscriminately and a load of profit opportunities for a few. This is a result of assymetric information; free riding bailouts and, coupled with the lack of oversight. Like I said, the chronic addict is just prescribed more alcohol and heroine. It´s not even a substitution therapy (in the past we had that, by creating bubble in different pockets of the economy). I´d say the current measures don´t work.