Sep

23

 The vilification of Wall Street is taking full force. It is the worst form of scapegoating, denial, and mistakes were made (but not by me). It is similar to the criticisms of the legal profession where the intransigence, unreasonableness, and greed of the litigants is blamed on the representatives who are doing the job set out for them in the system. The current crisis originated in the greed and failure to save by homeowners, their use of real estate borrowing for consumptive lifestyles. Their failure to save, their spendthrift ways are all being loaded on to the investment community who were doing their function within the system. Now emails are floating around fighting the bailout of billionaires on Wall Street. You are an easy scapegoat. No matter that the speculator helped provide the liquidity to create trillions in new wealth. No matter that the long held family home is valued at many multiples of it's purchase price. It is the most culpable real estate speculator and overextended consumer that now point the finger in the attempt to avoid their own errors, lack of judgment. With an election coming up, the politicians, the worst of all, are jumping on the BANDWAGON. The cycle is ending. The funny thing is that equities are barely down a 1/5 and they are throwing out the baby along with the bathwater. But it's good. We really don't need the big firms anymore with universal access and electronic execution. Truth is we really don't need big government either, but its turn comes next.

For the speculator, many new niches and many opportunity will arise. The government will be the ultimate slow mover. As they try to enter the market, as we have seen this last week, there are big waves kicked up. The least qualified populate government functions. Small and fast moving adaptors can thrive in such an environment. Seems that many big hedge funds are going down or weakening. The white shoe brokers are weak. The change will be good. It's just like evolution and climatic change. New species will arise. Many will perish unless they adapt. Even the data itself is reinventing itself with data over a year old being almost irrelevant. As Lack says, regulation will be a joke. Every rule will create a dozen loopholes to exploit that the slow moving professors never thought about. THEY can't control the markets. The big illusion is that government can cure the problems when in fact, THEY are the problem.

Kim Zussman replies:

K Zuss"Greed and failure to save by homeowners" is also what caused the markets to recover from the tech-bubble / 9-11 bear market. The FOMC could have chosen not to increase liquidity / ease rates in that environment — in which case there might have been a deeper/longer "my father's" recession.

Remember the wealth effect: as people's homes increased in value, they felt richer, borrowed more, spent more, and drove earnings up. And felt a lot of pressure to do so. How do you say no to the Mrs. when she complains about the many vacations the neighbors take, or their new boat?

One of my favorite symbols of this period was the web-ads showing ethnic-minority couples dancing on rooftops when their loan was approved. Hey, it's a free country.

Bruno Ombreux sees a silver lining:

Am I the only one thinking that this mess is actually very good news for small speculators?

Fewer investment banks, fewer hedge funds, higher cost of capital and more regulations mean less efficient markets, that is more edges. And at the same time less competition for those edges.

The golden age of speculation is coming.

Janice Dorn adds:

Power of You / Dr DornSome days ago, I sent a copy of my first book to Alan Millhone. The title of the book is: Personal Responsibility: The Power Of You.

We are living through an epidemic of failure/unwillingness to accept personal responsibility for our actions. The blame game is just that. No personal responsibility. Mistakes were made ( but not by me). When the locus of control shifts from inward to outward, there is nothing but whining, blaming, gnashing of teeth, bullying, etc.

The worst lies are the lies we tell ourselves.

Tim Melvin argues:

SlicerDon't confuse speculators with the banks and Wall Street. There is an enormous gulf between the two. The fact is the banks did create loans and loan structures that encouraged excessive borrowing. Merrill used to encourage homeowners to take out home equity loans and put the money in stocks. Homeowners did not create option ARMs or understand them. Banks created then and sold them. The public did not slice, dice and engineer toxic securities from their mortgages. Wall Street did that.

Does the public have culpability for their stupidity and greed? Of course they do and they are paying for it. Look at foreclosures. That can't be a pleasant experience. However, the Street has to take its share of blame for creating the speculative fires and then pouring gas on them.

Most "speculators" had nothing to do with the creation of this mess. They do not lend money or create securities. They trade. And most of us do it with our own money.

Jim Sogi replies:

While you are entirely correct, the public doesn't know or care of the difference, and blames you as much as Gold Man. Anything to deny personal responsibility.


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