"THIS IS A GREAT DRAMA OF OUR TIME---THE SUB-PRIME CREDIT CRISIS IS NOW THE AIDS VIRUS OF GLOBAL FINANCE. NO ONE KNOWS WHO'S BEEN EXPOSED OR 'SAFE' TO DO BUSINESS WITH ANYMORE. WHILE THIS COUNTRY WAS FOUNDED ON THE IDEA OF EQUALITY OF OPPORTUNITY, THERE'S NO SUCH THING AS EQUALITY OF OUTCOME (GIVING EVERYONE A MORTGAGE WHETHER THEY CAN AFFORD IT OR NOT). IT IS AND ALWAYS WAS A POLITICALLY CORRECT, UNWORKABLE MYTH OF THE LEFT---CARTER AND CLINTON---THAT'S NOW COMING HOME TO DEVOUR US." ---WebutanteWhat we're seeing this week is a transfer of fear from the credit markets to the stock/equity markets. Recession is guaranteed with the only operative questions being how deep, how long? And, can we stave off a depression?
I know this is dull and boring for many, if not most, of my readers and certainly my commenters. However, I think it's the Great Story of Our Time, the AIDS of Global Markets, bringing together finance, politics, psychology, values and government policies. I have to write about it as a long-time student of the markets and as a long-time, humble investor, long before I started blogging. I think everyone owes it to themselves to grapple as much as possible with what got us to this global meltdown. It was a long time in coming and will be a long time going.
There is no silver bullet, though there may be medicine that keeps us from certain death. We've suffered excesses of credit, not just in mortgages and banking, but also with credit card debt, home equity loans, consumer spending and debt, and business to business credit and debt. The good times have rolled for decades.
Remember the sexual revolution of the 60s and 70s? And the hangover, scars and sober learning many of us had in the following decades? The credit crisis is like the AIDS of Finance and we don't yet know how many individuals and institutions have been infected. It will bring the same pain, scars, and death to some and eventual learning and wisdom to others.
What doesn't kill us may cure us, if we're willing to be patient and reflective.
Some of this---like the policies of Carter and Clinton with the Community Reinvestment Act---was foisted on us by well-intentioned big government policies designed to create equality of outcome (which we all know is a fairy tale). And some of it is the result of human greed inherent in every one of us, on the left, right and middle of all races, sexes and cultural groups. Greed is an equal opportunity failure.
This financial epidemic is far, far from over. No one will come away unscathed. We can only hope some of us will get a lesson or two and come away better for it.
When it comes to easy credit, like easy sex, some of us may even become celibate and refrain from credit altogether. Other will only do it after making a commitment.
I ask this as a novice:
ReplyDeleteWhen you say Wall St. as we know it is gone: what exactly do you mean? Are you speaking of Lehman?
G, thanks for the great question. I'll try to answer with the caveat that it's probably the blind leading the blind....
ReplyDeleteWhat I mean is that Wall Street as we know it is shattered. It's been coming for a long time. The so called experts, the best and brightest, are falling like flies. Investment banks and 50% of the hedge funds are gone or will be in 3- 6-12 months, if they're not already.
What was Wall Street is already more and more decentralized into places like Charlotte NC, Atlanta Ga, Nashville, T. The smartest guys in the business aren't and won't be in NYC. I say that from personal experience. Though I manage some of my own money, through this experience, I now have found several of the best money men anywhere and they are so far ahead of the Wall Street guys, it's not even funny.
There is and will be a surge of personal education on investing and markets where people will start doing their own Wall Street investing on their personal computers and doing better than the 'experts' ever could. The Internet give each of us the opportunity to know as much if not more as any of the old, decaying guys on Fall Street. Of course that takes work, time and patience. But with resources like IBD, Investors Business Daily, anyone can be a Wall Street person.
Not everyone cares a wit about all this, but anyone who decides to learn will be much better off in every way, imo.
Thanks for the extra info. This decentralization + wider access to information is optimistic news! I'm glad to learn of it.
ReplyDeleteThose who take more personal responsibility for their finances, investing, health & wellness and their personal commitments will all be better off. Those who grow more dependent on experts and government will not be so fortunate.
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