Thursday, February 25, 2010

Hey Steve.... Still Think It's a Liquidity Crisis ?

Regular readers know I have had little use for the opinions of mid-life crisised, sometimes presidential candidate, sometimes magazine publisher, sometimes, but only when it suits him, free market capitalist, yet full time poster boy for the "lucky sperm club" Steven Forbes.

His rants way back as the markets were in meltdown that this financial debacle we are in, (yes contrary to mainstream propaganda we are still in it!) was simply a crisis of liquidity and that a simple removal of onerous, outdated, and inconvenient rules of mark to market accounting would solve everything in a jiffy. This removal is more commonly referred to as marking to fantasy and is a widespread practice among financial companies today.

Regular readers know I have and still do vehemently disagree with Mr. Forbes and the rest of the crowd echoing his shallow, sophomoric and simply idiotic remedies to our economic ills.

I have long argued, as many idiot bloggers in the blogosphere have as well, that this is NOT a crisis of liquidity but rather one of solvency. So for any out there like Mr. Forbes who still cling to the notion that this is simply a liquidity issue and ignoring mark to market will solve everything I offer up this article today by Jonathan Weil over at Bloomberg entitled Suing Wall St. Banks Never Looked So Shady.

Please read the article. You will start to understand why I have been so critical of the mark to fantasy proponents like Mr. Forbes and his comrades in arms Bill Isaac (former FDIC chairman.. and you wonder why FDIC is in the pickle it's in) and of course Larry Kudlow.

I anxiously await their myriad number of excuses as to why mark to market is still a bad thing even in the face of this evidence. My guess is that mark to myth is still their preference simply because they say so as the born-with-a-better-pot-to-piss-in-crowd everywhere and always are the smartest guys in the room. Makes me think of the quote from George Orwell who said;

"In times of universal deceit, telling the truth will become a revolutionary act".

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $12.06
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $6.05
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 2 units Ultrashort Xinhua China ticker FXP @ $8.49
Long 1 unit Ultrashort Real Estate ticker SRS @ $9.82
Long 2 units Direxion Tech 3X Bear ticker TYP @ $10.52
Long 1 unit US Dollar Bull ticker UUP @ $22.52 stop @ $21.97

Short 1 unit Daimler ticker DAI @ $52.23 stop @ $52.23
Short 1 unit CurrncyShr Aus Dlr ticker FXA @ $89.65 stop @ $91.71


Jr Deputy Accountant said...

HAHAHAHAHAHA LMFAO "lucky sperm club"... I'm dying over here.

Now that that's out of the way, first of all, excellent post, PS. Secondly, Forbes IS an idiot, I've said the exact same thing on JDA repeatedly so love to know that you feel the same. How could you not?

And yes, you are (of course) right, there never was a liquidity problem. The problem was that banks (and other large non-financial financial institutions) were over-leveraged on fake capital - a$$hats like Forbes and Bernanke call it "deflation" but really all that's happening is the evaporation of the fake capital that funded the build up to this entire debacle. Easy peasy, what's so hard about figuring that out?

Unemployment will continue to climb because we never had enough money to pay our collective workforce in the first place. Because we shunned m2m, we preferred to exist in this fantasy world of mark-to-Disneyland.

And obviously have not yet learned our lesson.

did you ever see the Bill Isaac thing where he talked about the FDIC being broke?

Issac, in a discussion with then Treasury secretary Don Regan, admits that the FDIC's "fund" is really just a work of accounting fiction.

ARGH! I'm no accounting "purist" but come on, WTF are these people smoking?!


Harleydog said...

thx for the note, much appreciated! Agree completely.

Just re-read your post on Regan and Isaac, what can one say except yet still more of the 'smartest guys in the room' driving us all off the cliff.

I ask every day how? why? and keep coming to the following conclusions. It is all just one big ....

A) School of Dumb and Dumber - just like the Lloyd Christmas quote "That's as good as money, sir. Those are I.O.U.'s."

B) School of 50 cent or rather Goldman Sachs - get rich or die tryin'

C) School of the nefarious - they know what they do with their deceit premeditated partners at the ready to pounce on the outcome.

Be well,