Monday, September 22, 2008

Jim Cramer Says Goodbye To Masters of the Universe---As Safe Becomes the New Sexy


Wildman Jim Cramer has written absolutely the best piece I've seen to date on the Wall Street meltdown---how we got there, what happened last week and where we're headed. It takes a bit of time and concentration, but well worth the effort. We owe it to ourselves and children to try to understand as best we can causes of this mess so we can avoid some of it in the future.

My only criticism of the piece is that it completely ignores the devalued dollar's contribution to the formation of the commodoties bubbles---housing, gold and oil, and the rise in inflation. I believe, as my friend John Tamny at RealClearMarkets, that this Bush Administration policy is at the heart of our economic woes.

I'll be back with more commentary later. Meanwhile, I'm heartened to know that Cramer is not fond of Hank Paulson (my least favorite of the bunch), Ben Bernanke or Alan Greenspan. (me neither).

Cramer opines, rightly I believe:

I don’t care what the stock market did late last week or what it does in the next few days. That age, the Master of the Universe Era, is over. Too many people were too badly burned by taking too much risk to repeat that trick again. That has practical implications for everything from private schools, Range Rover dealerships, and Sotheby’s auctions to SAT tutors, newsstand operators, and shoeshine guys. It will also have an impact on the Zeitgeist. Greed is good? Not anymore. I’m nobody’s innocent, but I think we’ll see a more chaste culture emerge from all of this, on Wall Street, and perhaps beyond. Caution will be the new daring. Safe will be the new sexy.

Yes, Jim, it's true for Wall Street. But as you rightly note in your article lots of people on Main Street stayed the fiscal conservative course and will be rewarded for not running with the fast crowd.

Wasn't that basically what our mothers taught us in junior high?


gcotharn said...

Thanks for linking The End Zone on your blogroll, and welcome to my blogroll! I ought to have linked you earlier, since I've been dropping in here so much.

Mr. Cramer's article looks interesting - but: please consider additional disclosure about your "other job"? Historical novelist? Gourmet Chef? Carpenter? Juco Engineering instructor? Gardener? Trader of Precious Moments on Ebay? Chess or Bridge player? Needlepointer? My interest is piqued.

Webutante said...

Thank you! Time has gotten away from me this morning and so I need to get to work....but I promise I'll get back to you later as to what I do on the other side of the Web......only the shadow knows.....

pm said...

Checked your blog this morning as I'm sitting here dealing with a lot of e-mail. If you take his(Cramer's) advice as counsel to withdraw to the sidelines and take a breather I guess I agree. Some of his commentary is at odds with my take on what's happening but I must say that I don't think anyone knows where we're at or what's on the immediate horizon.

My main difference is I don't think Bernanke is a culprit. He came in in Feb. 2006 and all the elements for this disaster were already at work. All the irresponsible debt was there waiting to collapse, I don't think there could have been a way to forestall it.

In 2006 the Cramer's were cheering investors on, they were not telling us to get out then. People probably wouldn't have listened anyway.

Now we have the mess and what to do next is the question. Bernanke wrote a book on the Great Depression some time ago and though I had difficulty getting thru it as a lot was technical economic formulas it can be read at a less complex level. The premise as I recall was that the lack of liquidity was the cause of the depression lasting as long as it did. Then the inability to expand money supply to reinflate economies was primarily caused by the linkage of money to gold reserves. Those countries that abandoned the gold standard earliest recovered fastest as they were able to put money into circulation with out that restraint.

I'm not advocating printing worthless dollars, however the credit supply cannot seize up without crippling an economy. Our world today is more complicated than it was in 1932 but certain underlying principles don't change. Once we get the credit markets working again we can deal with the inflationary issue.

We have a economic historical milestone here and things will never be the same. We free marketeers have got to reassess our philosophy and concede that regulation should have been foreseen to control the excesses that brought us to where we are. I just hope we don't over do it now..

Anyway, my point is I think Bernanke's understanding and belief in reestablishing liquidity will prove him to be the right man at the Fed for this time as Volker was in the 80's.This mess may recede quicker than is largely predicted.

Webutante said...

Agreed that no one has a complete handle on this and what will happen next. You have as good a handle as anyone I've seen and always appreciate your take.

When the liquidity shortage has been helped somewhat, then I agree we can work on the devalued dollar which is inflation. As the dollar rises, it will be like a tax cut to every American.

I too hope we don't over do the regulation, but historically we react in extremes which we later come to regret.

Webutante said...

To answer your question, gcotharn, about what else I do online, I'm a humble, humble student of the stock market and have been for about ten years. It means I spend time each day reading about the world in a completely different language other than words, opinions, fact and commentary. This other language is a very elegant shorthand that conveys much information.And occasionally I manage a little of my own money with this information.